Money Watch: High Noon at Time Warner? Icahn Rides In When an aggressive shareholder builds a big stake in a company and then starts making demands of management, the CEO ought to worry--especially if that shareholder is corporate raider Carl Icahn. Earlier this summer, the longtime Wall Street gunslinger got the CEO of the video-rental chain Blockbuster voted off the company's board (though he was later reappointed). Now, Icahn and his hedge fund, along with other investors, have bought up 2.6 percent of the media giant Time Warner and are pressuring CEO Richard Parsons to spin off Time Warner's cable unit into a separate company. (Time Warner had already planned to sell 15 percent of its cable business.) Icahn also wants the firm to buy back $20 billion worth of the company's stock. By demanding a share buyback, Icahn is tacitly saying that Time Warner stock is a worthwhile investment, not exactly bad news for Parsons. Icahn may also find that Parsons enjoys surprising support on Wall Street. Noted Merrill Lynch analyst Jessica Reif Cohen in a recent report: "Even frustrated investors admit management has a relatively strong track record."
Money Watch: Boo! A Frightful Month for Investors On Wall Street, October is typically considered the scariest month of the year. Major pre-Halloween stock market corrections have taken place in 1929, 1978, 1979, 1987, 1989, and 1997. As it turns out, however, it's September--not October--that ought to spook investors. According to Ned Davis Research, since 1900 the Dow Jones industrial average has slipped an average of 1.2 percent in September, making it by far the worst month for stocks. Over the past two decades, September is the only month when either the Dow or the S&P 500 index has shown any meaningful average monthly losses, according to the equity-research website advfn.com. "It might have something to do with September coming after the summer holidays," says Clem Chambers, ADVFN's CEO. Or investors may sell in September because they fear an October market meltdown. "When everybody learns September is the worst month," Chambers says, "maybe they'll start selling in August."
Money Watch: The Timing of SIMPLE IRAs Can Get a Bit Complicated Setting up most individual retirement accounts, or IRA s, comes with an April 15 deadline. But there's at least one glaring exception: If you want to establish a so-called SIMPLE IRA, a retirement plan for small businesses that employ 100 or fewer workers, your deadline is October 1. "It makes no sense to have a different deadline for SIMPLE IRA s," says Daniel Maul, president of Retirement Planning Associates, a consulting firm in Kirkland, Wash. Nevertheless, SIMPLE IRA s can be a good solution for the self-employed or small-business owners who want a 401(k)-like retirement plan for themselves and their workers--without the hassle or fees of setting up an actual 401(k), he says. SIMPLE IRAs allow workers to contribute up to $10,000 a year and can be established at many brokerages and fund companies.
Money Watch: Risk And Reward Since the start of the year, investors have been jettisoning risky holdings in their portfolios while gravitating to less volatile fare. That's according to the State Street investor confidence index, which measures changes in the level of risk in investment portfolios. That index has fallen from a reading of 90.1 at the end of 2004 to 82.1 in July. Given the uncertainties surrounding oil prices, which threaten to slow economic growth and profits, don't be surprised to see the index fall even further when State Street releases the August results of its closely watched index this week. Ironically, if some investors continue to be so risk averse, others might view it as a buying opportunity. In fact, Tobias Levkovich, U.S.-equity strategist for Citigroup Investment Research, argues that a contrarian strategy today "would involve buying into more-aggressive areas such as technology stocks."
Money Watch: Bubble Watch This week, the Commerce Department will report on sales of newly constructed homes in July. Many signs point to a housing market that's still in full boom. But since February, the median sales price of new homes has tumbled. Another drop may raise eyebrows on Wall Street.
