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. This car is going to get totaled
In other words, today's shareholders will only own 1% of the eventual company. The reverse split is just a way of keeping GM stock out of mere pennies that it's likely to be trading for if it ever did have 62 billion shares. Some may argue that it's better for today's shareholders to own 1% of the revamped company than to be wiped out completely, but who would own it today -- at current prices -- given the brutal dilution that is coming?
2. High praise and low blows
"Google has a huge new moat. In fact, I've probably never seen such a wide moat," Munger told investors at Berkshire Hathaway's
Why are these observations making this week's cut? Well, consider the ties to Google's mortal enemies. Buffett has been good friends with Bill Gates since the 1990s. Sue Decker sits on Buffett's board, and she was second in command at Yahoo!
3. Bank of Bizarro America
All week, there were rumblings that Bank of America
This is the kind of bar tab that would send shareholders into a frenzy, but did you realize that shares of Bank of America rose every trading day this week through Thursday?
- Monday -- up 19%
- Tuesday -- up 4%
- Wednesday -- up 17%
- Thursday -- up 6%
Really? The stock is up 55% over the first four trading days of the week on the slowly leaked news of a $34 billion capital shortcoming? Imagine how much higher shares would have gone if Bank of America had to raise even more!
That last point was hand-dipped in sarcasm and deep-fried in "what are you thinking, investors?" shortening.
4. Look out below
Shares of MercadoLibre
Is that reason enough to dump Latin America's leading online marketplace? Look closer. The dollar was strong relative to key South American currencies. At the local level, MercadoLibre was a beast: In local currency terms, consolidated net revenue rose a robust 37%.
The stock had been on a tear leading up to the report, so an exhale is natural. However, let's be fair if Mr. Market is going to claim that MercadoLibre let investors down on the top line.
5. It's not funny when it's Sirius
Sirius XM Radio
Good luck lassoing a scapegoat. New-car sales have been weak all over, but most of the Sirius XM defections came from retail subscribers. The company introduced higher rates for secondary accounts and began charging for Web access in March. Did that play into the migration? Perhaps, but average revenue per user actually fell during the quarter, so go figure.
In the company's defense, it did post a narrower loss and wasn't far away from generating positive free cash flow. The company has done a superb job of shaving operating costs. However, it can't forget its subscribers. This is no time to play it safe and passive.
Let's beat the dumb drum:
Google and MercadoLibre are Motley Fool Rule Breakers recommendations. Berkshire Hathaway is recommended by Stock Advisor and Inside Value. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletters today, free for 30 days.
Longtime Fool contributor Rick Munarriz is a fan of dumb and smart business moves. Investors can learn plenty from both. He does not own shares in any of the stocks in this story. Rick 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.
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