I. Market News: Vinik's Games Frighten Tech Sector
II. Heroes: Magma Copper, Image Ent., Condor, Insignia, Penn Traffic
III. Goats: British Sky, GTI, Cin. Microwave, Softkey, Digi, Banyan
IV. Investment Perspective: And You Thought He Was Serious?
V. Calendar: Monday's Economic Events

MARKET CLOSE

DJIA: 5087.13, up 12.64
S&P 500: 606.98, up 1.61
NASDAQ: 1055.31, down 3.89

MARKET NEWS

This weekend, check out the action in our feature forum---Follywood! Terry Rossio, co-writer of "Aladdin," currently working with Steven Spielberg on one of his new Dreamworks animations, is at Keyword: Smash with his latest installment of Wordplay. It's terrific! He's also Follywood's guest in The Globe at 11 pm Eastern.

The market went back to business as usual (at least usual as of late). The Blue Chip DJIA and the broader S&P 500 both regained much of what was lost in yesterday's last-hour sell program, while the Nasdaq continued to head South. A Washington Post article claiming that Jeff Vinik has unloaded much of the technology holdings in Fidelity's Magellan Fund has technology watchers nervous (see Investment Perspective).

HEROES

The takeover from Down Under. Magma Copper <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MCU)") else Response.Write("(NYSE:MCU)") end if %> erupted today, up $6 1/4 to $27 5/8 on news that Broken Hill Proprietary Ltd., an Australian natural resources conglomerate, will buy the company at $28 per share. Putting an exact value on the buy-out is difficult since Magma has three different classes of preferred stock in addition to some outstanding warrants. The deal has been reported anywhere from $1.8 billion to $3.4 billion, depending on what news service you check. In early November, CNBC's "financial correspondent" Dan Dorfman promoted Magma Copper as a "buy" based on talk from two Everen Securities analysts who saw the stock at $28 to $30 within a year. In the spirit of fairness, we must say, "Not bad, Dan."

Dan was at it again today, actually, pumping up shares of Image Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:DISK)") else Response.Write("(NASDAQ:DISK)") end if %> $1 1/4 to $8 on a rumored buy-out. John Kluge, chairman of Metromedia International Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MMG)") else Response.Write("(NYSE:MMG)") end if %>, is reportedly considering acquiring the laser disk distributor and combining it with Alliance Entertainment <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:CDS)") else Response.Write("(NYSE:CDS)") end if %>. Kluge and a colleague own about 36% of Image, which has had decent earnings over the last few quarters. Alliance distributes music CDs whereas Image distributes video CDs, so the deal does make a fair bit of sense. Why Kluge would let it leak and have to buy Image at a higher price is unfathomable, though. Color us skeptical here at the Evening News whether this deal materializes.

Would you buy a $3 1/2 stock if it were trading at less than six times earnings and a book value of a little over $5? Amwest Insurance <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:AMW)") else Response.Write("(NYSE:AMW)") end if %> would. And they did today, causing Condor Service Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:COND)") else Response.Write("(NASDAQ:COND)") end if %> to soar $3 1/2 to $7. Amwest will exchange 0.5 of its common shares for each outstanding share of Condor. Speculation is that Amwest bought Condor to increase its back office capacity. Perhaps Amwest is looking to expand more rapidly than it has been recently.

Hospitality Franchise Systems (HFS) Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:HFS)") else Response.Write("(NYSE:HFS)") end if %> sparked a rally in Insignia Financial Shares <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:IFS)") else Response.Write("(NYSE:IFS)") end if %>, which gained $4 1/8 to $34 today on news that HFS is buying up a 4% stake. Insignia owns and manages rental properties, and HFS will represent Insignia exclusively for "preferred vendor services," whatever the heck those are. The press releases did not say and the company declined to comment today. The revenues from these "preferred vendor services" are to be split 50/50 with HFS, though. Frankly, it is really hard to tell what is going on here other than the fact that HFS is buying into Insignia---big.

Shares of Penn Traffic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:PNF)") else Response.Write("(NYSE:PNF)") end if %> absolutely hounded MF Shorty again today, up $1 1/2 to $14 5/8 on fairly stiff volume. He was not alone in feeling pain from an apparent bout of short covering, though; another company shorted by a Foolish analyst, Macromedia <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:MACR)") else Response.Write("(NASDAQ:MACR)") end if %>, was up $7 1/4 to $53 3/4 on heavy volume as well. Macromedia is buying all 62,000 of OSC Inc. for $2.8 million, which the market apparently loved. MF DrJimbo, who runs the Storage Technology industry folder, is the one to ask about this one; he is the MF shorting the shares.

GOATS

British Sky Broadcasting Group PLC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:BSY)") else Response.Write("(NYSE:BSY)") end if %> got a flat rating from investors today, who pushed the shares down $2 1/4 to $37 3/4 after officials said that they would scrutinize the giant's dominant position in the pay television market. The company was actually up early in the day on news that Morgan Stanley was getting set to add the company to its global stock index. The shares snapped right back after the director general of fair trading, John Bridgeman, said he would take a closer look at complaints lodged by British Sky's rivals. We hope no director of fair trading ever examines whether The Motley Fool has the market cornered on Foolishness. Otherwise, we might get hit pretty hard as well.

GTI Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:GGTI)") else Response.Write("(NASDAQ:GGTI)") end if %> was hyped all day as a networker that had seen a high of $40 last year. Today, though, the stock dropped $3 3/4 to $11 3/4 on news that the fourth quarter looks to be pretty grim. The company expects revenues to be at the same level as the third quarter but operating net will be below the third-quarter's level. CEO Gary Luick resigned shortly after the news was released, the first in a series of executive resignations today. GTI manufacturers networking equipment, sure, but it is not anything sophisticated or cutting edge. This ain't no Cisco Systems here, making hubs, switches and routers; these guys are making cable. It is about the equivalent of saying Delphi, once a highly valued online service, was down after bad news and then comparing it to America Online or CompuServe.

We hinted that some other CEOs resigned today, with big repercussions in the stock market. We would be remiss if we did not follow through on that teaser and let you know that Cincinnati Microwave <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:CNMW)") else Response.Write("(NASDAQ:CNMW)") end if %>, down $1 7/16 to $5 9/16, dropped because the CEO and founder left the company to "pursue other business interests." Cincinnati Microwave has seen better days, and was up pretty high last year when the ultrahigh frequency and microwave wireless communications company said it was going to get into the cellular business. After a few big charges to get out of it, however, investors saw this resignation as the last straw.

Softkey International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:SKEY)") else Response.Write("(NASDAQ:SKEY)") end if %> did the third-grade equivalent of running to teacher today, losing $4 3/4 to $29 after it went crying to the courts about how big bad Learning Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:LRNG)") else Response.Write("(NASDAQ:LRNG)") end if %> and Broderbund Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BROD)") else Response.Write("(NASDAQ:BROD)") end if %> have made "false and misleading" statements about the software concern. Did they say something like "you're software is all cheap hack jobs designed to appeal to penny pinchers?" Did they say something like "Softkey is the conglomeration of three of the biggest software losers of all time turned into a fake growth stock?" Oops---I guess *we* said that. There are a few businesses where it pays to be the low-cost, low-end producer, but software doesn't appear to be one of them. Ok, Softkey, you can come out of time-out now if you promise to play nice.

Some big money staked on Digi International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:DGII)") else Response.Write("(NASDAQ:DGII)") end if %> and Banyan Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:BNYN)") else Response.Write("(NASDAQ:BNYN)") end if %> meeting over the past few weeks was forfeited today, pushing Digi down $1 to $22 1/5 and Banyan $1 3/8 to $11. The companies announced a strategic alliance instead of the merger that many people were anticipating. Digi, which does remote access networking, and Banyan, which supplies enterprise networking, decided that if they integrated their products, but not their companies, they could both reap the benefits. Another one for the Speculating-On-Takeovers-Does-Not-Pay file.

INVESTMENT PERSPECTIVE: Magellan Manager Playing Market Games?

"Believe what I do, not what I say" was the message Fidelity Magellan manager Jeffrey Vinik sent to Wall Street today, thumbing his nose at investors who expected him to tell the truth about what he was buying and what he was selling in any interview over the last two months. The Washington Post reported today that Vinik has been liquidating Magellan's positions in a few stocks and this was enough to bring down the entire technology group. The ones he singled out were Motorola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MOT)") else Response.Write("(NYSE:MOT)") end if %>, losing $1 1/8 to $60 3/8, Micron Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:MU)") else Response.Write("(NYSE:MU)") end if %>, down $2 3/8 to $51 7/8, National Semiconductor <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:NSM)") else Response.Write("(NYSE:NSM)") end if %>, tumbling $3/8 to $21, and Alliance Semiconductor <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ:ALSC)") else Response.Write("(NASDAQ:ALSC)") end if %>, falling $2 7/8 to $19 5/8.

Fidelity never discloses this information directly, but cagey investors can glean this information from the company's periodic reports to shareholders at year's end and from SEC mandated reports which require funds to reveal their top ten positions. Except for this, though, it is virtually impossible to tell what any Fidelity manager has in his or her fund at any given moment, since it is all registered to Fidelity Management and Research (FMR) and not to the individual funds themselves. Complicating this further is the fact that fund managers at Fidelity very often trade with each other, bypassing the market entirely, in order for the activity not to be picked up by traders.

Vinik has ridden high over the past few years ever since taking control of the mutual fund Peter Lynch made great, and whose success has basically built Lynch an empire consisting of two best-sellers and a regular spot in a print magazine. Vinik is one of those "gooroos" the financial press loves to follow and quote, part of an elite circle of fund managers that includes Paul Wick of Seligman Communications, another manager who has been caught saying one thing and doing another this year. Wick liquidated Advanced Micro Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE:AMD)") else Response.Write("(NYSE:AMD)") end if %> even as he was hyping the stock to the press.

This recalls for the Evening News a soon-to-be-published interview with Jim Cramer, who until recently graced the pages of SmartMoney's Unconventional Wisdom column. Mr. Cramer's bold statement to the News was this: "All analysts [and money managers] are reporters." The traditional firewall between reporting and purchasing (one that requires most financial reporters for the conventional press to sign disclosure forms promising not to trade in stocks they cover) has essentially been shattered by Wall Street's media-hype star system, which puts high-profile money managers at odds with their readers. Mr. Cramer was dragged through the mud unfairly for a SmartMoney column he wrote where he talked about four small-cap stocks his fund was buying---an article that sparked a rally in those shares. The man's reputation was besmirched by Money Magazine, Kiplinger's and a number of competitors whose agenda was, if anything, questionable given that the upstart SmartMoney has stolen a fair bit of their audience.

Perhaps those same critics who hounded Cramer for simply talking about what he owned (and did not into the subsequent rally, an examination of SEC documents reveals) will go after Vinik with even more venom; he actually had the audacity to lie to millions in various televised and print interviews. In the continuing circle of the "outrage" of the week, these print publications clinging to the outmoded idea that the best reporter is one who isn't actually an investor might rile up people into a moral frenzy.

I prefer to take a different point-of-view, however. Mr. Vinik is employed by his fund's shareholders to generate market-beating returns. It is quite clear that this is his job, and anyone listening to his comments who does not factor that into it is more than a bit naive. Analysts and money managers should be able to do or say anything; anyone who follows such comments with lemming-like efficiency needs to re-examine his or her actions, in my estimation. It is never a sufficient reason to buy a stock because "Vinik likes it," or the analyst on CNBC's Buy, Sell or "Fold" likes it; all of these people are professional money managers whose agendas do not necessarily coincide with that of their audience. Rather, the financial industry is best served by introducing a healthy skepticism towards the comments of any professional investor, analyst or otherwise, a skepticism that the Fool attempts to foster in its readers.

I am not saying that you should not listen to money managers or analysts, or that they are only fit for ridicule. There are quite a few consistently good, honest and straightforward analysts whose work is always a pleasure to read. Jim Cramer, whose column is now in New York magazine, immediately comes to mind. Jim Crabbe of Crabbe-Huson is another straight shooter. On the analyst side, Michael Parekh of Goldman Sachs or Mary Meeker, a top notch software analyst, are also people to watch---most notably for their coverage of America Online specifically, and the online world in general.

Nevertheless, the hoards of newsletter writers, money managers and fund managers feted by outlets like CNBC should be viewed with the deepest of skepticism, blind faith remaining "the one unpardonable sin."

CALENDAR: Monday's Economic Events

---13- & 26-Week Treasury Bill Auction

Byline: Befumo/Sheard (MF Templar/MF DowMan)