It never ceases to amaze us how much time and energy people put in trying to forecast the direction of the stock market. Entire businesses and personalities are based on it. Over on CBS MarketWatch today, Thom Calandra wrote his column based on a premise that stocks will decline for "at least three more years." He's talked to a market historian who apparently has all the answers. Go read it if you want to, but don't get yourself worked up in a tizzy.
The market may decline over the next three years. We'll be the first to tell you we don't know. If the rest of the media would get out of the crystal-ball business, the world would be a better place. Over the long term, we're still confident the market will resume an upward trajectory. According to Jeremy Siegel's data in the latest edition of Stocks for the Long Run, stocks have averaged an annual return of 10.2% from 1926 through 2001 -- that's through the first two years of the current market doldrums.
But don't just keep the faith. There are stocks out there that will beat the market in the coming years. We look for them every month in The Motley Fool Select and right here on Fool.com. We're not capitulating. We plan to beat the market over the long term, and you can, too.
In today's Motley Fool Take:
- Wal-Mart Flashes Cash
- Quote of Note
- Travelers' Billion-Dollar Charge
- Shameless Plug: Your No. 1 Resolution
- Reality Check
- Discussion Board of the Day: Reality Television
- Company Creates Conflict
- Quick Takes: Kmart, General Motors, XM Satellite Radio, more
- And Finally...
Wal-Mart Flashes Cash
Coming into a crowded field of competitors, Wal-Mart has at least one distinct advantage: cash, and lots of it. The other bidders, J Sainsbury and William Morrison Supermarkets, are offering either all-stock transactions, or some combination of cash and stock. Not only could Wal-Mart handily top their offer prices, but the temptation of an all-cash offer for Safeway shareholders might mean that Wal-Mart wouldn't necessarily have to get into an all-out bidding war to begin with.
Safeway's board has already approved William Morrison's all-stock bid of $4.6 billion. Then, Sainsbury jumped in, saying it may bid as much as $5 billion. Wal-Mart hasn't declared yet how much its all-cash offer will be.
The much sought-after Safeway is the fourth-largest chain in Britain. It's fallen on hard times in the last few years, but its 10% market share would be a great asset for the eventual victor. Were Wal-Mart to succeed in its bid for Safeway, after combining the chain with its existing ASDA chain, the retailer would control about 26% of the British grocery market. That would bring it head to head against No. 1 one chain Tesco.
And that's where Wal-Mart's desire for Safeway could ultimately break down. Britain has much stricter competition-preserving regulations than the U.S. Wal-Mart would have to be cleared by the Office of Fair Trading (OFT) to make its bid. ASDA would have to divest a number of stores, likely around 100, to gain clearance.
Such bureaucratic hoop jumping could potentially take six months or more. William Morrison, the fifth-largest grocery chain, will likely face the fewest regulatory hurdles. Safeway may not be able to afford the waiting time it could take for a cleared bid from Wal-Mart or Sainsbury. Because of that, it could end up taking the board-approved all-stock bid from William Morrison.
For once, where Wal-Mart's involved, it may not come down to whose pockets are the deepest. Company officials are set to start talks with the OFT today. However, lots of cash is still lots of cash, and Safeway just may decide that Wal-Mart is worth the wait.
Quote of Note
"It's said that Wal-Mart has the deepest pockets, but you get deep pockets by not being too foolish with your money." -- Tim Rees, a director of Insight Investments
Travelers' Billion-Dollar Charge
Travelers Property Insurance Corp.
After the charge, Travelers will have $3.4 billion in reserve for the lawsuits, which are proving to be more "annoying" than estimated. Following rampant use of asbestos in the 1970s (we hear even toothbrushes were made of the stuff back then -- OK, no, not really), national asbestos claims are expected to total $200 billion when all is said and done. Most claims against corporations are paid by insurance companies.
Travelers was spun off from Citigroup
The company will post a loss of $790 million, or $0.79 per share, for the fourth quarter of 2002, and all earnings for the first nine months of 2002 will be snuffed out. For last year, Travelers expects to lose $27 million, or $0.03 per share. In 2003, it anticipates earning between $1.69 and $1.79 per share.
Insurance companies aren't the only ones fighting asbestos suits. Just yesterday, the Big Three auto makers -- General Motors
Shameless Plug: Your No. 1 Resolution
What are your goals for 2003? How about shedding some of that credit card debt with those last 10 pounds, or supersizing your savings account instead of your fries? Well, you've come to the right place, Slim! We'll help you start the year on the right foot, in our New Year's Financial Resolutions Center.
Don't worry, folks. CBS lost. So, you'll get to see a B-list of stars compete against one another in I'm a Celebrity... Get Me Out of Here after all. The amusing clincher is that U.S. District Court Judge Loretta Preska studied even the most subtle of contrasts before making her decision -- like how a vegetarian celebrity wolfing down a worm paralleled a similar situation on one of the earlier Survivor episodes.
Fact may be stranger than fiction, but it makes for some good viewing, too. PBS documentaries and MTV's The Real World may have been pioneers, but they timed their jump too early to cash in on reality's pay dirt. It was the debut of Survivor three years ago that found network programming executives scrambling to replace dud sitcoms and unmarketable dramas with people a lot like, well, us.
Fidelity gets put to the test on an island (Temptation Island), and contestants try to determine who is sabotaging a game from the inside out (The Mole). If one show tries to make a love connection, another comes back swinging, like Fox's
Years from now, you may look back and wonder if you actually did see John McEnroe taunting contestants strapped in a chair with heart-rate monitors. You did. You really did.
You won't find the networks complaining. Rather than haggle with pretentious celebrities over salaries and residuals, reality TV opens up the casting couch to the anxious citizens of the world with no qualms about humiliating themselves for free.
Never fear. Eventually, folks will tire of the trend, the same way prime-time quiz shows grew thin through overexposure. The Osbournes and Anna Nicole Smiths of the world will no longer shock us. The worms consumed will grow to consume our patience. Fact will play second fiddle to fiction once again. But until then, what's on the tube today? Liars and bachelors and dares, oh my.
Discussion Board of the Day: Reality Television
Ready to see Survivor hit the Amazon? If ABC is airing Celebrity Mole, where are the celebrities? Anyone else hoping that The Amazing Race comes back to at least add an element of geography to this rubbernecking addiction? All this and more -- in the Reality Television discussion board. Only on Fool.com.
Company Creates Conflict
This is a story about a British supermarket chain and the pressures it's putting on a certain analyst. It is a great illustration of the less-publicized role corporations -- in England, the U.S., and elsewhere -- have played in fueling analyst conflicts of interest.
Last month, Robert W. Baird Securities analyst Paul Smiddy wrote a research report criticizing the management of Big Food Group, and downgraded the stock from "neutral" to "sell." Now, the company says Smiddy is no longer welcome at its briefings and presentations.
"They said because I didn't show them the draft of the note, because I didn't send it to them before I published, it was unprofessional behavior," Smiddy told Bloomberg. Big Food insists it's only upset there are inaccuracies in the report and that it didn't get a chance to respond to it, and that it fully supports the right of an analyst to issue any rating he or she sees fit.
But let's get right down to it: If Smiddy had issued a "buy" rating, he would have been welcomed with open arms no matter how inaccurate his report might have been.
We have constantly railed on analysts for issuing favorable ratings to companies they thought didn't deserve them. Indeed, all the major Wall Street brokerage firms just agreed to pay some $1.4 billion to settle charges of biased and misleading research. But we also need to hold accountable companies that put pressure on or shun analysts who issue unfavorable ratings.
Big Food Group may or may not have legitimate points about Smiddy's research. Either way, it should apologize to him for its behavior, and invite him over for tea.
Still hoping to emerge from bankruptcy by the end of April, Kmart said it will lay off as many as 35,000 employees and close down 326 more stores. That will leave the discount retailer with a core of about 1,500 locations. The company also said it made a profit of $349 million in December, despite the fact same-store sales were down 5.7%.
It was a crude awakening for Lone Star Technologies
Does XM mark the spot? General Motors
Speaking of music, could the five major labels be on their way to becoming four? The New York Post is reporting that EMI and BMG have restarted merger talks. Along with AOL Time Warner
On a different note but still carrying over today's musical theme, Overture
Wait. This just in. In local news, fourth-grader Phil Frazier took a break from practicing for his piano recital by breaking into an impromptu rendition of "Chopsticks." His mother shouted his name from the kitchen. He stopped abruptly and got back to his Mozart.
Today on Fool.com:
- In Rule Breaker, Tom Jacobs asks if it's time to buy AOL Time Warner.
- Matt Richey puts sweater seller Hampshire Group under the microscope.
- In Fool's School, stock price matters.
Bob Bobala, Robert Brokamp, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Jackie Ross, Reggie Santiago, Dayana Yochim