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Sunday, 16 January 2011

The 5 Dumbest Things on Wall Street: Jan 14

5. Goldman's Recommitment Ceremony

So long Goldman Sachs, the inscrutable, all-powerful money-making machine. Hello Goldman Sachs, re-committed to being an all-powerful money-making machine.

Goldman dumped a 60-something page report on the public on Tuesday after an extensive review of the company was carried out by something it calls its "Business Standards Committee." This is a newish committee made up mainly of Goldman Sachs executives, plus one or two people intended to add outside perspective, such as Wal-Mart Chairman Lee Scott.

The choice of Scott has a certain poetry to it. It's as if Goldman, not knowing or trusting any ordinary people it could consult with to see how its behavior affects them, figured it would talk to someone who got very rich by understanding how to sell stuff to ordinary people.

But Scott only knows one way to sell stuff to ordinary people -- make it really cheap. Goldman apparently took that advice to heart when writing up its report. It's filled with cheap phrases like "the firm's culture has been the cornerstone of our performance for decades," and "the Committee believes all financial institutions, including Goldman Sachs, bear responsibility for constantly improving practices and procedures relating to the marketing and distribution of structured products." How bold.

Like many Goldman documents, the report veers from emptiness into absurdity. Take the list of abbreviations. Among TheStreet's favorites are EMD for Extended Managing Director and TCM, for Transaction Class Matrix.

And the report would not be complete without a flash of the trademark Goldman arrogance.

"We believe the recommendations contained in this report represent a fundamental re-commitment by Goldman Sachs: a re-commitment to our clients and the primacy of their interests; a re-commitment to reputational excellence associated with everything the firm does; a re-commitment to transparency of our business performance and risk management practices; a re-commitment to strong, accountable processes that reemphasize the importance of appropriate behavior and doing the right thing; and a re-commitment to making the firm a better institution."

In other words: We took a look at what we were doing. Ah, that was refreshing. Now let's go do it some more.

TheStreet Says: 60+ pages of "re-commitment" to assure customers you'll get serious about everything you do? Forgive us if we're not reassured. 4. 50 Cent's Penny Pump

The curious case of rapper 50 Cent using his Twitter account to endorse a stock in which he has a large investment could represent an evolutionary step in the blurring of the lines between celebrity endorsement and questionable stock advice.

While we don't know of any Securities and Exchange Commission cases revolving around Tweets, that day may not be far off. Maybe the SEC can announce the case against 50 Cent through its own Twitter feed, which would be a nice touch.

It's a tangled web that celebrities are weaving when it comes to stock picking, and in the least it's dangerous terrain, especially based on the fact that 50 Cent's name has a higher monetary value than the stock he was recommending as a great investment.

Much more value, actually. Before 50 Cent's Twitter recommendation sent shares of H&H Imports up near 300%, shares of the penny stock were trading at the lowest share price in their history. In a numerical irony, H&H's highest stock value occurred in June 2010, when it was trading at, yes, exactly the mark of 50 cents.

50 Cent and his lawyers are clearly concerned. 50 Cent's first Twitter post about H&H stated, "HNHI is the stock symbol for TVG there launching 15 different products. They are no joke get in now."

H&H makes a 50 Cent-endorsed line of headphones -- and when we say "makes" it's in the loosest sense of the term since H&H only has a headphone prototype, and at the recent Consumer Electronics Show in Vegas 50 Cent only had a picture of the prototype to show. Heck, even Lady Gaga was getting in on the action at CES, putting in an appearance on CNBC as well to talk up her Polaroid-branded products with Maria Bartiromo.

Once the mainstream press picked up on 50 Cent Securities, LLC's Twitter recommendations, the rapper dramatically altered his flow, going from spittin' hot fire about H&H to taking a page from an E.F. Hutton ad, Tweeting "HNHI is the right investment for me it may or may not be right for you! Do ur homework." Then reminding them that "I own HNHI stock thoughts on it are my opinion. Talk to financial advisor about it."

50 Cent owns 7.5 million shares of the company and the warrants on an additional 22.5 million shares for which he paid a total of $750,000, or 10 cents a share. Last Friday, right before 50 Cent began tweeting about H&H, shares doubled to 10 cents. By Monday, shares soared to 45 cents after the 50 Cent call -- a paper gain of $5.2 million. By the end of trading Thursday, H&H shares were back at 27 cents.

Once the media picked up on the potential "pump and dump" controversy, a 50 Cent spokesman pointed out that the rapper's shares were restricted, meaning that they could not be immediately sold as the share price jumped. Still, there were certainly some savvy investors who won on the churn.

TheStreet Says: We can see the new CNBC lineup now -- Lady Gaga replaces Erin Burnett while 50 takes over for Bartiromo. 3. Bill Gross Bugs Out

Bill Gross, founder and co-chief investment officer of Pacific Investment Management Co., dug deep into his literary tool belt for his latest investment outlook that was posted on the company's Web site last week.

"We are all ... mantises eating and being eaten, mindlessly thrusting and flailing about in activity that would make little sense to a visitor from another space-time."

From there it's on to references to Ahab, Buddha, the Dali Lama and so on and so on. But mantises are the key, make no mistake. We are all mantises of one sex or another.

Now, we have to admit, this caught our attention last week and, in hindsight, should have been a shoe-in for this column. Other dumbness, however, took precedent. It's an unfortunate reality of the gig.

Thankfully, Gross wasn't done this week patting himself on the back for his brilliant bon mots. He just can't let go of the mantis. That, and did you catch that he's read a lot of books? He's a worldly guy, OK.

"I used the praying mantis metaphor in my recent investment outlook pointing out that there are consequences for mindless political thrusting and Washington spending policies. We as Americans eventually lose our heads the way a male mantis does in the process of reproduction," said Gross during an interview with Bloomberg. "The point is the current and future generations of American mantises, male or female, will pay for this in terms of a price."

Bill, we get it. We got it last week. You see irrational, irresponsible behavior going on. Why it had to be sexually-tinged irrational and irresponsible behavior is beyond us, but, you know, your call. Now, can you please never mention this again, or at least find a way to do so that makes you sound less like a tittering 13-year old with few friends and a penchant for burning ants with a magnifying glass?

TheStreet Says: Any reason you couldn't have gone with lemmings? 2. Sears Signs On the Kardashians

Sears is looking to capture some of that Kardashian magic.

The long-suffering and almost irrelevant retailer sparked some buzz this week with the announcement that the Kardashian Kollection will be hitting store shelves at 400 stores in August. We can only assume this is phase two in the Kardashian sisters outreach program to the lower-income consumer, the first being their incredibly successful dive into the fee-laden prepaid credit card market that they had to back out of last month.

And when we think Kardashian, we immediately think of Sears. The collection, sorry, "Kollection," reportedly will consist of 60 pieces of jewelry, 30 bags, a dozen shoes and 40 apparel items. It's a natural synergy and we're sure the "Kollection" will look great right next to the Land's End merchandise.

"The exciting new collection will embrace Kim's glamorous red carpet looks, Kourtney's more Bohemian chic vibe and Khloe's rocker style," read Sears' announcement of the new line. "From timely pieces to fashionably tailored looks, the collection will appeal to all women who love fashion."

Sears has a great track record of pairing celebrities and its special brand of fashion. LL Cool J launched a line with the retailer in 2008 that sold so well that in 2009 LL Cool J himself had to come out and reassure people that the line was selling just fine and that there was no problem with his relationship with Sears.

And things are on the rise at Sears. This week the retailer reported that same-store sales were down 6% domestically in December and were down 3.8% for the year to date.

Unfortunately for Sears, the Kardashian Kollection announcement came out the same week that Advertising Age published the results of a study showing the ineffectiveness of celebrity endorsements. According to AdAge, the majority of television ads featuring celebrities in 2010 underperformed for brands, with less than 12% of the ads resulting in a greater than 10% lift for a brand. Granted, the study dealt explicitly with celebrity television spots and not c-list celebrity clothing lines, so we're sure the Kardashian's will fare better than Tiger Woods or Lance Armstrong or any other people with actual accomplishments under their belts.

TheStreet Says: Things must be bad when you turn to the Kardashian's as the first step in the road back to relevance.

1. Tostitos' Inside Man

Sports commentator, and we use the term commentator loosely here, Brent Musburger knows on which side his tortilla chip is salsa-ed.

The sports blogosphere was abuzz with accusations Tuesday that Musburger and Disney-owned ESPN cashed in for Tostitos chips before the game-winning field goal on the last play of the Tostitos BCS National Championship Game between Auburn and Oregon.

Musburger, calling the game Monday night for ESPN, said before the 19-yard-field goal by Auburn kicker Wes Byrum that gave No. 1 Auburn a 22-19 victory:

"This is for all the Tostitos."

Man that's catchy. It just rolls off the tongue, doesn't it? And who would call out Musburger for attempting a blatant and incredibly awkward product placement for those footing the bill for such a spectacle? Turns out, pretty much everyone.

Darren Rovell, CNBC sports business writer, had Tweeted that the product mention was worth $2.5 million. He then dutifully followed up with a Tweet from a spokesperson for Tostitos maker Frito-Lay, a unit of Pepsico , saying that the company did not pay for the one-liner. ESPN said it had nothing to do with it either.

Sadly, this wasn't even close to the first time Musburger has trotted out this clunky, wannabe catch phrase. It turns out that Musburger had used the same line in 2002 when Ohio State beat Michigan and would go on to play in the, why of course, Tostitos Fiesta Bowl national championship game against Miami.

TheStreet Says:Hard to beat Chris Berman's "back, back, back, back ..." home run calls, but Musburger gets added failure points for embedding corporate shilling into a signature phrase.

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