As you clean out your email inbox, you'll likely delete at least one message from Nigeria's Federal Audit Committee, claiming you can rake in a share of several million dollars if you just help the sender transfer the cash into a foreign bank account.
It's a well-known scam, but what you may not know is that these emails actually do come from Nigeria, and the scam is one of the country's top five industries, according to MSNBC. About 1% of the recipients respond, and the scammers net about $100 million per year. Wow, that seems like a lot! Although that's still $1 million short of what Kenneth Lay walked away with after helping drive Enron into bankruptcy.
The FOOL 50, which rallied up to a 0.6% gain today, decided not to pack it up and head to Lagos after all.
In today's Motley Fool Take:
- SEC Fights for Funding
- Discussion Board of the Day: Securities & Exchange Commission
- DuPont's Glazed Earnings
- Quote of Note
- Hooray for Hollywood
- Shameless Plug: Free Stock-Picking Advice
- Quick Takes: Xerox, Lucent, Eli Lilly,AirTran, more
- Announcement: Attention New Jersey Fools!
- And Finally...
The mission of the Securities and Exchange Commission, in its own words, is: "to protect investors and maintain the integrity of the securities markets." That might give us comfort in this year of the scandal, but remember that the SEC can only do what it can afford to do -- without adequate funding, the agency can't provide adequate protection. As it stands, the SEC is far outpaced by many companies' legal coffers, and it has an outdated computer system and an underpaid, insufficient staff.
SEC funding has become a hot issue, for those paying attention. As this nice recap of recent SEC funding history by Neal Lipschutz of Dow Jones explains, the Sarbanes-Oxley Act included an increase in SEC funding from $438 million to $776 million. President Bush also vowed to increase SEC funding when he addressed the nation on corporate responsibility in July of this year.
But The New York Timesreports (free registration required) the White House has backed off the budget provision and is now urging Congress to provide the agency with $568 million, 27% less than the new law authorized. According to the Associated Press, Sen. Paul Sarbanes, chairman of the Senate Banking Committee, recently warned Bush that the SEC's "effectiveness will be seriously compromised" unless it gets more money.
It's hard to understand what the president and Congress are thinking in not quickly allocating some big bucks to the SEC. In 2001, national defense discretionary spending totaled an estimated $292 billion, some 16% of our national budget. That's 376 times more than the proposed $776 million for the SEC. Just today, President Bush signed an increase in military spending of more than $34 billion over the previous fiscal year. Of course our national defense is important -- but so is our financial defense.
This should be very disheartening to investors. We need -- and deserve -- markets and financial information we can trust. If the SEC doesn't have the teeth it needs to enforce tougher rules and higher standards, then we're much less likely to see a real change in corporate behavior. How are we to have more faith in our financial futures, given these circumstances?
Consider sending your thoughts to your congressional representatives and/or the White House.
How do you feel about the lack of money for the SEC? Can investors feel secure if the Commission lacks sufficient funds? Find out what fellow Fools are saying, in the Securities & Exchange Commission discussion board.... Only on Fool.com!
Dow component and chemical giant DuPont's
But as we've said time and again, earnings and the estimates that come with them can be deceptive. DuPont had a good quarter, particularly in an economy that's hurting competitor Dow Chemical
First, the numbers: The company's sales declined to $5.5 billion in the period, from the year-ago's $5.6 billion. Net income, excluding items, rose to $401 million, from $128 million. Actual earnings per share, excluding items, came in at $0.40, versus $0.12.
Now, yes, that seems like a huge improvement, but here's the catch -- $0.14 of that $0.40 came from tax benefits. Obviously, even without those benefits, DuPont would have improved results substantially over last year. But articles reporting on its earnings, which merely state the company blew by estimates, paint an inaccurate picture of the situation. Earnings don't indicate anything significant about DuPont's ongoing operations.
We don't want to ignore the fact that DuPont is managing well in a difficult economy, thanks to extensive cost-cutting and tight cost controls. Product sales to continued strongholds, such as the housing and automotive sectors, helped keep its third quarter on track. But the company is still vulnerable to future manufacturing weakness and a possible war with Iraq, despite the fact that it's not as affected as Dow Chemical by the high costs of oil and other feed stocks.
All's not ugly at DuPont, but it certainly isn't as rosy as today's headlines would let you believe.
Quote of Note
"The hand that rules the press, the radio, the screen, and the far-spread magazine rules the country." -- Learned Hand (1872-1961), U.S. Federal Court judge
You've got to love a happy ending. When video rental giant Blockbuster
But with a fortunate twist of Frank Capra proportions, Hollywood nailed its September-quarter numbers today and raised the ante for the quarters that lie ahead. The company saw its earnings grow from $0.17 a share to $0.26 a stub for the quarter on revenue of $369 million.
The video rental industry has been booming, even as the recession lingers. With money tight and consumers wary of traveling, a night at home with the entertainment system has proven a welcome option. So, the 1,800 Hollywood video stores were a popular destination last quarter, with same-store sales climbing 7%. The company thinks the floor will collect even more wear and tear in the fourth quarter, as it sees comps climbing by 10% and growing even further and faster come next year.
But it's not only the brisk business propping up the industry's fundamentals. The transition to DVD formatting has given chains higher margins on a medium that takes up less shelf space than the bulky VHS tapes. Concept expansion has also helped, as Hollywood Entertainment continues to add video game offerings to its stores.
In keeping with the happy Hollywood ending, the company also upped its guidance. It now expects to earn about $1.20 a share this year and between $1.40 and $1.45 per share in fiscal 2003. That's enough to put a smile on any face, whether the economy fades to black or not.
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