The indexes plunged more than 3% after a "tough day" for coalition forces in Operation Iraqi Freedom signaled the conflict may take longer than Americans expected.
Financial publications sent conflicting messages, some from one page to the next, about the short- and long-term effects of war on the markets, reaffirming what the Fool has always said about the irresponsibility and impossibility of market timing.
Our economy has been struggling for a variety of reasons, many of which will still exist when the conflict with Iraq has subsided. Bill Mann reminds investors that companies make up our market, not geopolitical events. So, while the indexes may ebb and flow with each news story, investors should avoid the unpredictable waves and continue to look for solid companies with strong potential for growth.
President Bush said his war plan doesn't change with every development. Nor should investors'.
In today's Motley Fool Take:
- Too Late to Buy a Home?
- Discussion Board of the Day: Buying or Selling a Home
- AOL Turns On Broadband
- Shameless Plug: Save for the Unexpected
- IBM's Stock Option Dance
- Quote of Note
- Quick Takes: Wal-Mart, Altria, Starwood, more
- And Finally...
The stock market wasn't the only thing rocketing higher last week. According to Bankrate.com's national survey, mortgage rates shot up by nearly a quarter percent over the past few trading days.
With the 30-year fixed-rate average gaining 22 basis points to 5.92%, and the 15-year option tacking on 23 basis points to 5.25%, one has to wonder if the window to buy or refinance a home has closed for good.
With rates hitting levels unseen since the 1950s this month, it may have been naïve to expect borrowing costs to get much lower. Besides, a year ago, 30-year fixed mortgages were going for an average of 7.1%. The window is still open. It's just not as wide as it was two weeks ago.
Home hunters may not feel much of an impact, if real estate prices inch lower as rates inch higher. Realtors commanded hefty property prices when the mortgage dollar stretched farther. If the interest-rate tide is, in fact, changing without a rebounding economy, we might have another bubble burst on our hands -- this time, in the real estate sector.
However, the rules are different for those simply looking to refinance their homes. The monthly savings of lower mortgage payments are immediate, while the principal balance remains the same. A buoyant market may have meant higher assessed values from which to borrow to build that white picket fence and wraparound porch, but the savings are still real if you originally financed at higher rates.
So, don't fret a closing window. Crunch the numbers, and if the view looks good, go for it.
Does the recent uptick in borrowing costs find you rushing to our Home Center to learn how to lock into low rates? Are you looking to make a move? Want to learn more about the state of real estate? All this and more -- in the Buying or Selling a Home Discussion Board. Only on Fool.com.
The Oscars are the Superbowl of award shows, and that's the likely reason AOL Time Warner
Viewers were treated to an image of a satiated, negligee-clad Sharon Stone lying in bed, enticing her unseen visitor to stick around for a while. Cut to AOL's little yellow Instant Messenger running man and the new slogan for the campaign, "Welcome to the World Wide Wow."
Cute and clever, yes. Effective? Well, we'll just have to wait and see. AOL, spending $35 million on the six-week campaign, is definitely hoping for the best.
The spots support the new add-on service "AOL for Broadband," which rolls out March 31. As Internet users switch from slow dialup connections to speedy broadband hookups in ever-increasing numbers, AOL hopes its 27 million subscribers don't abandon ship. It needs to remain competitive with current, stripped-bare broadband offerings from companies like Comcast
The new service will cost $9.95 a month for existing subscribers, and will offer broadband goodies like music and video downloads. For traveling or other times when the customer is away from the broadband connection, the add-on will offer five hours of dial-up use. Non-subscribers will have to pony up $14.95 for the service.
Around 16 million American households currently shell out between $40 and $60 a month for high-speed Internet, either through a cable modem or digital subscriber line (DSL). AOL's new service and the charges for it would be piled on top of those fees. While that may seem prohibitively expensive, the ability to keep a long-standing email address plus the broadband extras may just do the trick. Plus, having a few dialup hours a month for traveling is a good bonus.
We won't know if AOL's broadband push is working until the company's second quarter, given the timing of the rollout. However, for a company long on trouble and short on luck, "AOL for Broadband" may just be the beacon of hope it needs.
Here at Fool.com, we spend a lot of time talking about investing in the stock market. But that's for your long-term savings -- money you won't need for at least five years, right? Right! What about those unpredictable zingers life throws at you at the worst times? Why, that's why you need a stash of short-term savings. Let us tell you how to start saving today.
An intrepid reader sent us a note about a shareholder proposal in IBM's
IBM's board of directors is "unanimously opposed" to the proposal, which is interesting because one of the board members is Ken Chenault, CEO of American Express
IBM's reasons for opposing the proposal are telling. First and foremost is the fact that IBM follows Generally Accepted Accounting Practices (GAAP) by having a footnote that describes the effect of options. What IBM does NOT say is that GAAP calls expensing of options "accounting best practices," so while companies are given the choice whether to expense or not, by not expensing they are electing to go a route that is less than best.
IBM claims to be awaiting the outcome of current discussions at the Financial Accounting Standards Board (FASB) as to whether to require options expensing. Apparently the fact that FASB has already declared expensing using current models an improvement on listing their economic cost at "zero" is not sufficient.
Last year, IBM gave out nearly 60 million options, more than 3.4% of total shares outstanding, significantly higher than its awards the previous two years. IBM has also allocated hundreds of millions in shareholder equity to buy back shares on the open market, essentially allocating shareholder money to offset the dilutive effect of these options. IBM is hardly an abuser of stock options, but its shareholders deserve significantly better than such a lame fob-off of a substantial issue.
Dear IBM shareholders: Your board of directors urge you to vote against this proposal. We urge you to vote "FOR."
"America goes not abroad in search of monsters to destroy. She is the well-wisher to the freedom and independence of all. She is the champion and vindicator only of her own. She will recommend the general cause by the countenance of her voice and the benignant sympathy of her example. She well knows that by once enlisting under other banners than her own, she would involve herself beyond the power of extrication, in all the wars and interest and intrigue, of individual avarice, envy, and ambition, which assumed the colors and usurped the standards of freedom.... She might become the dictatress of the world. She would no longer be the ruler of her own spirit." -- John Quincy Adams
The Wall Street Journal reports, "it was business almost as usual" at America's malls, car dealerships, and real estate offices this weekend, meaning there's no convincing evidence of a "CNN effect," where consumers stay glued to their TV sets instead of, well, consuming. Wal-Mart
Shares of Altria
Starwood Hotels & Resorts Worldwide
In local news, Japanese Magnolia trees are just beginning to bloom across the county, providing residents a quiet lift as they commute to school and work.
Today on Fool.com:
- For updated stories throughout the day, bookmark our ever-changing News section.
- 12 Promising Mutual Funds: Selena Maranjian says these funds are way above average.
- Matt Richey explains how Quality Systems saves lives and money through a software approach to medical care.
- Citigroup CEO Sandy Weill withdraws his nomination for NYSE board.
- Don't put off life insurance: If anyone relies on your income, you need it.
- In Fool's School, read about organizations that help people help themselves.
Bob Bobala, Robert Brokamp, Mathew Emmert, Jeff Fischer, Tom Jacobs, LouAnn Lofton, Bill Mann, Selena Maranjian, Rex Moore, Rick Munarriz, Matt Richey, Jackie Ross, Reggie Santiago, Dayana Yochim
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