Money & Business
Money Watch: Suddenly, Looking Seriously Like Merger Bait
Getting hitched is easy; making a merger work is a whole lot tougher. Just ask Philip Purcell. The embattled chief executive of Morgan Stanley is in the midst of an embarrassing coup attempt. Eight former executives are publicly trying to unseat him as head of the financial services giant he helped create in 1997 when his old firm, Dean Witter, Discover, merged with Morgan Stanley. Purcell took more heat last week after Morgan Stanley's two top investment bankers quit. The infighting has left the firm hobbled in the minds of many investors, and some on Wall Street are wondering if the company is ripe for plucking by a rival. "The speculation has definitely increased," says Morningstar analyst Meghan Crowe. Among the possible buyers: J. P. Morgan Chase, HSBC, even Citigroup. But wait--isn't that how Morgan Stanley got into this mess to begin with: by trying to merge its way to success? The inability to make mergers work has gotten a host of CEO s in trouble lately, the latest example being Carly Fiorina at Hewlett-Packard. Leave it to Wall Street to be dreaming of a second marriage for Morgan Stanley before the first one is officially kaput.
Money Watch: Halt, Identity Thieves! Or At Least Slow Down
Last week, the information broker LexisNexis acknowledged that identity thieves--criminals intent on stealing Social Security numbers and other data to obtain credit or loans fraudulently--may have gotten information on as many as 310,000 individuals in the company's files. Yet "this is only the tip of the iceberg," says Gail Hillebrand, senior attorney with Consumers Union. In recent weeks, several financial, healthcare, and educational institutions have reported incidents of lost or stolen information on more than 2 million Americans. Most recently, HSBC warned at least 180,000 holders of the General Motors-branded MasterCard that their credit card information may have been swiped because of an apparent breach at Polo Ralph Lauren. There is little consumers can do to stop this theft. But consumers do have the right to put a temporary "fraud alert" on their credit files if they suspect they have been or are likely to be victims of identity theft.
Money Watch: Don't Look Now, But Cash Is Trash No More
Cash has been trash in recent years thanks to record-low interest rates--and money market funds have been at the bottom of the heap. Just last year, the average money fund yielded a paltry 0.51 percent. But after seven rate hikes by the Federal Reserve Board (with more to come), money funds are paying out their highest average yields since November 2001: 2.18 percent. Some think money funds could be paying out as much as 3.5 percent within a year or so. At a time when stocks are stuck in neutral--the Dow Jones industrial average is actually down around 5 percent year to date--cash could be king.
The Week Ahead: Stuck In Low Gear
With the pace of retail sales growth slowing and gas prices near record highs, no one expects the major automakers to report strong profits this week. General Motors, whose stock is at a 12-year bottom, recently lowered its guidance for first-quarter earnings to a loss of $1.50 a share. Ford thinks it will beat Wall Street estimates of 25 cents to 35 cents a share in the first quarter, but full-year earnings are likely to disappoint. Still, investors will be watching when the automakers report Tuesday and Wednesday. Both companies face shrinking market share at a time when sales of their moneymakers--gas-guzzling SUVs--are slumping. For investors, this may be a time to boycott these stocks. But consumers might consider this a buying opportunity. Some GM and Ford models sport cash incentives of $3,000 and more per vehicle.
The Week Ahead: Pressure On Prices
There are just days to the next Federal Reserve Board meeting on May 3, and inflation is the hot topic. This week, the Labor Department will report both the producer price and consumer price indexes. If CPI rose more than 0.4 percent in March, Wall Street will be bracing for a bigger-than-expected rate hike.
On the Way Up?
Consumer price index
Aug. 2004 0.1 pct.
March 2005 0.4 pct.*
*Estimate
[chart labels]
0 0.1 0.2 0.3 0.4 0.5 0.6 pct.
Aug. 2004 Jan. 2005 March
Note: Reflects month-over-month increase in CPI
Sources: Labor Department, Market News International
Graphic by Rod Little-- USN&WR
This story appears in the April 25, 2005 print edition of U.S. News & World Report.
advertisement
