5 Dumbest Things on Wall Street: May 1

ADVERTISEMENT

Air Force Folly

The U.S. Air Force soared to new heights over New York's financial district Monday. They successfully smashed through the stupidity barrier.

An already jittery Wall Street was spooked when an Air Force jet and one of President Obama's official planes flew low over the Statue of Liberty shortly after the market open.

With memories of Sept. 11 still lingering in lower Manhattan, many employees fled their buildings -- including traders at the New York Mercantile Exchange Building and employees of American Express (Stock Quote: AXP) and The Wall Street Journal, which is part of News Corp (Stock Quote: NWS)

Little did they realize, however, that the cat and mouse game being played in the skies above them was just a staged government photo-op.

An Obama administration official said the mission was to get a picture of the President's plane flying around the Statue of Liberty in order to update their photo files.

As to why the Department of Defense didn't just snap shots of Lady Liberty from the Staten Island ferry like every other tourist, we have no idea.

Never one to run away from a photo-op himself, Sen. Charles Schumer (D, NY) blasted the Federal Aviation Administration for not warning the public saying there was "no need to scare thousands of New Yorkers who still have the vivid memory of 9/11."

Meanwhile, a furious New York City Mayor Michael Bloomberg slammed the New York Police Department for not warning him about the stunt. Had he known, said Bloomberg, he would have tried to stop it.

President Obama, who was not aboard the plane, told reporters Tuesday that the more than $300,000 military exercise was "something we found out about along with all of you" and would not happen again.

Let's get this straight. The senator, mayor and the president were all out of the loop while New Yorkers are running scared in the streets.

It sure doesn't give us a lot of confidence when the only government official with a clue is a big, green statue in the harbor.

Dumb-o-meter score: 100 -- We salute America's 'Top Guns' with our top score for a job well dumb!






Pork Paralysis

Did they have to call it "swine flu?" Why not la influenza Mexicana or the Mexican jumping bug?

These are undoubtedly the questions America's pork producers are asking themselves as fears surrounding the so-called swine flu pandemic are causing consumers to shun the other white meat and slam their stocks. Despite the fact that the disease is not spread via the consumption of pig products, shares of Smithfield Foods (Stock Quote: SFD) and Tyson Foods (Stock Quote: TSN) fell 12.4% and 8.9% respectively Monday.

The World Health Organization reported that confirmed swine flu cases rose to 257 worldwide Thursday. The organization also announced it will stop using the term "swine flu" to avoid confusion over the danger posed by pigs. The illness will now be called by its scientific name H1N1 influenza A.

The proposed name change, however, is too little too late for commodity investors already slammed by scores of traders bringing their little piggies to market. June hog futures closed down 2.7 cents, or 3.4%, at 66.3 cents per pound on Tuesday after closing down the 3 cents a pound daily limit on Monday.

"This is not a food-related issue, it's a person-to-person issue," said Smithfield CEO Larry Pope, complaining about the misnomer. Smithfield, the largest U.S. hog and pork producer, said the flu was not present in hogs or employees at any of its worldwide operations, including its joint venture in Mexico.

Unfortunately for Pope and America's other pig purveyors, the world continues to view pork as, well, not kosher. No matter how illogical, countries including China and Russia are banning U.S. pork imports from states such as Texas, Kansas, and California, where cases were reported.

Once the swine flu joins the forgotten ranks of mad-cow disease and bird flu, global consumers will regain their taste for bacon, ham, ribs and pork chops.

Until that day, the old Wall Street saying will never prove more spot on: Bulls make money and bears make money. But pigs get slaughtered.

 

Dumb-o-meter score: 95 -- That's all folks!' Yes, Porky. It certainly is.




Dumbfounded About Dendreon

Dendreon's (Stock Quote: DNDN) cancer drug may prolong lives in clinical trials, but its stock is causing brain cramps at the Nasdaq (Stock Quote: NADQ).

Dendreon stock was inexplicably sliced by more than half Tuesday, mere minutes before shares of the biotech company were halted pending news regarding trial results for its cancer drug, Provenge . When trading in the stock resumed after Tuesday's close, the shares rocketed higher on positive Provenge data, more than doubling the lows seen during the fall and - much to the dismay of many shareholders forced to sell at a loss -- topping its pre-plunge price.

In a bizarre series of events, Dendreon's stock was trading above $24 a share until approximately 1:25 p.m. EDT when it suddenly fell off a cliff. Over the next two frantic minutes, the stock continued to selloff, sinking below $8 for a time, before being halted at $11.81 - a full 45% below the previous day's closing price.

No doubt some of the hundreds of thousands of shares sold during the frenzy came from investors unnerved by the stock's hasty decline. More likely, however, they were the result of automatic stop loss orders triggered by the stock's abrupt slide, meaning that most investors were unaware they were unloading their shares at the time.

The stock was still on hold at 2:00 p.m., when the company released the data showing Provenge extended the survival of patients with advanced prostate cancer by more than four months.

Those investors still in the stock -- or fortunate enough to scoop up shares during the brief but powerful selloff -- celebrated the good news. Shares rocketed to $25.75 in after hours trading Tuesday and opened up at $26.82 on Wednesday morning.

Alas, those poor souls who unwittingly unloaded their shares had no such luck, and they won't have much in terms of redress either. Late Tuesday afternoon, the Nasdaq ruled the trades were a result of a "clearly erroneous" brokerage error and would not be canceled.

The exchange says its decision is final and not open to appeal.

Our appeal to Nasdaq: Next time, don't just sweep the problem under the rug. Dig through the dirt and protect traders instead.

 

Dumb-o-meter score: 90 - Sorry Dendreon investors: Nasdaq doesn't know, doesn't care.




Citigroup Goes Begging

Somebody please tell Citigroup (Stock Quote: C) that billion dollar beggars can't be choosers.

Citigroup, which has collected $45 billion in federal bailout funds, is seeking permission from the Treasury Department to reward certain workers with bonuses, according to the Wall Street Journal. The beleaguered bank's chief executive Vikram Pandit requested the funds during a meeting earlier this month with Treasury Secretary Timothy Geithner in order to boost employee morale and prevent poaching, the paper said.

The size of Pandit's bonus appeal was not divulged. But Pandit certainly showed the enormity of his chutzpah simply by asking.

Granted, it must be tough for him to run a Wall Street bank with the government looking over his shoulder. And most certainly it must be gnawing at Pandit that rivals JPMorgan Chase (Stock Quote: JPM), Wells Fargo (Stock Quote: WFC), Morgan Stanley (Stock Quote: MS) and Goldman Sachs (Stock Quote: GS) are rushing to repay Uncle Sam's IOUs, while Citi is looking for more handouts.

We entirely understand that Citi's investment bankers and traders must be nearly catatonic over their compensation prospects now that the American taxpayer is signing their checks. In fact, it's probably their demoralized state that stirred Pandit to pitch the Treasury Secretary in the first place.

Our compassion for Pandit's plight, however, does not match the audacity of his request for more taxpayer money.

 

Dumb-o-meter score: 85 -- Don't fall for the sob story, Tim! Vikram is no victim.




Ken Lewis Gets Stripped

Don't tease us, you naughty shareholders of Bank of America (Stock Quote: BAC). If you are going to make Ken Lewis take it off, make him take it all off.

BofA's shareholders voted to strip the chairman's title from Ken Lewis by a narrow margin Wednesday, as investors at the company's annual meeting expressed disappointment with his handling of the Merrill Lynch deal and the bank's slumping shares. Director Walter Massey was chosen to replace Lewis as chairman of the bank's board, though Lewis will maintain his positions as president and CEO.

All 18 directors were voted in by what BofA characterized as "comfortable margins." As to whether their easy election victories will make the banks irate shareholders sleep any more comfortably at night, we here at the Five Dumbest Lab highly doubt it.

But that's a story for another dumb day.

Ken Lewis, not his flunkies on the board, danced on the mainstage at Wednesday's meeting. And he was anything but revealing, especially when it came to the question of whether BofA will have to raise additional capital at the conclusion of recent government stress tests of the nation's 19 largest banks.

"We're still waiting to hear from our regulators about what will be required, so we don't have enough information at this point to make a decision," Lewis said at the top of the meeting. Lewis also said he could not discuss details of the stress tests, which are not yet complete, until he gets the green light from regulators.

Clever move, Ken. You're getting very good at kicking the problem upstairs, blaming Washington for running your bank into the ground.

Back in December it was Federal Reserve Chairman Ben Bernanke and then-Treasury Secretary Henry Paulson pressuring you to remain quiet about losses at Merrill Lynch, which the bank was buying. In your testimony before New York Attorney General Andrew Cuomo in February, you said "it wasn't up to me" to disclose Merrill's fourth-quarter losses as they were becoming apparent.

Now, you are once again waiting on government instruction to tell you what to do.

So please remind us again Ken: Now that the shareholders have snatched your chairman title, and the government has clipped your authority -- what do we need you for anyway?

 

Dumb-o-meter score: 75 -- King Ken has no clothes. And it's getting awful windy in Charlotte.

 

 

 

 

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

Show Comments

Back to Top