Ahhh, politics. Following the announcement yesterday that Merrill Lynch (NYSE: MER) had settled its conflict-of-interest case with the New York state attorney general's office, the partisan bickering began. Some praised Attorney General Eliot Spitzer, but others criticized his efforts. In the day's worst case of grandstanding by an ambitious and publicity-hungry political official, Rep. Michael Oxley (R-Ohio) was quoted as saying, "Grandstanding by ambitious and publicity-hungry political officials will not lead to healthy and responsible securities markets."
Spitzer was able to get Merrill to pay $100 million and change the way it does business by severing connections between stock analysts and their companies' investment banking units. We'll admit this doesn't solve everything, but it's an important first step. Oxley's comments are almost laughable. Consider this sentence from a CBS MarketWatch article: "Spitzer's investigation into investment banks and brokerage houses on Wall Street 'undermines' 70 years of effective national regulation of the securities industry, Oxley said."
We see where this "effective" regulation has gotten us. There seems to be less trust on Wall Street now than in recent memory, as scandal after scandal comes to light. Spitzer got some results. We can only wonder what motivates Oxley to criticize Spitzer's efforts, but it may have something to do with the fact that Oxley's top contributor by far is another firm under investigation by the New York attorney general -- Credit Suisse First Boston.
The bipartisan Motley Fool 50 kept pace with the rest of the market today, inching upward a half percent.
In today's Motley Fool Take:
Warren Buffett once more has Wall Streeters scratching and shaking their heads. Yesterday, he announced the offering of a newfangled security -- one that hasn't been seen before. Called SQUARZ, the securities are essentially bonds that offer a negative interest rate, coupled with a warrant representing the right to purchase shares in Buffett's company, Berkshire Hathaway (NYSE: BRK.A), at prices 12-15% above the current price.
In The New York Times (free registration required), Floyd Norris summed the offering up by saying: "Buffett wants to borrow up to $287.5 million, and he thinks he should pay a negative interest rate on the money. That is, he thinks the lenders should pay him money. And what do the lenders get in return, aside from negative cash flow? They receive the right to buy shares in Berkshire Hathaway at a premium over the current market price. That right will be good for five years, by which time, the lenders will hope, Berkshire stock will have risen enough to make the investment a good one."
But Buffett isn't the type to welcome such dilution of his shares. It appears that this offering represents a new way for the master capital allocator to gain additional investible capital (a.k.a. "float"). It's perhaps at the same time a signal that he doesn't expect his stock to skyrocket anytime soon.
Learn more in Buffett's initial press release and his follow-up release (including a note that, due to high demand, some $400 million worth of the security was sold), and also in this Bloomberg article. Perhaps the most insightful commentary on this new offering can be found on the Fool's own Berkshire Hathaway discussion board.
"Real knowledge is to know the extent of one's ignorance." -- Confucius
The Gap Drexler Leaves Behind
Like an unfolded stack of casual slacks, this is how Mickey Drexler's tenure gets undone. The retail guru, who has struggled of late as Gap Inc.'s (NYSE: GPS) CEO and president, announced that he would be retiring. Drexler didn't found the company but it sure is lucky to have found him. He joined the upstart store chain in 1983 and ushered in years of prosperity. Riding denim in the 1980s and khakis in the 1990s, the company expanded quickly without missing a beat in what is often a very fickle world in specialty retail.
Cashing in on relaxed dress codes in the workplace and filling a niche for quality branded basics, the company was never content to be a one-trick pony. Gap acquired a young Banana Republic and tweaked it into an upscale concept while launching Old Navy to fill the growing demand for hip apparel at value prices. Drexler oversaw the monster growth and reaped the praise, but now it's time to pay the piper.
Like the company's low-rise jeans, the stock just doesn't go as high as it used to. It actually hasn't traded this low since 1997. From inventory problems to bad judgment calls, the company that was always dressed to thrill sputtered. Executives fled in droves, too -- and when turnover at the top tops the turnover of tops, it's time to give the tongue twister a rest and realize that Drexler was human after all.
With more than 4,200 stores across all of its concepts, many in a state of disarray, Drexler's legacy won't have the happy ending that anyone masterful enough to keep a chain on top for so long as he did through the 1980s and 1990s deserves. However, his replacement will be walking into a situation heavy in baggage but with plenty of upside. It's how reputations are made. It's how Mickey made his.
Discussion Board of the Day: Gap
With Drexler leaving, where does that leave you? Our community members can't seem to agree. Fool lewisfaber is short the stock and thinks that investors should follow Mickey's lead and bail while fellow Fool ohyes thinks that the search for new management will lead to a stock rally. So, where do you fit in? Somewhere between the gap? All this and more -- in the Gap Discussion Board. Only on Fool.com.
Light Up... or Drink Up
Ever had the urge to smoke a cigarette at an inappropriate or illegal time, such as in a movie theater, at a non-smoking restaurant, or while your wife is in labor? Have no fear -- nicotine-flavored water is here! Starting this July, major drugstore chains will begin selling Nico Water, which contains as much nicotine as the famous patch. However, unlike the patch, Nico Water wasn't developed just to help people kick the habit. It will be marketed as an alternative to cigarettes, especially where smoking is prohibited.
This led us to ask two questions: 1) What would happen if you tried to extinguish a fire with Nico Water, and 2) what other products could be manufactured to oblige our hedonistic longings? We don't have an answer to the former, but we have some ideas about the latter:
- Some great new snacks: Poppy-sicles, Pot Tarts, and ButterScotch Candies (now with more scotch than butter)
- Cool off with some refreshing Vanilla Rum and Coke
- A new air freshener: Glade's Country Fresh Model Glue
- "Would you like a McMartini with your Voodoo Chicken McEntrails?"
- If you have the munchies, try some Ding Bongs (which will give you more munchies)
- When visiting vegetarian friends, bring some Porka-Cola, or perhaps some Cream of Meat
- Ben & Jerry's new flavor: Acid Rain
- Whiskey Friskies -- for cats with lives to spare
- The butter alternative: "I Can't Believe It's Not LSD But I Do Believe I Can Fly."
- The cure for what ails ya: Jack Daniels Rubbing Alcohol
- Cereals such as Frosted Flasks, Ecstasy Loops, Resin Bran, Crack Jacks, and Get Lucky Charms (with pink moons, yellow stars, and blue Viagra)
- Wet Ones -- the patch for Nico Water addicts
Shameless Plug: Great Stock Ideas
Find out which five stocks we like for the rest of the year when you sign up for The Motley Fool Select. Every month, our writers produce outstanding analysis on companies that are worthy of your investment consideration. Subscribing to Select may feel like joining an exclusive club, but this is one secret we don't mind letting out.
WorldCom (Nasdaq: WCOM) says it will eliminate its MCI Group (Nasdaq: MCIT) tracking stock structure (say that three times fast!), a plan that will save $284 million a year in dividend payments. The $0.60-a-share dividend due on July 15 will be the final one. WorldCom and MCI Group have each lost about 90% of their value in the last year.
Shares of Redback Networks (Nasdaq: RBAK) jumped today after Nokia (NYSE: NOK) said it would be purchasing a 10% stake in the DSL equipment provider. Meanwhile, a report out from Gartner Dataquest says Motorola (NYSE: MOT), Samsung, and Siemens AG all gained market share in the mobile phone market, while Nokia held steady.
Polo Ralph Lauren (NYSE: RL) reported fourth-quarter earnings this morning. The clothing retailer earned $0.48 a share, which was flat from last year. Higher sales in Europe helped offset declines in the U.S. The company is keeping a "conservative" outlook for the next few months, citing "consumer uncertainty."
Guidant (NYSE: GDT) says it will undergo a restructuring of its Endovascular Solutions unit. About 200 employees will lose their jobs, though half will be offered positions elsewhere. The restructuring will result in a one-time charge of $28-$31 million. Separately, the medical device maker said second-quarter earnings should hit the upper end of analyst estimates of $0.48-$0.50 a share.
And Finally...
Today on Fool.com: In Rule Maker, Bill Mann waxes rhapsodic about one of the most powerful, valuable brands in the world.... Zeke Ashton explains why great companies at good prices, not cosmic theories, beat the market over time.... Robert Brokamp shows you how to fortify your retirement nest egg.... In Fool's School, don't let confusion over your 401(k) options halt your retirement planning.
Contributors:
Bob Bobala, Robert Brokamp, Jeff Fischer, Tom Jacobs, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Reggie Santiago, Dayana Yochim
![Subscribe to Fool.com Headlines [RSS 2.0]](http://g.fool.com/art/icons/rss_30x14.gif){kind=icon}
RSS Headlines
Fool UK
