It’s been a week of big pronouncements, some good, some bad. Mr. Market has reacted as always: with big swooping spasms of total confusion. Here’s the rundown.
On the plus side: Cisco announced its fiscal third-quarter numbers, which were better than expected—net income of about $720 million compared to a loss of more than $2 billion in the same quarter last year. Investors went hog wild over this news yesterday, perhaps reading it as a sort of flashback to the swinging late 1990s, when CSCO was a magic company. The Nasdaq was up by nearly 8 percent. Not surprisingly, the rally fizzled today. Cisco’s actual revenue, after all, was actually lower than a year ago.
On the, uh, minus side: Billionaire folk-hero investor Warren Buffet informed his faithful followers at this year’s Berkshire Hathaway shareholder meeting that the United States will suffer a nuclear attack. “We’re going to have something in the way of a major nuclear event in this country. It will happen. Whether it will happen in 10 years or 10 minutes, or 50 years … it’s virtually a certainty.” Berkshire Hathaway’s portfolio includes insurers such as General Re, which took a huge hit after Sept. 11; Buffett thinks the government should be the ultimate insurer for terrorist-attack damage. Berkshire “A” shares are trading around $75,000, near a 52-week high.
Also more of, you know, a minus: An anthrax scare centered on Federal Reserve mail helped spook the markets today.
Pitt falls? Former corporate lawyer Harvey Pitt has been dogged by criticism of bias pretty much from the moment he took over as Securities and Exchange Commission chairman. The latest wrinkle comes in the form of a meeting he had with the new head of KPMG (a former Pitt client). The KPMG chief said in a (leaked) e-mail to his troops that he told Pitt the SEC should take no action against the accounting firm in the ongoing Xerox investigation. Pitt says the meeting happened, but the Xerox stuff didn’t come up. In any case, at this point Pitt is most useful to reform zealots, who can take advantage of his lightning-rod status for as long as he hangs around.
Off to Bermuda: Stanley Works shareholders approved a plan to move the firm’s legal residence to Bermuda, thereby reducing its tax burden by an estimated $30 million. The plan has attracted a lot of attention, with critics calling such moves “unpatriotic” and proposing various legislation to stop the move. “There has not been a day like this in this state since Benedict Arnold sailed to Bermuda,” says U.S. Rep. James Maloney, D-Conn. He says small shareholders will be hurt by a tax that the maneuver will trigger and blames “large, institutional shareholders” for approving the plan. Of course, “large, institutional shareholders” tend to be mutual or pension funds, which of course act on behalf of the individual investors who have money in those funds.
Was the name a problem? Secretary of Defense Donald Rumsfeld has canceled the Crusader artillery system. The biggest corporate loser, if assorted politicians fail to resurrect the program, is United Defense Industries, a spinoff of the politically wired Carlyle Group; about 20 percent of its 2001 revenue came from the Crusader program. United Defense sold shares to the public last December, when there was more Wall Street enthusiasm for defense stocks. UDI rose to nearly $30 but is now at around $21, close to its offering price. Military hardware fans will be interested to know that the Crusader has it is own Web site where, oddly, you can order “Team Crusader” clothing, gifts, and accessories, including a deck chair ($90) or a deck of cards ($12). Just in time for Mother’s Day.
Blizzard of Ozzy news: Some reports say the Osbourne family will let MTV’s cameras back into their lives for another couple of seasons of their surprise-hit “reality” show for a fee in the $20 million range. Also, his missing dog was found. And finally, Ozzy attended the White House Correspondents Dinner, where he was the guest of Greta Van Susteren; George Bush included at least one Ozzy gag in his jokes for the assembled press. So I guess things are back to normal. Except for the anthrax stuff. And the pending nuclear attack.
