Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.
1. A tale of two Citis
The banking crisis appears to be nearing an end, now that even Citicorp
It's obvious why Citi wants to hand back the $20 billion bailout, as it's watching its rivals doing the same thing. Citi doesn't want to be the only banking heavy left under governmental scrutiny, with angry taxpayers complaining about every bonus issued or tactical move made.
The rub, of course, is that Citi isn't like the other banks. It has a sturdy Tier 1 common equity ratio, but it's also been reluctant to lend out money. The government also has a 34% stake in Citi, and it's no dummy. It realizes that Citi's efforts to raise the money to pay off the TARP would be dilutive to Citi shareholders, so it wants to make sure that it can get out first.
In short, Citi's heart is in the right place, but it just doesn't have much of a beat.
2. Tiger by the tail
Let's start with the obvious zinger: When a spokesperson is coming clean on several extramarital affairs, the last thing he needs to pitch is a drink called Focus.
The real pity is that PepsiCo was apparently in the process of killing the lackluster product anyway. It claims that Woods' flings have nothing to do its decision. Maybe so, but the timing is lousy.
3. Simon slays
You'd think book publishers would be smart enough not to fall into the same traps that have slammed the record labels and the movie studios. At the very least, you'd think they would have read up on the downfall of their fellow media industries.
This idea is going to fail. It won't convert owners of e-book readers during the hardcover phase, and they'll just move on to something fresh four months later. The price points won't go away, so the devaluation is going to stick. The only difference here is that Simon & Schuster will simply sell fewer books.
4. Throw the book at the Nook
Speaking of e-book devices, Barnes & Noble's
- "Every one of the Nook's vaunted distinctions [from Amazon's Kindle] comes fraught with buzz kill footnotes," writes David Pogue in The New York Times.
- "After testing the Nook for about a week, I don't think it's as good as the Kindle, at least not yet," The Wall Street Journal's Walter Mossberg reveals.
It's bad enough that the Nook has a supply problem that's forcing it to miss most of the initial demand during the holiday season. However, since it's identically priced to Amazon.com's
5. Beans to an end
Green Mountain Coffee Roasters
Peet's never stood a chance. It was forced to offer a blend of cash and stock, and the shares kept getting slammed with every higher bid. The upside for Peet's is that it will be on the receiving end of at least $8.5 million in merger-termination fees.
Business case studies will also be left chuckling at Green Mountain for paying $35 a share for a company that was trading at just $0.21 a share 10 months ago.
Let's beat the Dumb Drum:
Green Mountain Coffee Roasters is a Motley Fool Rule Breakers selection. Amazon.com is a Motley Fool Stock Advisor pick. PepsiCo is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletter services free for 30 days. That certainly wouldn't be a dumb move.
Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves alike, since investors can learn plenty from both. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.