We're winding down Buy, Sell, or Home? month this week by giving away some of the Gardners' money. The Fool co-founders are looking for home-improvement ideas, and they're willing to pay for them. Give it your very best here. All can play. You could win $500.
In today's Motley Fool Take:
- Market Climbs Wall of Worry
- Quote of Note
- Sears' Softer Slide
- Discussion Board of the Day: Teens & Their Money
- Research In Motion Stalled
- TMF Money Advisor
- Quick Takes: ImClone, AstroPower, new home sales, more
- And Finally...
Market Climbs Wall of Worry
With the major indexes all up better than 1.5% today, most news services are reporting that stocks are higher because of two pieces of positive economic data: growing consumer confidence (83.8 versus last month's reading of 81.0) and higher new home sales (up 1.7% from March to April). Both come as pleasant news, to be sure, but what's really lifting this market is the overlay of these positive economic developments on a backdrop of fear.
What kind of fear? All of the following economic problems have been in the news of late: excess industrial supply, post-bubble deflation, mounting federal and state budget deficits, rising healthcare costs, a falling U.S. dollar, unfunded pension liabilities, uncertain derivative risks, aging demographics in the Western world, a European economy on the brink of recession, a Japanese economy still showing no signs of life, the ever-present threat of terrorism, and the still-unknown ramifications of SARS.
Scary stuff, no doubt. But after three years of declining stock prices, a lot of this bad news is already "baked in" to current prices. The three-year bear market seems to have finally restored investor sentiment to a healthy level of paranoia. As such, we're finally back to the days where the market can climb the proverbial wall of worry -- at least for a while.
Even with the market looking bullish for the time being, Fools would be smart to keep the following in mind:
The overall market averages remain at historically high valuation metrics, so there's little case to be made for uniform, sustained bullishness.
It's a stock picker's market. While the averages may have rallies and fallbacks, there will be larger opportunities among certain individual stocks that have the right combination of valuation and business merits.
Don't forget about the host of problems outlined above. To the extent that they're not in the news, they become a risk to stock prices.
Quote of Note
"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one." -- Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds
Sears' Softer Slide
As bidders begin lining up for the sale of Sears'
With Sears in the process of looking over its first batch of bids this week and hoping for a quick close to the transaction by the next quarter, it would be a shock if major credit card companies such as Citigroup
But are the bidders biting off more than Sears can shoo? Sure, Sears has 25 million accounts to offer, but while its Gold MasterCard is sturdy, how much faith can a bidder have in the struggling retailer's in-house Sears Card?
For starters, at a chain hungry for sales growth, how picky do you think the credit approval process actually is? Then you have the fact that you're talking about Sears here. The card is only good at the company's stores as well as paying for AOL Time Warner's
The nearest retailer to Sears in the credit card space is Target
Does that mean that the eventual winner will be a loser? It's possible. With so many interested parties, including European concerns like Royal Bank of Scotland and HSBC Holdings
But are the same investors that have bid up shares of Sears by nearly 50% since the divestiture plan was announced two months ago ready to accept the company they will be left with? Sure, the balance sheet is going to get an extreme makeover for the better, but you're still stuck with Sears.
The retailer's namesake store business failed to turn an operating profit this past quarter, and you've got a volatile situation with yet another CEO, who claimed a fat, undeserved bonus last year. Are shareholders really ready to own the softer side of Sears?
Discussion Board of the Day: Teens & Their Money
Fool Rick Munnariz is pondering the right allowance for his kids. Do you have any tips for teaching children about money? You do realize that 50 Cent is a rapper, not a financial denomination, right? All this and more -- in the Teens and Their Money discussion board. Only on Fool.com.
Research In Motion Stalled
How many of us have had a brilliant idea only to discover that somebody had the idea well before us? It's a sobering experience, especially when the idea has already been patented. Research In Motion
Research In Motion (RIM) has sold the popular BlackBerry e-mail device, with its handy little keypad, for several years, but last November it lost a lawsuit to NTP that claimed infringement of five patents on wireless transmission of e-mail. Apparently, NTP made several inventions first, and patented them.
Privately held NTP was awarded a $23 million judgment, and now Research In Motion has been ordered to pay an additional $8.8 million in enhanced damage charges, as well as paying 80% of NTP's legal fees. Research In Motion has subsequently planned for $58 million in litigation provisions that it will book quarterly over the next year.
Perhaps oddly, the company's stock steadily advanced to 52-week highs (at $20) before today, valuing the unprofitable firm at $1.5 billion. That may prove a steep price given the challenges ahead. Research In Motion is likely to face higher royalty rates and stalled licensing contracts. The company has agreements to license its technology to Nokia
Additionally, a judge is pondering NTP's request to halt U.S. BlackBerry sales altogether (which Research In Motion would immediately appeal). On the positive side for RIM (and demonstrating the complexity of lawsuits), even with NTP's victory the U.S. Patent Office is reviewing the contested patents to see if they'll stand.
Overall, it's an unfortunate turn of events for the Canadian-based RIM. Giving it the benefit of the doubt, it's very unlikely that the company aimed to use someone's patented invention -- it just accidentally stepped on it. Patent law is tricky. Even eBay
TMF Money Advisor
There's no better independent help for your financial affairs than TMF Money Advisor. It gives you all the tools you need to plan ahead and -- more importantly -- take action to secure your financial future. Plus, when you sign up for TMF Money Advisor, you'll get our latest online seminar, Perfect Your Portfolio: Asset Allocation for Long-Term Wealth, for free. Sign up today!
Data provider Fidelity National Information Solutions
Shares of troubled biotech drug maker ImClone Systems
Once-darling solar power company AstroPower
New home sales inched up 1.7% and existing (why don't they ever say "used"?) homes sales rose 5.6% in April over March. The national average rate on 30-year mortgages hit 5.34% last week, and the price of a median home was $163,400, up 8% over last year.
Today on Fool.com:
- For updated stories throughout the day, bookmark our ever-changing News section.
- Should you fire your pro?: Dayana Yochim explains why good help is so hard to find these days.
- Asset Allocation: Tom Jacobs introduces our asset allocation seminar.
- Buy, Sell, or Hold?: Liar's Poker author Michael Lewis on Microsoft, The New York Times, and Eliot Spitzer.
- After 11 straight quarters, there are signs VC funding may finally stop declining.
- Tenet Healthcare's CEO, Jeffrey Barbakow, bids adieu.
- In Fool's School, understanding P/E ratios.
Bob Bobala, Robert Brokamp, Mathew Emmert, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Reggie Santiago, Dayana Yochim