Tomorrow, we observe the one-year anniversary of the terrorist attacks on New York and Washington. Today, two events show us why the markets are still 10% to 20% lower than they were a year ago.

First, Attorney General John Ashcroft says there is a "high risk of terrorist attacks" tomorrow, especially overseas.

But most important to investors, it seems, is another development in another Wall Street scandal. Rep. Billy Tauzin's (R-La.) committee has been investigating whether Martha Stewart sold shares of ImClone Systems(Nasdaq: IMCL) with insider knowledge of impending bad news from the FDA. Today, Tauzin says there is doubt Stewart has told the truth, and he is turning the investigation over to the Justice Dept.

The Motley Fool 50 dipped briefly on today's news, then recovered to gain almost 1%. It still refuses to sign up for Martha's flower-arranging classes, however.

In today's Motley Fool Take:

Corruption, Not Terror, Ails the Market

One day before the anniversary of 9/11, a CBS News/CBS MarketWatch poll shows many Americans fear the worst is yet to come for the stock market. Despite that, optimism abounds, as only 7% believe a drop of 17% or more is likely in the Dow Jones Industrial Average. By contrast, 32% believe the Dow will close above 9,000 this year -- a gain of 6%.

It's fun to look at numbers like these, but the real story behind the poll is the incredible level of mistrust U.S. citizens have for corporate executives. Get this: While about a quarter of respondents worry about the effects of terrorism on the markets, fully half say scandals such as the ones at Enron and WorldCom make them less likely to invest.

Think about that, all you CEOs, CFOs, analysts, and auditors out there. You have more influence on your country's investing confidence than anything terrorists can muster. Think back to the horrific events of one year ago, and you'll understand what a powerful statement this is. It's a credit to Americans that we have so much faith in our country and our economic system. Wall Street was attacked, the markets closed down, but we knew they would open again.

And yet the dirty, rotten, thieving players who lied to investors and padded their own pockets have accomplished what the terrorists only dreamed of -- undermining Americans' confidence in the markets. Shame on them.

Quote of Note

"Courage is the price that life exacts for granting peace." -- Amelia Earhart, American aviator

Buy, Hold, or Sell? So What!

Yesterday brought the Securities and Exchange Commission's deadline for Wall Street analysts to rate companies with a uniform code of buy, hold, or sell. In honor of this August event, Bloomberg analyzed the current ratings from the nine largest securities firms. The service found Lehman Brothers, Salomon Smith Barney, and Morgan Stanley the most bearish with the most sells, with Deutsche Bank and UBS Warburg the least. Here's the breakdown: 

  
    Firm                 Buy %  Hold %  Sell %
   
Lehman Bros.          32     40      28
Salomon Smith Barney  36     38      26 
Morgan Stanley        34     46      20 
Bear Stearns          37     42      19
CSFB                  42     37      19 
Merrill Lynch         49     45      6.3 
Goldman Sachs         57     38      6 
UBS Warburg           51     44      5 
Deutsche Bank         54     43      3

We'll take the bet that the difference in sell percentages between the top five and bottom four is statistically significant. However, because there is sometimes more than meets even the Foolish eye, we called three of the four banks with the lowest sell percentages (finding a phone number for the fourth, UBS Warburg, taxed our writer) for comments, and by press time, we heard from Deutsche Bank and Goldman Sachs.

Deutsche Bank spokesperson Chris Cortezi distinguished her firm from others this way: "Our ratings are based on absolute returns -- the target prices analysts have set. A 'sell' is defined as a stock that will fall by 10% or more over 12 months. A lot of the other firms have systems where the rating is based on that analyst's universe of coverage, a stock relative to its sector. If you say your sector is going 20%, but X stock will be less, then it's outperforming your sector."

The Goldman Sachs' spokesperson -- who asked us not to use his name so his friends wouldn't kid him for appearing on The Motley Fool (we're offended!) -- said, "A number of firms have changed rating systems. Five or six announced yesterday. We've announced a new system to implement in fourth quarter. When we implement our new rating system in fourth quarter, there will be a broader distribution of ratings."

Our take? The distribution of ratings is a red herring. Even if the SEC were able to enforce total objectivity on the part of analysts, it's analysis, not ratings, that matters. Investors in individual stocks must understand a business and its financials well enough to make an informed decision. If analysts offer helpful information -- and a few have been known to -- great, though we revealed in The Motley Fool Manifesto that much stands in the way. But don't let the rating, an analyst's view of the stock's prospects in the next 12 months, by itself sway you.

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Thank Heaven for 7-Eleven

Big things are afoot with the Big Gulp people. 7-Eleven(NYSE: SE) is reporting a 3.5% spike in same-store sales for the month of August. What makes the performance even more impressive is that it comes on top of a 7.5% uptick in August of 2001. The convenience store chain has been rocking through the lackluster economy, but it seems to be doing so mostly unnoticed.

With its share price languishing in the single digits, the stock seems to be fighting the same kind of stigma associated with its stores -- as petty corner stores serving up frozen Slurpees to those on the run, or suburban hangouts for folks who like to drink their brews out of brown paper bags.

The reality is far more exciting. Sales at the same-store level grew by 5.1% last year, after surging 5.3% higher back in 2000. It's hard to get any more recession-resilient than 7-Eleven. From the commuter scooping out discounted gasoline to the weary consumer buying groceries in small amounts, 7-Eleven has proven its relevance in today's environment. Now it's time to prove that standing in the stock market.

Discussion Board of the Day: Living Below Your Means

Whether you enjoy bargain eats at 7-Eleven or long for fancier fare elsewhere at affordable prices, there are many ways to pinch pennies without pinching your budget. Want more? Have tips to share? All this and more -- in the Living Below Your Means discussion board. Only on Fool.com.

Quick Takes

Is it time to sever the severence? That's what the board of WorldCom is considering as the troubled global communications specialist ponders whether to strip its fallen chief Bernie Ebbers of his severence package. With $1.5 million in annual payments and generously low interest rates on personal loans, the company might decide that -- amidst fighting through accounting irregularities and its continuing quest to remain solvent -- maybe sending more money Ebbers' way isn't in WorldCom's best interest.

The buy orders will be flying in for Ameritrade(Nasdaq: AMTD), as the company embarks on a hefty 40-million-share repurchase plan. The company, a participant in our Discount Broker Center, closed on its acquisition of rival Datek earlier this week. Ameritrade will also be unloading its TradeCast subsidiary.

Wireless may be bouncing back. Fueled by strong summer demand in Europe, Nokia(NYSE: NOK) is now looking for its mobile phone sales to grow between 4% and 9% over last year's third-quarter showing. The company is sticking to its estimate, calling for the sale of 400 million handsets this year.

Who says that you can't exercise in retirement? Mickey Drexler, closing out his tenure as Gap(NYSE: GPS) CEO, is exercising 14.5 million of his executive stock options. However, he will be selling some of his stock in the company to cover the transaction. You know, to cover the, ummm, gap.

How do you make green from brown? If you're UPS(NYSE: UPS), you work out a five-year deal with your aircraft mechanics union to avert any kind of labor dispute. According to UPS, the new arrangements will give industry-leading wages to mechanics.

There is one less biotech battle to watch, as Biosite(Nasdaq: BSTE) and Xoma(Nasdaq: XOMA) have set aside their differences. Settling their patent and licensing issues, Xoma will now be free to practice some of Biosite's patents related to multi-phase antibody phage display, while Biosite will be able to play off Xoma's bacterial cell expression technology. In short, there is some degree of harmony in the DNA chain.

Biotech drug maker Genentech(NYSE: DNA) reported disappointing Phase 3 trial results for its breast cancer drug candidate, Avastin, in combination with chemotherapy. Shares tanked over 15% in pre-market trading, but lost only 8% during regular trading. Genentech has long been an investing darling due to its uncanny ability to partner with the right companies to bring protein therapeutic drugs to market. However, our biotech analyst Tom Jacobs (TMF Tom9) finds it way overvalued at an enterprise value to trailing 12-month free cash flow ratio of 71.

And Finally...

Today on Fool.com: The Rule Breaker Port buys, sells, and praises two biotech stocks.... Not every tech company is in the dumps. Meet a software survivor.... With the advent of MP3s and file sharing, we can all be rock stars.... Why companies split their stock, in Fool's School.

Contributors:
Bob Bobala, Robert Brokamp, Tom Jacobs, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Jackie Ross, Reggie Santiago, Dayana Yochim