Having Short-Term Money in the Markets
By Selena Maranjian (TMF Selena)
My biggest investing turkey for this year relates to timing. I needed some money, so I had to sell some stocks. And what a bad time to do it! This drove home to me a message I've written about many times, but failed to incorporate sufficiently in my personal finances: Don't park any money you might need in the next five or so years in the stock market, as you never know what the stock market will do in the short term. (Instead, put it in short-term savings accounts.)
My portfolio is down considerably from where it was a few years ago, but in most cases, I still have long-term faith in my holdings. That doesn't help me if I need to sell in the short run, though. In some cases, I'd even bought a few shares hoping they'd pop up in price quickly, before I needed to sell. Again, stupid, since that was nothing more than a gamble. In sum, perhaps the investing turkey in my portfolio this year was... me!
Money Market Funds
By Rick Aristotle Munarriz (TMF Edible)
What's more embarrassing than getting lapped by a snail? How about being passed up by your own tail? Over the years, no one has paid more than a cursory glance to money market fund expenses. But now that yields are falling faster than Michael Jackson's sanity, fees matter. So, it may have come as a shock when taxable money market funds were averaging a paltry 1.21% payout earlier this month, while their nontaxable peers were offering a more generous 1.22% yield. You got that? You can skirt taxes and still yield more even if you don't. Why? Because while tax-free funds have always lived thrifty lives, taxable funds have -- rather inexplicably -- gotten away with higher fund operating expenses.
So this turkey tastes a lot like stuffing, as in the stuffing that money market funds have been tacking on to their income vehicles. Yes, Free Parking is something that you will find only on a Monopoly board, but a little prudence and cost absorption under these historically low-yielding days would have saved the money market fund industry from this humiliating underperformance.
"Gobble Gobble," Says the Government
By Robert Brokamp (TMF Bro)
Quick... name one meaningful step the government has taken to restore faith in the public markets -- one action that will significantly reduce the chances of another Enron or WorldCom occurring. Sure, CEOs and CFOs have to sign off on their companies' financial statements, but that won't prevent much -- if an executive's a crook, will a required signature stay his greedy hand? The accounting oversight board? Its first-ever chairman has already resigned, and the seat remains vacant. The Securities and Exchange Commission? It's led by a lame-turkey chairman, with no new appointee in sight.
Remember all those congressional hearings where Ken Lay, Bernie Ebbers, and friends were trotted in front of the cameras to take the Fifth? What was accomplished? In the meantime, the Dow is down approximately 12% since February, and the corporate criminals are free to enjoy a sumptuous holiday season.
No matter. If our 401(k)s keep dwindling, we still have Social Security. Oh, wait....
WorldCom and Capellas
By Bill Mann (TMF Otter)
Last December, as the debates raged on over the wisdom of the proposed merger between Hewlett-Packard
Capellas emerged recently as the new CEO for bankrupt and humiliated WorldCom, which has been beset by story after story of accounting and operational fraud. He says he aims to bring a level of stability and integrity to the company through his own personal conduct. If he thinks that his recent history at Compaq/HP provides investor confidence for the future at WorldCom, he is dead wrong. HP lost $5 billion in market cap on the day his departure was announced. Given that his track record at Compaq was less than stellar, it seems that much of the purge was due to HP investors realizing they'd been sold a bill of goods. WorldCom should be so lucky.
By Rick Aristotle Munarriz (TMF Edible)
If turkeys come in all shapes and sizes, this one is big and blue. IBM
What really stinks here is not so much that the company has done this before, but rather that it chose to inflate its results through smoke and number-crunching mirrors just months after the Enron implosion. It's like speeding past a cop who was already ticketing someone else. What does IBM stand for? Inconsiderate Boneheaded Move? Let's go over this again, IBM: Ethics above targets. Honesty above chicanery.
Ex-Tyco Chief Dennis Kozlowski
By Rex Moore (TMF Orangeblood)
The past couple of years have been marked by a corruption on Wall Street that surprised even the most cynical. Nothing symbolizes the abusive excesses more for me than Dennis Kozlowski. Besides furnishing his company-paid Manhattan apartment with a $17,100 traveling toilette box, a $15,000 dog umbrella stand, and a $6,000 shower curtain, the ex-Tyco
By Tom Jacobs (TMF Tom9)
The revelation of Jack Grubman's email suggesting that he traded his analyst rating of AT&T for Citigroup
No one in the United States can deny that communities are connected by webs of favors. The stereotype of the old boys club is based on teams, fraternities, and secret societies both explicit and implicit that grease the wheels of commerce. Corporate women and minorities don't want to end them -- they want to join them -- because they know that the world is about relationships. A partner at one of the top worldwide corporate firms once told me her career was stalled until she finally collared her mentor in the elevator to tell him, "If you don't bring me along on these trips, how will these corporate managers get to know me?" What could he say? He did, and today she's a star. Everyone wants in, and then the strong survive.
In the jungle of New York's financial world, the Grubman of humble background was definitely in -- and a success. Yet despite his multi-million dollar salary and bonus, his relationships with and access to top execs throughout the telecom and other industries, and his star quality, at some level I'll bet Jack Grubman felt he was Jay Gatsby. However much he had made it, he still felt he didn't belong and was somehow a pretender. If he could just put his kids into the right school, put them on the inside track, well, perhaps his roots would somehow not stain their future -- and they wouldn't have to fight as hard to get in as he had. He is hardly unique. This is every outsider's story, familiar to generations of immigrants or the poor.
The Grubman school imbroglio is noble in the sense that you have to admire a man who will do everything for his family. But did he? Even though it's an open secret in his social world that everyone tries anything to get into this school, what now? What will his kids think when they find out he was willing to risk his -- and their -- good name for club membership, when he could simply have hired a dialer (to call for the limited number of required school visit slots) and applied to the myriad other expensive New York private schools? I'd hate to be having Thanksgiving at the Grubman house.
The moral for investors is simple: We must never forget that all the players in this game -- and it is a game -- are human. Trust yourself most of all.
ImClone Founder Sam Waksal
By Rick Aristotle Munarriz (TMF Edible)
You remember that kid back in school who could never keep a secret? You know, the one who took pleasure in imploding Tooth Fairy and Santa Claus myths and didn't give it a second thought when he told your entire second-grade class that you had a crush on your teacher? Back then, he was a rascal. Now on Wall Street, you can call that a Waksal. ImClone
Waksal has pleaded guilty to some of the insider trading accusations and he'll be sentenced come January. Here's a sentence for Waksal: What were you thinking? His loose lips sunk his own ship, flooding Martha Stewart's in the process. Let's not whitewash the white-collar crimes here. While this may not have been an act of violence, it certainly bloodied the CEO moniker.