Remember the Steve Martin bit about the googlephonic stereo with the moonrock needle? That was the 1970s and to make a long story short, the wild and crazy guy paired it with the highest number of speakers short of infinity, and it still sounded like -- well, let's just say, not worth the money.

According to SpaceWorld, astronomers have detected "the deepest note ever generated in the cosmos, a B-flat flying through space like a ripple on an invisible pond." Not having heard it yet doesn't necessarily make you a square. Sure, it's been around longer than Bob Dylan (roughly 2.5 billion years), but it's more than a million billion times deeper than what the human ear can detect.

B-flat? Who writes in B-flat anymore?

In today's Motley Fool Take:

Semis Fall Out of Bed

The red-hot semiconductor sector is leading the market into the red today.

Last night's disappointing earnings guidance from Texas Instruments(NYSE: TXN) and a downgrade this morning on Micron Technology(NYSE: MU) combined for a one-two punch that sent the SOX index reeling. The Philadelphia Semiconductor Index (XPH: SOXX) is off more than 3.5% today, albeit still up an incredible 55% year-to-date.

The semis' strong run this year has been predicated upon a second-half earnings recovery, which would then turn into a full-bore cyclical upturn in 2004. But there are two problems at this juncture: 1) the sustainability of the current economic recovery is by no means a foregone conclusion (especially given recent signs of worsening unemployment); and 2) semis' valuations at this point are in nose-bleed territory, even when viewed through the lens of next year's earnings estimates.

So far, valuation hasn't mattered a whit for semi stocks, but the "v" word has a habit of sneaking up and mattering quite a bit when least expected. Right now, Intel(Nasdaq: INTC) trades for 27 times expected 2004 earnings; Applied Materials(Nasdaq: AMAT), 46 times; KLA Tencor(Nasdaq: KLAC), 30 times; Novellus(Nasdaq: NVLS), 57 times; and Texas Instruments, a forward P/E of 36.

Again, these are P/Es based on 2004 estimates -- guestimates, really -- which have already seen a number of increases of late as analysts have raced to upgrade these stocks.

While it remains to be seen exactly how the current economic recovery plays out and to what degree semiconductor fundamentals benefit, today's sell-off may be a sign that rising anticipation of a semiconductor upturn has already seen its peak.

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XM Shorts Squeal

Shares of satellite radio market leader XM(Nasdaq: XMSR) rose 20% in the first two days this week. For a company quite a ways from being free cash flow positive, what gives, other than short-term whims and pain for shorts?

First, a bolstering of finances. XM announced Monday a sale of 11.32 million shares for about $13.25 each, yielding $150 million in a deal expected to close today. When I looked at satellite radio recently in a two-part series, XM and Sirius Get Ready and Beyond the Price-to-Dream Ratio, one important cash factor was XM's need to launch a spare satellite and pay for another spare. This new moolah (at a cost of 10% dilution to current shareholders like me) plus $345 million at the end of Q2 puts the company in a stronger position and able to handle both the launch and replacement -- however long it takes for insurance companies to pay for the decline of the satellite being replaced. If they do.

Second was a press release with the misleading headline "XM Satellite Radio to be Standard Equipment on Honda Accord Models." Clicking to the release reveals that it's actually going to be standard on a few more "certain" models. Press releases can alert you to material information on your companies between quarterly SEC filings, but you must read critically.

The stock jumped, and the financials were part of the reason. But there's more. When any news draws traders and investors to boost a stock, shorts can feel more pain. As of the most recent monthly report, a whopping 45% of XM's float was sold short, with eight days to cover at average daily volume.

Because of rising daily trading in XM shares, the number of shares short -- over double that of a year ago -- is now a third fewer days to cover, but anything over a week can cause a quick price rise to bring a short squeeze. That is, when a short position holder wants to or is forced to cover at any price and increased loss. As we've seen this week, volatility rules. (To learn more about shorting and what it can teach an investor, there is really no better place than Jeff Fischer's recent two columns on shorting, the 10 Most Shorted and 10 More Most Shorted.)

Both XM and competitor Sirius are speculations on the future of subscription-based satellite radio. Each is now well-positioned financially to continue the subscriber race and hoped-for profitability for at least six quarters at estimated cash burn and subscriber growth rates. Those add to a wild-eyed guess of the subscriber numbers and time frame it might take to turn free cash flow positive -- 2.4 million subs for XM and 1 million for Sirius by the end of 2004. Investors should do and understand their own estimates to avoid buying a dream -- and paying the price.

Discussion Board of the Day: Nokia

What did you think of the news coming from the Nokia and TI camps this week? Is the chip sector finally back for keeps? Are the Houston Texans really that good -- or the Miami Dolphins that bad? All this and more -- in the Nokia discussion board. Only on Fool.com.

Fannie and Freddie vs. Jason: Even Scarier

We've been writing about mortgage giants Freddie Mac(NYSE: FRE) and Fannie Mae(NYSE: FNM) as their misguided accounting practices have come to light over the past several months. With that in mind, before we get into today's happenings, it's probably a good idea to give you a brief recap on these troubled titans of the mortgage business.

The Federal Home Loan Mortgage Corporation, or Freddie Mac, is a congressionally chartered corporation that purchases residential mortgages from various lenders, securitizes them, and then resells those loans to investors in the debt markets (I know, I know, exciting stuff, but it gets better).

Government-sponsored entity Fannie Mae, or the Federal National Mortgage Association, basically packages loans made by the Federal Housing Administration (FHA) for resale, and also sells a small number of non-government loans.

All that basically means that these institutions, whose securities have the explicit or implied backing of the U.S. government, are huge players in the mortgage investment arena, and potential problems here add extra-strength antacid to a lot of diets.

That's why recent news of accounting shenanigans and three-plus years of earnings restatements have really put the kibosh on these stocks. And, fresh on the heels of myriad accounting scandals across this great country, calls for action are lighting the switchboards all over the Capitol.

As Bill Mann mentioned in his recent article, the lack of disclosure historically required by these companies has regulators fearing what could be under the hood. And they should be fearful, since according to Reuters, these companies own or underwrite nearly half of the $7.1 trillion (yes, with a "t") in U.S. mortgage debt. If that doesn't make this whole thing scarier than Freddy vs. Jason (the scariness of the film's success more than the movie itself, of course), I don't know what would.

Interestingly, all this terror is prompting the administration to recommend today that Congress assume regulation of both Fannie and Freddie "to reassure markets [that Freddie and Fannie] do not pose a risk to the financial system."

Frankly, implied or not, the government is on the line for a lot of dough here, and when one considers that the end of that line has been held for a number of years by people with demonstrated moral and ethical challenges, I'm not sure the move is going to cut down on antacid use anytime soon.

Quote of Note

"The most important thing to do when you find yourself in a hole is to stop digging." -- Warren Buffett, 1990 letter to Berkshire Hathaway shareholders

And Finally...

Today on Fool.com:

You just can't get anything cheap these days. Ticketmaster now says that if you want great seats at concerts or ball games, you're going to have to bid for them. So, you may want to stay on your La-Z Boy and watch network TV for free. Or you could go outside and get some exercise with Bill Mann as he runs up the risk curve.

And on a completely unrelated note, Robert Brokamp's figured out the math and knows Why the Roth IRA Rules.

In local news, Paul Biggins was laughed out of gym class today.

Contributors:
Bob Bobala, Robert Brokamp, Paul Elliott, Mathew Emmert, Jeff Fischer, Tom Jacobs, Jeff Hwang, LouAnn Lofton, Alyce Lomax, Bill Mann, Selena Maranjian, Dave Marino-Nachison, Rex Moore, Rick Munarriz, Matt Richey, Reggie Santiago, Dayana Yochim