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We'll never be able to accuse the Polynesian island of Tonga of having a lack of imagination (or ambition). Apparently not content to rely solely on beaches and breezes to draw tourists, the South Pacific island kingdom is accepting advance bookings for seven-day adventures -- in space. Reuters says female American aviation pioneer Wally Funk was the first to purchase one of the $2 million tickets, which are good for 45 days of training and the week-long flight in low-earth orbit. The first launch date is set for sometime in 2005. The Motley Fool 50 applauds Tonga for diversifying its revenue stream, but is passing for now on the actual space flight. The index fell 1.5% today. In today's Motley Fool Take:
While Pepsi (NYSE: PEP) spokeswoman Halle Berry was bagging the Best Actress Oscar at last night's Academy Awards show, the sultans of fizz were landing their own piece of prized metal. Pepsi will be teaming up with United Airlines parent UAL (NYSE: UAL) in a multi-year pact that will grant the world's second-largest soft drink maker global pouring rights on the world's largest air carrier. So, come May, you might mistake a United flight for Saturday Night Live's Olympia Restaurant when the "No Coke, Pepsi" chant starts making the flight attendant rounds. For Pepsi, taking the airborne soda sales from its Coca-Cola (NYSE: KO) nemesis is done for more than just sugar water bragging rights. Winning over exclusive distribution at the front line of the cola war provides high-volume exposure along with the high-volume sales. In a world often dominated by Coke at the retail level, Pepsi has matured from the point where it was buying up restaurant chains like Pizza Hut, KFC, and Taco Bell in order to secure the high-margin syrup sales. It spun off the eateries as Tricon (NYSE: YUM) widened its product line with the acquisition of Quaker Oats, fortified its already impressive salty-snack arsenal, and is now headstrong enough to go mano a mano with Coke on the retail soda front. No, Coke isn't going to relinquish the throne any time soon but, as Halle Berry will tell you, it's the new Pepsi Twist. It's pretty refreshing. Would anyone ever base their flight selection on whether it's Sprite or Mountain Dew being served? Speaking of which, have you squared away your summer travel plans yet? Can you "Take" us with you? All this and more -- in the Best Travel Spots/Tips Discussion Board. Only on Fool.com.
Pepsi at 30,000 Feet
Discussion Board of the Day
Beware of Bond Funds
Ain't life grand? The economy is recovering, spring is blossoming, and we're rid of the Oscars hyper-hoopla for another year. Oh, and interest rates will probably rise. (You gotta take the bad with the good.)
Most experts believe that Alan Greenspan and his band of merry men (and one wily woman) on the Federal Open Market Committee will raise the federal funds rate sometime this year. Other rates -- such as those on mortgages, money markets, and certificates of deposit -- have been creeping up for weeks. So, it'll cost more to borrow money and you'll get a little extra on your income investments.
And your bonds will lose value. Blame the inverse relationship between bond prices and yields. If interest rates rise, then the prices of existing bonds drop. Why? Let's say you have a bond that yields 5%. Then rates rise and a bond comes along that yields 5.25%. If you want to sell your bond, you'll have to offer a discount to compensate for the lower yield.
If you invest in individual bonds, this is no big deal. As long as you hold the bonds until maturity, the issuer will return your entire principal (assuming the issuer is still in business). However, if you invest in bond funds, you may be in for a surprise.
In 1994 and 1999, for example, a series of rate increases resulted in losing years for the average bond fund. With the fed funds rate currently at 1.75 -- the lowest since 1961 -- it would seem that rates have nowhere to go but up.
Don't get us wrong: Bond funds have their advantages. They 1) offer diversification, 2) make the investment of small amounts -- including the reinvestment of dividends -- a snap, and 3) offer the potential for capital appreciation. Many bond funds returned more than 20% in 1995. And, despite three rate increases in 2000, a bunch of bond funds posted double-digit returns for the year.
But if you're truly after principal preservation, here are some considerations:
- If you have the resources and know-how, invest in individual bonds. It's especially easy to invest in Treasury securities, including the popular I Bond. Visit Treasurydirect.gov to buy commission-free investments from Uncle Sam.
- Go with short- or intermediate-term bonds/bond funds right now. Long-term bonds are more volatile, and the extra yield you'd currently get isn't worth the risk.
- Check out alternatives to bonds for your short-term savings.
Tax Countdown: 21 Days
Let your computer do the counting
You work hard all day (downloading pictures of David and Tom Gardner). You don't want to come home and do a lot of tax-related calculating. That's why you might consider any of the tax-prep services aggregated on the IRS e-file Partners Page. Depending on the company, you can do your taxes online or using a downloaded program, then e-file your return. There's usually a fee (though some services are free for some people). But the programs walk you through the process of completing a return, doing the math for you along the way. That's easier, less messy, and more accurate than filling in a return with a pencil. And if you're due a refund, you'll get it in half the time if you e-file.
Krispy Kreme's Sweet Disclosure
As if you needed another reason to love the sugary, ambrosial goodness of Krispy Kreme Doughnuts (NYSE: KKD), you can now munch on the empyreal treats knowing you're supporting a company that is doing its best to help the American public.
Stung by criticism over an off-balance sheet "synthetic lease" -- which was legal but unacceptable to investors in the wake of the Enron mess -- management has decided to amend its insider trading policy. The result is an improved form of disclosure in which the public will find out within 48 hours about any selling by President and CEO Scott Livengood, as well as the company's chief operating officer, chief financial officer, and the executive vice president of Concept Development. (Let's develop a concept right now: "Eat these doughnuts, they're celestial!")
Krispy Kreme says these four executives are also adopting SEC Rule 10b5-1 plans, which allow them to establish prearranged buy or sell schedules that will spread their transactions over a set period of time, minimizing any appearances of trading on non-public information.
As you might expect, we salute any policies that put more information more quickly into the public's hands. We'll give Krispy Kreme a raspberry-filled cheer, however, for invoking patriotism as the reason for its moves. The accelerated reporting and adoption of Rule 10b5-1, says Livengood, "is an effort on the part of Krispy Kreme to constructively participate in the process of building public confidence in corporate America."
Spin it however you want, Krispy Kreme... just keep those blissful, elysian sweets rolling off the assembly line.
Shameless Plug: The Game of Life
What will you be doing during your retirement -- eating beans and clipping coupons or dining on steak and traveling the world? Get a sneak preview by playing The Game of Life.
Quick Takes
While Halle Berry cried, Denzel Washington beamed, and hobbits stomped their feet in excitement at the Academy Awards ceremony last night, AOL Time Warner (NYSE: AOL) and Vivendi stakeholders should also have rejoiced. AOL stands to profit from the increased play that its winners, such as "Training Day," and "Lord of the Rings: The Fellowship of the Ring," will receive. Best Picture winner, "A Beautiful Mind," should do the same for Vivendi Universal (NYSE: V), French parent of Universal Pictures.
Aerospace and defense contractor TRW (NYSE: TRW) is asking its shareholders to "just say no" to two shareholder proposals that it believes would give key information to and otherwise assist competitor Northrop Grumman (NYSE: NOC), which has made a $6 billion hostile takeover bid for TRW (amounting to about $47 per share, less than the firm's recent stock price). TRW plans to spin off its large auto parts division and sell its aeronautical unit.
If you're looking for signs of a sluggish economy, don't look at drugstore chain Walgreen (NYSE: WAG). It just reported second-quarter earnings of $327 million, up 10% over year-ago levels, and sales of $7.5 billion, up nearly 17%. Credited for the performance were higher sales of prescription drugs, smart pricing, and superior store locations. Walgreen has been taking market share from competitors recently.
In other drugstore news, the No. 2 chain, CVS (NYSE: CVS), reportedly nixed bonuses to top executives because the company did not meet 2001 targets. How refreshing, that a company dares to not heap additional riches on bigwigs who haven't distinguished themselves during the year. (For example, brown delivery specialist United Parcel Service (NYSE: UPS) rewarded its big cheeses more richly this year than last, despite significantly smaller revenues in 2001 than 2000.)
One of the most promising divisions of Warren Buffett's Berkshire Hathaway (NYSE: BRK.A, BRK.B) company is its Executive Jets unit, which sells fractional ownership shares in private planes. It's such an attractive business that various competitors have emerged, trying to grab a piece of the pie. One is calling it quits, though. On Friday, UAL (NYSE: UAL), parent of United Airlines, announced it's taking its Avolar business jet business back to the hangar. Berkshire Vice Chairman Charlie Munger is likely not surprised, having wondered last year how United would even pitch the service, as it would compete with United's first-class carriage.
ABN Amro (NYSE: ABN), the largest bank in the Netherlands, is getting out of the U.S. investment banking business, laying off 550 employees. The company found itself not big enough to compete profitably in equity sales, trading and research, and mergers and acquisitions. It got out of the Japan market and eliminated some 2,500 jobs last year.
And Finally...
Today on Fool.com: The sport of bashing big business is getting out of hand.... Zeke Ashton looks at a pharmaceutical company that doesn't have the typical high-risk profile that normally comes with the territory.... Fool's School searches for fantastic plastic -- the ideal credit card.
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