AOL buys Time Warner. Bill Gates steps down as CEO of Microsoft. Sega now has 13 percent of the U.S. video-game market. And American Mutual Holding, an Iowa company, has agreed to buy the Indianapolis Life Insurance Company. Who can possibly keep up? All the more reason to buy really expensive Internet stocks, which can just keep going up. ... Actually, that doesn't seem to be working so well. Perhaps it's time to think about the virtues of municipal bonds.
The truth is while the AOL-Time Warner deal was huge, it's more unusual now for a week to pass without a similar announcement. (Though I can't quite get over the shock of that insurance deal.) In a way, the most confusing part of this week was the breathtaking volatility in the stock market, and in particular in the Nasdaq. After a week in which tech stocks mainly moved in one direction--down--they came rallying back powerfully, but instead of resuming their steady upward ascent, they've begun swinging around wildly (even more wildly than usual). Companies that have reported blowout quarters--like Yahoo and Akamai--have been punished for no apparent reason, while other companies are trading much higher or lower on no news at all.
You might say, of course, that this is just par for the course. But it feels a little different. It feels, in fact, like investors might be thinking a little more seriously about risk. But then it could just be the sunspots. And with that, on to this week's Cocktail Chat.
1. "Ford unveiled its forthcoming line of electric vehicles, and said they will be sold under the new brand name Th!nk. (An odd choice, given the fact that thexclamationpointunk doesn't really trip off the tongue.) Company spokesman will presumably be The Artist Formerly Known As ..., and I imagine the advertising campaign will break new ground in the inventive use of heretofore ignored punctuation marks."
2. "The astonishing volatility of the Nasdaq has clearly driven some people batty. TheStreet.com quoted one trader this week who said that since you can look at a chart of the Nasdaq 100 and can see 'perfect double-top' (which is like looking at a cloud and seeing an elephant), we should 'buckle our seatbelts.' The trader requested anonymity, which isn't surprising. Would you want to be quoted saying something that meaningless?"
3. "Most curious headline of the week, from the Times: 'GM Presses Bid for Daewoo, Vowing to Preserve Its Identity.' I don't know. I may be naive, but I think that even if this deal does go through, GM will not disappear. But, then, I'm a dreamer."
4. "Tommy Hilfiger's stock was crushed Thursday after the company announced that its earnings for the fourth quarter would be well below analysts' expectations. Analysts attributed the company's problems to overly subdued colors in Hilfiger's women's line. The company did say it was 'fully committed to enhancing long-term shareholder value.' But what we want to know is: Is the company now fully committed to bright colors?"
5. "Attacking America Online's acquisition of Time Warner as a danger to the public, Jeff Cohen of FAIR included as part of his indictment of AOL its use of controversial accounting methods. Why not? God knows that how AOL used to amortize its marketing costs should certainly be front-and-center in any discussion of this deal."
6. "The Times' Maureen Dowd, in a column about America's obsession with the stock market, wrote that 'now your personal trainer knows as much about one-day price movements as Warren Buffett.' Actually, I think the whole point of investing the way Warren Buffett does is that personal trainers have always known more about one-day price movements than he has."
7. "Jonathan Bulkeley, CEO of barnesandnoble.com, resigned in order to, yes, spend more time with his family. In response, the stock dropped 63 cents. Must be comforting to know that's how much difference investors thought his departure would make."