Newspapers and blogs have been on fire after Apple reported its earnings with speculation about the health of its chairman and CEO Steve Jobs. Is the pancreatic cancer he dealt with in 2003 back? Why is he so thin?
BloggingStocks' Peter Cohan wrote that "The Times quotes Charles R. Wolf, an analyst at Needham & Company, who suggested that without Jobs, Apple stock could easily lose a quarter of its value in an instant. I agree. And that's why I think it's time for Apple to formally disclose Jobs' condition to shareholders."
That makes perfect sense: Jobs' health is clearly material to Apple shareholders, and it would be good for the company to disclose, in the form of an 8-K, what exactly is going on. It's time to put the rumors to rest.
But here's the problem: How far do you take that? Should companies have to tell their shareholders everything about their top executives' personal lives that could impact their job performance?
This could get messy in a heartbeat. Imagine a proxy statement that, in addition to the usual report of the audit committee, also included an opinion from Dr. Phil on the state of the CEO's marriage, and whether his son's drug problems were depressing him and taking his time and focus away from the company's operations.
If you agree that companies should update shareholders on an important CEO's health, then it isn't such a stretch to suggest that other personal factors impacting job performance should be disclosed too. But who would want to be the CEO of a company where one's personal life is exposed in Perez Hilton-detail in SEC filings?
The S&P 500 is down 12% this year. But some stocks are doing spectacularly well.
My newsletter, which has been picking three stocks a month for the last five and a half years, has found several of them. This year, it's up 29% so far. That increase is the rise in the average stock mentioned in the newsletter since its initial mention through the end of June. And it uses a 2% stop loss rule which automatically sells any stock that has declined by 2% and charges that decline against the returns.
With oil prices on the rise, these three are likely to benefit. But at some point, their valuations will exceed their earnings growth. So keep a close eye on them.
So the big news on Thursday was CBS' (NYSE: CBS) hefty $1.8 billion purchase of CNET (NASDAQ: CNET). Douglas McIntyre already explained why this was such a "weird deal" in an excellent article that you can read here. I'd like to expand on that thinking a bit by asking if it should have been Viacom (NYSE: VIA), as opposed to CBS, in the buying seat.
Remember "old Viacom"? Old Viacom was composed of CBS and "new Viacom", the latter being the Viacom of today. I know, confusing, but that's how things are when a big media conglomerate splits in two. Anyway, there was a general mandate given to both companies, one that basically stated the logic of CBS being an entity that focuses on cash flows and dividend increases while new Viacom would focus on acquisitions to promote capital appreciation of the company's stock. Sure enough, the yield on CBS tells the tale perfectly.
So, I have to ask, what gives? I mean, a check of CBS' latest 10K shows that the broadcaster generated $2.2 billion in operational cash flow in 2007. I think paying $1.8 billion for anything, let alone a questionable asset vis a vis CBS' core media competencies, might be too much given CBS' mission to return a lot of value to shareholders over the long-term in the form of dividends.
Lost in the flurry of activity over the weekend surrounding The Bear Stearns Companies (NYSE: BSC) is this morning's news that Carlyle Capital, the subsidiary of the Washington-based private equity king Carlyle Group, is 'winding up.' MarketWatch reports that Carlyle Capital, 15% of which is owned by Carlyle Group partners, has more liabilities than assets.
It is interesting that Carlyle can't utter the word 'bankrupt' -- instead preferring the innocuous-sounding term: 'winding up.' But Carlyle shareholders will be left with nothing. And, as I posted, since Carlyle borrowed $32 for every dollar of equity, or $16.6 billion, to buy mortgage-backed securities (MBS), the banks who take possession of those MBSs will probably be eager to dump them as fast as possible -- unless they think they will get a better deal by waiting.
But why wait? After all, the Fed lent $30 billion to JPMorgan Chase & Co. (NYSE: JPM) on a non-recourse basis to take over Bear Stearns's MBSs. This means that if Bear's MBSs go bad, the Fed will take the hit. Is there any active market at all right now for MBSs? If so, should the Fed just dump Bear's MBSs and take the hit now? Won't Carlyle Capital's banks do the same? And who will step in to buy all these MBSs? At what price?
The Wall Street Journal's [subscription required] David Wessel gets it. His analysis of the problems with the banking system and how to fix them are spot on. He thinks there are three steps to fix the system and I agree.
His three steps:
Link banker's pay to the quality of the loans they originate
Improve the quality of bank monitoring to increase transparency
Stop letting the ratings agencies' clients pay for their ratings
I posted about these ideas last year. In this October 2007 post, for example, I commented on the importance of putting banker's compensation at risk when they originate loans. I thought that if bankers' bonuses were at stake, they would be more careful about the loans they originated. I also discussed the importance of transparency in reporting. And in this August 2007 post, I talked about how the ratings agencies were compromised by the fact that they were being paid by the people they were supposed to rate.
I like Wessel's ideas and I hope his powerful editorial pulpit helps to get them implemented.
As Peter Cohan discussed earlier, shares of Lululemon Athletica (NASDAQ: LULU) awere down more than 8% [earlier] today. A New York Timesarticle mentioned that the seaweed content of Lululemon products, which are labeled as being made of 24% seaweed, is actually 0%.
According to newspaper, "The Times commissioned its test after an investor who is shorting Lululemon's stock - betting that its price will fall - provided Chemir's test results to The Times."
Short sellers get a lot of grief, but this story provides evidence of why I respect their research so much. Sell-side analysts operate on a research method based on trust; they generally parrot the claims made by management, and have well-deserved reputations for downgrading stocks after they lose most of their value.
The $62 billion Columbia Funds Series Trust Cash Reserves
According to the New York Times [registration required] these four funds own commercial paper -- short term corporate IOUs -- backed by residential mortgages which Standard & Poor's may downgrade. S&P specifically raised questions about four commercial paper issuers for possible downgrades:
Here are some highlights from this past week's earnings coverage from BloggingStocks: 
Here are some highlights from this past week's 
So the big news on Thursday was 
Lost in the flurry of activity over the weekend surrounding 
As Peter Cohan 
The week in preview: Chicken soup (or a doughnut) for the recession-weary soul?
Comfort Zone Investing: Oil's down, which is a start, but not good enough
Stocks have their worst week in six years
