What to Watch on Wall Street This Week: Celebrity Beats and Blue Chip Feats

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Ronald McDonald waves to kids outside a newly opened McDonald's franchise in West Haven, CT, USA
You can never know in advance all the news that will move the market in a given week, but some things you can see coming. From the launch of a highly anticipated new online music service to the world's largest burger chain checking in with its quarterly numbers, here are some of the things that will help shape the week that lies ahead on Wall Street.

Monday -- Honoring the Dream: Don't expect to see a ticker symbols scrolling along the bottom of your screen on Monday. All of the major exchanges are closed in observance of Martin Luther King Jr. Day.

There is, however, one company reporting fresh financials on Monday. First Defiance Financial (FDEF) is defying conventional wisdom by announcing its latest quarterly results after 5 p.m. The Midwest banker and insurance agency will host its conference call on Tuesday morning.

Tuesday -- Beats Me: It will get even more crowded in the streaming music space when Beats Music rolls out on Tuesday.This isn't just another online platform. Beats Music has been generating buzz as a result of its all-star team of execs including Dr. Dre, Trent Reznor and Jimmy Iovine. A lot of money has gone into Beats Music, and that includes bankrolling a commercial in next month's Super Bowl broadcast.

Beats Music is an affiliate of premium headphone darling Beats Electronics. It hopes that music buffs will be willing to pay $10 a month for a streaming service that relies on celebrity musicologists to assemble its playlists, which it claims will be superior to those constructed by the algorithmic engines fueling the leading streaming sites.

Wednesday -- Be My Little eBay: The online revolution has been good for eBay (EBAY). The leading Web-based marketplace is also the company behind the popular financial payments processor PayPal. eBay reports on Wednesday. Analysts expect to hear revenue and earnings per share both climbed 14 percent for the holiday quarter.

%VIRTUAL-article-sponsoredlinks%PayPal has been the faster grower of eBay's two main businesses. It's been able to extend its reach far beyond facilitating auction transactions on eBay.com, and now a growing number of mainstream retailers accept PayPal as easily as they can swipe major credit cards. eBay has come a long way since its days as a place for Pez fans to swap dispensers.

Thursday -- Unhappy Meals: Things haven't been easy for McDonald's (MCD) since it's 10-year streak of positive monthly comps came to an end in late 2012. The world's largest restaurant operator has struggled to grow sales at the store level, and its push into premium items like fancy chicken salads and barista-brewed coffee beverages has confused patrons instead of exciting them.

Wall Street isn't holding out for a lot of growth when McDonald's reports on Thursday. Analysts see revenue and earnings climbing no more than 2 percent. One can always argue that at least it's a baby step in the right direction, but McDonald's has also missed Wall Street profit targets in two of the past three quarters.

Friday -- Battle of the Household Brands: Fridays are typically quiet on the exchanges, but that's not the case when you're in the heart of earnings season. Procter & Gamble (PG) and Kimberly Clark (KMB) are some of the blue chips stepping up with their latest quarterly results come Friday morning.

Procter & Gamble is the company behind Crest toothpaste, Pampers diapers, Gillette razors, and Duracell batteries. Kimberly Clark puts out Huggies diapers, Kleenex tissues, and Kotex feminine products. Let's hope a diaper war doesn't break out. That could get messy.

Motley Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends eBay, Kimberly-Clark, McDonald's and Procter & Gamble. The Motley Fool owns shares of eBay and McDonald's.

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What to Watch on Wall Street This Week: Celebrity Beats and Blue Chip Feats

Warren Buffett is a great investor, but what makes him rich is that he's been a great investor for two thirds of a century. Of his current $60 billion net worth, $59.7 billion was added after his 50th birthday, and $57 billion came after his 60th. If Buffett started saving in his 30s and retired in his 60s, you would have never heard of him. His secret is time.

Most people don't start saving in meaningful amounts until a decade or two before retirement, which severely limits the power of compounding. That's unfortunate, and there's no way to fix it retroactively. It's a good reminder of how important it is to teach young people to start saving as soon as possible.

Future market returns will equal the dividend yield + earnings growth +/- change in the earnings multiple (valuations). That's really all there is to it.

The dividend yield we know: It's currently 2%. A reasonable guess of future earnings growth is 5% a year. What about the change in earnings multiples? That's totally unknowable.

Earnings multiples reflect people's feelings about the future. And there's just no way to know what people are going to think about the future in the future. How could you?

If someone said, "I think most people will be in a 10% better mood in the year 2023," we'd call them delusional. When someone does the same thing by projecting 10-year market returns, we call them analysts.

Someone who bought a low-cost S&P 500 index fund in 2003 earned a 97% return by the end of 2012. That's great! And they didn't need to know a thing about portfolio management, technical analysis, or suffer through a single segment of "The Lighting Round."

Meanwhile, the average equity market neutral fancy-pants hedge fund lost 4.7% of its value over the same period, according to data from Dow Jones Credit Suisse Hedge Fund Indices. The average long-short equity hedge fund produced a 96% total return -- still short of an index fund.

Investing is not like a computer: Simple and basic can be more powerful than complex and cutting-edge. And it's not like golf: The spectators have a pretty good chance of humbling the pros.

Most investors understand that stocks produce superior long-term returns, but at the cost of higher volatility. Yet every time -- every single time -- there's even a hint of volatility, the same cry is heard from the investing public: "What is going on?!"

Nine times out of ten, the correct answer is the same: Nothing is going on. This is just what stocks do.

Since 1900 the S&P 500 (^GSPC) has returned about 6% per year, but the average difference between any year's highest close and lowest close is 23%. Remember this the next time someone tries to explain why the market is up or down by a few percentage points. They are basically trying to explain why summer came after spring.

Someone once asked J.P. Morgan what the market will do. "It will fluctuate," he allegedly said. Truer words have never been spoken.

The vast majority of financial products are sold by people whose only interest in your wealth is the amount of fees they can sucker you out of.

You need no experience, credentials, or even common sense to be a financial pundit. Sadly, the louder and more bombastic a pundit is, the more attention he'll receive, even though it makes him more likely to be wrong.

This is perhaps the most important theory in finance. Until it is understood you stand a high chance of being bamboozled and misled at every corner.

"Everything else is cream cheese."
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