Tiffany's Tiff; Coffee's Cold War; John Carter's Collapse; Greece Makes The Grade; Farewell Cruel Goldman.
5. Tiffany's Tiff
Come on Tiffany(:TIF). Can't you and Swatch simply drop all the lawsuits and settle this silliness over a nice breakfast?
Tiffany & Co. filed a $590 million counter-claim against the Swiss watchmaker Monday in a Dutch arbitration court. The legal retaliation comes three months after Swatch sued the fabled retailer -- and its former partner -- for an estimated $4.2 billion in lost profits. The pair originally tied the knot back in 2007 to boost the development of Tiffany-branded watches, but the 20-year deal ended in acrimony last September.
Swatch said Tiffany's claim "has no factual or legal basis" and it will contest it "vigorously." Furthermore, Swatch told the press that it planned to keep the engagement ring because Kim Kardashian kept her 20.5 carat sparkler and she was only hitched for 72 days.
Okay. Okay. We're just kidding about Swatch citing Kim's wedding ring controversy. But it is hard for us not to chuckle at this joke of a legal battle.
Swatch said it had invested "millions to develop, distribute and sell Tiffany & Co. watches," but that the venture was undermined by "systematic efforts" by Tiffany to block the business from growing.
As to how those millions Swatch sunk into the failed marriage translate into $4.2 billion in lost earnings, well, we have no idea.
Meanwhile, on the other side, the deal with Swatch represented less than 1% of sales in 2010, or less than $30 million, according to Tiffany's most recent annual report. So where on earth does Tiffany get the stones to counter-sue for a gob-smacking $590 million? Once again, we have no clue.
That said, we do know it's time for Tiffany to end this tiff, not escalate it with another stupid suit.
Seriously guys, who cares if Swatch is ticked off? They have plenty of time to get over it. Just watch them.
4. Coffee's Cold War
Two powerful leaders made major pronouncements last week, avowing their friendship and promising continued cooperation. The equity markets, nevertheless, saw through their platitudes and revealed what could soon be a sizable rift between the once-close confidantes. Meanwhile, the cost of the black liquid that Americans just can't live without unnervingly continues to escalate.
Yes folks, the situation between Green Mountain Coffee Roasters(:GMCR) and Starbucks(:SBUX) has indeed reached the brink.
What? You thought we were talking about last week's meeting between President Obama and Israeli Prime Minister Benjamin Netanyahu? What are you crazy? We're talking coffee here. Barack and Bibi couldn't even think about solving the Middle East crisis without getting their morning Joe fix first.
Green Mountain shares fell 16% last Friday after Starbucks announced its plan to offer a competing single-cup espresso maker. Starbucks' stock headed in the other direction, climbing 2.9% on the news, even though the CEOs of both companies diplomatically tried to tamp down worries that the two coffee giants were unavoidably marching toward a conflict.
Starbucks CEO Howard Schultz stated Thursday that the two companies could "co-exist" because its new Verismo machine is for espresso customers while the Keurig caters to coffee drinkers. Starbucks also reaffirmed its intent to supply its brand of K-cup packs for Keurig machines.
For his part, Green Mountain CEO Lawrence Blanford said in a statement, "We believe Starbucks to be a very satisfied participant in the Keurig K-Cup system, having frequently communicated its ongoing support of the Keurig K-Cup platform."
Behind the scenes, however, Blanford was far less sanguine. The company filed a statement with the Securities and Exchange Commission inferring that it was surprised by Starbuck's move and that it was "working with Luigi Lavazza" on a single-serve espresso-based machine of its own to compete with the Verismo.
If you ask us, it sounds like Green Mountain is applying the old Ronald Reagan maxim of "trust but verify" to its relationship with fellow coffee superpower Starbucks. And no matter what either party publicly declares, the brewing battle over "morning in America" is only starting to heat up.
3. John Carter's Collapse
You know, before we utterly emasculate Disney's(:DIS) failed Martian fighter flick John Carter, let's give the Lorax his due: That's one tough little environment-saving, ass-kicking critter they got there!
We're not kidding kids. There's a reason why the Danny DeVito-voiced figment of Dr. Seuss's imagination raked in $39.1 million at the domestic box office last weekend, making it the top box office draw for the second straight week. It's because the Lorax doesn't mess around and its producers knew exactly what they were doing.
The same can't be said for Mr. Carter or his movie studio, however. That mess of a production reportedly cost $350 million to make and market, yet still finished second to Universal's Lorax, taking in a paltry $30.6 million.
Sure the movie's overseas business gave it a boost by chipping in an additional $70.6 million, raising its total worldwide opening haul to $101.2 million. But come on Bob Iger! What in Heaven's Gate were you thinking when you greenlit that flop? Taylor Kitsch may have been able to score touchdowns and set teenage girls hearts aflutter on the football TV series "Friday Night Lights," but that's child's play compared with opening a quarter billion dollar movie.
Analysts are talking about a more than $100 million write-down because of this bomb. That said, Disney is going far and wide to protect the architect of this Ishtar equivalent, Andrew Stanton, the Pixar-based director of "Finding Nemo" and "Wall-E."
Rich Ross, chairman of Walt Disney Studios, said in a statement, "Moviemaking does not come without risk. It's still an art, not a science, and there is no proven formula for success."
Well, yes and no Rich. Stanton does have the magic formula when it comes to animated movies, but the guy never directed a big-budget live-action movie before. So it's clear you put the Carter before the horse when you gave a novice like Stanton carte blanche (or should we say Carter blanche?) to make his dream film.
Oh yeah, there is also that one other proven formula for success that Ross forgot to mention, and it applies not just to Hollywood, but investing as well. In fact, some say it's the only free lunch on Wall Street.
It's called diversification. And we doubt Disney's brass will forget it the next time somebody suggests going all-in on a flyer of a film like John Carter.
2. Greece Makes The Grade
Congratulations Greece! After all your trials and travails of the past year, you finally got an upgrade from a ratings agency. We here at the Five Dumbest Lab are so proud of your achievement that we are almost speechless.
Of course, Fitch only raised the country's bond rating from "restricted default" to a still junky "B-" after Athens carried out the biggest debt write-down/bond swap in financial history, so don't be too proud of yourselves.
Hey, we said almost speechless. Did you really think we could remain totally silent about Greece's debt crisis after all the blood, tears and ink spilled over this issue in the past year?
As they say in Athens: No freaking way!
A total of 83.5% of private investors holding Greek debt agreed to last week's bond swap, a deal which forced them to swallow losses of more than 70% on their holdings. As a result of the agreement, Greece will most likely gain access to 130 billion Euros ($170 billion) in additional bailout money from its Eurozone and IMF benefactors over the next few years. The country has been subsisting since May 2010 on its initial 110 billion Euro ($144 billion) goodwill package.
That's the good news. The bad news is that even after shedding all those obligations and scooping up all those bailout bucks, the Greeks are really no better off than before. Despite Fitch smacking a "stable outlook" on Greek debt post the upgrade, the country is actually less stable than ever. In fact, the country looks a whole lot like the floor of the Augean stables before Hercules got there.
Don't believe us? Think about it. The so-called troika that is effectively governing Greece -- the European Union's executive commission, the European Central Bank and the IMF -- are under so much pressure from their own constituents to squeeze Greece into line that the country's growth prospects are now slimmer than ever. Unemployment is rising and hope is diminishing.
Moreover, the moral hazard created by the bailout has eliminated any incentive for the Greeks to pay back their creditors. Look, if Europe bailed them out before, why won't they do it again? And if they don't, who cares? Greece's resentful population would gladly go back to the drachma in a heartbeat. Things can't get much worse for them, can they?
Here's another way to look at it. Remember how the United States broke away from England because of "taxation without representation"? Well, right now the Greeks are experiencing "austerity without representation."
Honestly, what the Greeks really need is their own George Washingdopolous to lead them somewhere, anywhere away from what is now a worse situation than ever.
They need greatness right now. Not a grade.
1. Farewell Cruel Goldman
Some Wall Streeters are calling Greg Smith's farewell letter cum New York Times op-ed his Jerry Maguire moment. And we can understand their point. The former Goldman Sachs(:GS) executive certainly had an epiphany about what he viewed as a negative change in culture at his former firm and felt compelled to share it with the world.
"Today is my last day at Goldman Sachs," waxed Smith. "After almost 12 years at the firm ... I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it."
Sure. We can visualize Smith, as played by Tom Cruise, decrying Goldman's greed as he proudly marches out of his corner office to begin a new, and more altruistic, chapter in his life. Maybe he even grabs an idealistic secretary on his way out in order to assist him with his new high-minded venture. And just maybe she looks like Renee Zellweger.
That said, while we certainly grasp Smith's grievances, we here at the Five Dumbest Lab, however, believe that Smith's send-off salutation is less Jerry than Navin, as in Navin R. Johnson.
Navin, if you remember, is the movie character whose Opti-Grab invention enabled him to rise from poverty to extreme wealth, only to lose his moral compass along the way. Like Smith, Navin made millions and millions of dollars selling products which ultimately proved to be harmful to his customers. And like Smith's former employer Goldman, Navin never really cared too much about the welfare of those clients until the government forced his hand.
Goldman ponied up $550 million last year for its conflict-of-interest sins. Similarly, Navin sent payments of $1.09 each to 9,987,653 plaintiffs to compensate them for his misdeeds.
Unlike Smith, however, Navin was wiped out after he personally mailed those check-filled letters. When he finally left his mansion, Navin took all he could carry with him: An ashtray, a paddle game, the remote control, a lamp, a chair. Those were his only possessions in the world before he was eventually saved by his family's good graces.
As for Smith, well, we don't expect him to mail back his millions to the clients he feels he, or at least his firm, defrauded. Or at least we've seen no indication of it. As he repeatedly reminded us in his letter, he went to Stanford and is far too smart to do that. (And apparently Smith, like Navin, was also a major fan of paddle games, boasting that he won a "bronze medal for table tennis" at an international competition.)
Yeah, we feel far more comfortable comparing Greg Smith to Navin R. Johnson than to Jerry Maguire. Two well-meaning guys who set out to find their "special purpose" but ultimately fell victims to corporate corruption.
Come on. You know the Navin R. Johnson we're talking about.
He's The Jerk.
--Written by Gregg Greenberg in New York.