RealMoney by TheStreet.com

Government's Latest Shakedown: $25 Billion -- Today's Outrage

twocents@thestreet.com (Chris Markowski) — Sat, 11 Feb 2012 12:52 GMT

NEW YORK (TheStreet) -- Jerry Garcia, late of the Grateful Dead, is probably turning in his grave.

When U.S. Attorney General Eric Holder and U.S. Housing and Urban Development Secretary Shaun Donovan announced the federal government and 49 state attorneys general reached a $25 billion agreement with the nation's five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses, something is definitely happening on Shakedown Street.

The shaken are Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial. ...

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They Just Don't Get Google!

twocents@thestreet.com (Marek Fuchs) — Fri, 10 Feb 2012 22:59 GMT

NEW YORK (TheStreet) -- Long operating off in the ether of Internet search, Google is apparently coming to your living room. They appear to be planning a home entertainment hardware device, a true departure.

As in the case of any distinct shift, Google faces a future full of natural challenges and advantages. But too many in the media (and, yes, Financial Times, I'm giving you the hairy eyeball) merely framed Google's move in a just-the-facts-ma'am fashion, including nothing about other companies history in shifting from one business realm to another or anything on the precise nature of competition Google will now face.

The New York Times did both. Both Apple and Amazon, they noted, have changed stripes. The online retail giant is now selling the Kindle, their own gadget--while gadget peddler Apple has shifted into selling content. That bodes well for Google's transition (though Amazon is losing bundles on the Kindle, so it's success is still an open question.) ...

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Oracle's Big Buy

twocents@thestreet.com (Marek Fuchs) — Fri, 10 Feb 2012 22:34 GMT

NEW YORK (TheStreet) -- Oracle swallowed Taleo whole this week for $1.9 billion, further reversing course on its formerly strident and mocking take on cloud computing.

And wouldn't you know it? A good chunk of the media didn't mention the reverse, which was severe enough to give longtime Oracle watchers whiplash. A violent change in direction is important to mention, though. It can be a sign of rudderlessness and desperation, think Hewlett-Packard, listing this way and that.

But a sharp change in direction could also provide evidence of a flexibility needed to remain viable in a competitive marketplace over time. What's the case with Oracle? Probably the latter, but you can't even proffer a guess at the answer if you are not asking the question. ...

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Bank Stock Investors: Ignore Mortgage Settlement (Update 3)

twocents@thestreet.com (Philip van Doorn) — Fri, 10 Feb 2012 22:14 GMT

Updated with market close information.

NEW YORK (TheStreet) -- Investors should ignore Thursday's foreclosure settlement.

The $25 billion settlement between federal regulators, 49 states' attorneys general, and the largest loan servicers -- including Bank of America , JPMorgan Chase , Wells Fargo , Citigroup , and Ally Financial -- removes some headline risk for the banks, while providing some cash to millions of consumers who lost their homes, but the banks were already substantially reserved for their immediate $5 billion cash payout, and the loans subject to principal write-downs as part of the settlement, had already been substantially marked-down by the banks. ...

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The Real Reason Behind Bank of America's Rally (Update 1)

twocents@thestreet.com (Dan Freed) — Fri, 10 Feb 2012 20:19 GMT

Bank of America story updated with Friday's share price movements in final paragraph.

NEW YORK (TheStreet) -- Bank of America bulls are feeling brilliant, as their bank is up 47% year to date, making it best performer in the S&P 500 year to date.

They should be congratulated, assuming they didn't buy the shares on Sept. 8, 2008 at $34.37. That's where Charlie Peabody, analyst at Portales Partners, told them to buy. Peabody, who no doubt had plenty of bullish company at that time, finally reversed that long-held conviction this week, downgrading the stock to "hold." ...

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Man Bites Dog As SEC Causes Downgrade

twocents@thestreet.com (Dan Freed) — Fri, 10 Feb 2012 20:06 GMT

NEW YORK (TheStreet)--The Securities and Exchange Commission, that infamous wrist-slapper of financial crooks, has actually caused a major financial stock to be downgraded.

On Friday, analysts at Bank of America Merrill Lynch downgraded Federated Investors to "Neutral" from "Buy" because of a widely expected rule proposal from the SEC that would tighten the rules for the money market fund industry. Federated, which is one of the largest money market managers in the U.S. and has 77% of its assets under management in money market funds, according to Merrill, is highly vulnerable.

"We had previously believed proposals were tolerable for Federated, but the possibility that the SEC will propose liquidity 'hold-backs' which limit the amount investors can redeem from money market funds would fundamentally alter the product in our view, potentially making it less widely used," the report states. ...

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Will Apple Reach $500 in February?

twocents@thestreet.com (Olivia Oran) — Fri, 10 Feb 2012 17:31 GMT

NEW YORK (TheStreet) -- Shares of Apple were on a tear this week, rising nearly 8% since Monday to $496.07 in recent trades.

The stock has also risen 23% since January.

Reports that consumer electronics giant would be releasing an iPad 3 next month sent Apple's stock soaring to new highs. The updated tablet will have better graphics, a faster processor and a higher resolution display, according to The Wall Street Journal. ...

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Greece Crisis Is Getting Worse

twocents@thestreet.com (Elliott Morss) — Fri, 10 Feb 2012 17:21 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- The eurozone situation was bad enough six months ago. It is getting worse.

None of the key players are addressing the fundamental problem the eurozone is facing: the weak sisters (Greece, Italy, Portugal and Spain) are not now and will never be competitive with Germany, et al. This problem will not be resolved until either the weak sisters or Germany, et al. leave the eurozone and issue their own currencies. ...

Mixed Feelings With Changing Jobs: Ask Noah

twocents@thestreet.com (Noah Kass) — Fri, 10 Feb 2012 13:30 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- Q: For the last four years I have been successful at my job. However, I have definitely reached a standstill . . . The company lacks direction and I'm constantly the one looking forward as my co-workers seem content to keep the status quo.

I'm aware my bosses feel I'm irreplaceable; they love my skill set and my vigilance! Regardless, I am ready to leave. I've already been offered a new job with a smaller more innovative agency. I have been consulting with family and friends and doing my own research, everyone feels it is a smart move. Truthfully I feel nervous, but imagine that's a very normal reaction? ...

The DOJ's 3 FCPA Strikes

twocents@thestreet.com (Richard S. Levick and Esq.) — Fri, 10 Feb 2012 13:18 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

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NEW YORK (TheStreet) -- After years of unprecedented success enforcing the U.S. Foreign Corrupt Practices Act -- the law that prohibits companies and individuals from offering or giving bribes to win or retain business abroad -- the Department of Justice has hit a series of major stumbling blocks that has commentators questioning the very future of FCPA enforcement. ...

GOP May Not Deserve to Win

twocents@thestreet.com (Peter Morici) — Fri, 10 Feb 2012 12:32 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- Rick Santorum's victories in Colorado, Missouri and Minnesota laid bare Mitt Romney's weaknesses and the GOP's fading prospects for defeating Barack Obama.

Romney's advantages are money and organization. His well-financed machine overwhelmed opponents in Florida, but he chose not to devote many resources to those beauty contests, and without the advantages of money -- and massive attack ads -- Santorum bested him by an average margin of 20%. Rick Santorum ...

If Facebook Is Worth $100 Billion, Google Looks Cheap

twocents@thestreet.com (Minyanville) — Thu, 09 Feb 2012 22:07 GMT

By Steve Birenberg NEW YORK (Minyanville) -- The latest quarterly earnings season continues to be the dominant influence on Wall Street, but a few other events have imposed and impacted trading in media and communications stocks. In particular, the Facebook IPO filing has taken center stage. Facebook will not begin trading for a couple of months, but an active market for the shares in private transactions strongly suggests that when it does come public, it will be valued at near $100 billion.

Growing more than 50% annually with $3.5 billion in revenues and over $1 billion in operating profit, $100 billion is extremely generous but probably about right given historic valuations of major Internet IPOs. I have received a lot of questions from friends and clients about buying Facebook, but with the stock likely to rise sharply from its IPO price, taking the valuation well north of $100 billion, it is hard to make a recommendation. More from Minyanville Can Facebook's Lowliest Millionaires Afford to Settle Down? Wireless Broadband, Mobile Still Driving Media Industry Verizon and Redbox Take a Shot at Netflix, Facebook Faces Its Critics

Basically, until it starts trading, we do not know what price you will pay for Facebook. Unless you are very wealthy and an important client of one of the underwriters, you will not be able to buy Facebook at the IPO price. I would buy it at the IPO price but probably not too much higher. ...

Sprint's Troubled Quarter

twocents@thestreet.com (Marek Fuchs) — Thu, 09 Feb 2012 17:19 GMT

NEW YORK (TheStreet) -- Any reasoned coverage includes sales and earnings compared to expectations, but successful traders must also be mindful of how non-headline numbers compared to expectations.

Unfortunately, the bulk of the media failed to alert anyone on Sprint's iPhone numbers.

Here's the deal: Sprint reported a troubled quarter. While there was excitement about the iPhone's potential impact on the troubled Kansas company's fortunes, they are subsidizing the product to a nearly comical degree, losing money they won't make up anytime soon (if ever) with contract fees. ...

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Revolution in the Boardroom

twocents@thestreet.com (Richard S. Levick and Esq.) — Thu, 09 Feb 2012 13:48 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Richard Levick and Kathleen Wailes

NEW YORK (TheStreet) - Activist investor Daniel S. Loeb just claimed another corporate scalp. Tuesday's announcement that Yahoo Chairman Roy J. Bostock and the company's three longest-serving directors will not seek reelection represents Loeb's second major victory in as many months. In January, Yahoo CEO and co-founder Jerry Yang stepped down amid rampant speculation that Loeb was plotting a proxy fight aimed at forcing a management shakeup. Yang's ouster and the subsequent board overhaul were no small feats, even at an underperforming company such as Yahoo. Notch another win for the activists. More are sure to follow. ...

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Where Do the Candidates Stand on China?

twocents@thestreet.com (Lauren Bloom) — Thu, 09 Feb 2012 12:48 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- The recent revelation that Apple's business partners aren't always squeaky clean has had China much in the news of late. Reportedly, Foxconn, a Chinese manufacturer that sells computer parts and microchips to Apple subjects its hundreds of thousands of employees to appalling working conditions.

Between January and November of 2010, 18 Foxconn employees attempted suicide, with 14 succeeding, to protest low wages and on-site hazards. Apple's good-guy image took an even more serious hit from headlines in January 2012, when 150 Foxconn workers threatened mass suicide after the company refused to pay promised compensation. ...

Why China-Bashing Is Not a Good Strategy

twocents@thestreet.com (Kathleen Brush) — Thu, 09 Feb 2012 11:00 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- China-bashing is back with a vengeance. American politicians know that voters love this type of tough talk. They also love a bogeyman that can be fingered for the nation's economic ills. Red China, the last bastion of the evil communists is a perfect Darth Vader-like replacement for America's former arch nemesis, the Soviet Union. There it lurks manipulating its currency, stealing intellectual property, aiding U.S. enemies, abusing human rights and causing America's trade deficit. So what if this takes China out of context, most Americans don't know that.

The Chinese have made it clear that they don't like the rhetoric, except when it can be repurposed into rhetoric on the dangers of democracy and individual freedoms. For example, America as a greedy soon to be ex-economic superpower suffering from capitalism gone wild, being led by a failed democratic system that prioritizes opposing points of view over national progress. Add to this a warmongering nation obsessed with military power following in the footsteps that felled the Soviet Union. So what if it takes America out of context, most Chinese don't know that. ...

Why Our Currency Will Fail: Opinion

twocents@thestreet.com (Chris Martenson) — Wed, 08 Feb 2012 16:03 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (ChrisMartenson.com) -- The idea that the very same economic forces that are currently plaguing Greece, et al., are somehow not relevant to the United States' circumstances does not hold water. As goes the rest of the world, so goes the U.S.

When we back up far enough, it is clear that money and debt are there to reflect and be in service to the production of real things by real people, not the other way around. With too much debt relative to production, it is the debt that will suffer. The same is true of money. Neither are magical substances; they are merely markers for real things. When they get out of balance with reality, they lose value, and sometimes even their entire meaning. ...

Curb Trade Deficit and Rev Up Oil: Opinion

twocents@thestreet.com (Peter Morici) — Wed, 08 Feb 2012 15:07 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- On Friday the Commerce Department is expected to report that the deficit on international trade in goods and services was $47.8 billion in December, unchanged from November.

This trade deficit is the most significant barrier to more robust economic growth and jobs creation -- even more formidable than the federal budget deficit -- because its effects are more enduring. ...

Death by Technology

twocents@thestreet.com (Vince Crew) — Wed, 08 Feb 2012 15:05 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- Yes, I'm a bit of a Luddite. For 20 years, I successfully sold the benefits of technology from mainframes, video, voice, data and every networking/transmission option available -- up until I got out of the industry in the mid-'90's.

Since then I have disavowed the paperless era, the culture that made technology our master instead our slave. Not only did I believe that pack of lies, I got others to do so as well. ...

Disney Earnings Coverage Disappoints

twocents@thestreet.com (Marek Fuchs) — Wed, 08 Feb 2012 13:46 GMT

NEW YORK (TheStreet) -- You don't have to be a financial journalism forensic specialist to chip away at media coverage of Disney's earnings, reported yesterday.

Reuters, for example, said right in their first sentence that the company's movie studio put in a "poor showing," later adding that company also has been trying to boost the movie studio's performance, which implies a failed effort. Ouch. That take is simply too harsh and simplistic. The New York Times, by contrast, got it right with this more measured assessment: "Moviemaking was more of mixed picture." ...

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Election Stocks: The Big Winners

twocents@thestreet.com (Nat Worden) — Wed, 08 Feb 2012 12:00 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- Investors are all too often their own worst enemies, and one common way this manifests itself is through political bias.

In the run-up to the reelection of President George W. Bush in 2004, die-hard Democrats were too willing to ignore or deny the economic expansion that was under way because they were anxious to see the incumbent lose his job. These emotions probably led some investors to miss out on the full benefits of the bull market that was under way then, and the same is true in 2012. Staunch Republicans accuse President Obama of leading the country down the road to ruin even as the S&P 500 has essentially doubled from the lows it made shortly after the Democrat took office -- an epic rally by historical standards....

Bank of America Will Hit $10 in 2012: Poll Wrap

twocents@thestreet.com (Dan Freed) — Wed, 08 Feb 2012 11:00 GMT

NEW YORK (TheStreet) -- Bank of America will reach the $10 mark before 2012 is done, according to an online poll of TheStreet's readers.

More than 75%, or 907 of the readers who voted in the poll believe Bank of America will hit $10 sometime this year, while just over 17%, of 210 readers, see the bank accomplishing this feat in 2013. Just shy of 4% of the readers polled predict Bank of America won't hit $10 until 2014, while another 3% or so don't see the bank ever reaching the $10 mark.

Bank of America's stock price has had a tremendous run of late. Since bottoming at $4.92 in December, the shares are up nearly 60% through Tuesday's close of $7.85. ...

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The Death of Big Bank Power and the Rise of Tech Hegemony

twocents@thestreet.com (Minyanville) — Tue, 07 Feb 2012 21:40 GMT

By Conor Sen NEW YORK (Minyanville) -- The biggest change that occurred during the tremors of 2008 that nobody caught was the power hand-off from banks to tech companies.

One of the most fascinating economic history books I've read is The Pursuit of Power a look at 1,000 years of world history and how changes in technology, military technology in particular, altered the dynamics of power relationships throughout the world. Developments as wide-ranging as the discovery of gunpowder, the introduction of military drilling, and the invention of the internal combustion engine have had profound impacts on society that are often visible only with the benefit of decades or hundreds of years of hindsight.

Similarly, we see that as society changes, the institutions that dominate the organization of production and human interaction have tended to wield unchecked power and collect monopolistic profits. Think of the pharaohs, emperors, and kings of the ancient world, or the church in the Middle Ages. ...

Alcohol: Serial Killer With a Social Pass

twocents@thestreet.com (Elliott Morss) — Tue, 07 Feb 2012 19:08 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- I just saw the great movie "White Irish Drinkers" and it got me thinking. Global deaths from smoking are almost twice as high as alcohol-related deaths -- 5.4 million vs. 2.5 million annually. And yes, it is also true that nearly half of all heavy smokers will die because of the "sticks." But there are many other ways drugs can kill. It turns out that the damage resulting from excessive alcohol consumption dwarfs that from cigarette smoking. Smoking and Drinking 'Externalities' Heavy smoking/drinking causes health problems for the individual smoker/drinker -- like death! But aside from secondary smoke, the side effects/externalities of smoking are quite limited. You can work (even if you have to go outside periodically for smokes), you can drive to and from work, and you can be a good parent.

If anything, smoking allows people to relax and focus more on the task at hand. And with the growing global obesity epidemic, smoking is a plus -- weight control. As I have noted in an earlier piece, people who stop smoking normally gain 5 to 15 pounds....

Smartphones in Context

twocents@thestreet.com (Marek Fuchs) — Tue, 07 Feb 2012 17:33 GMT

NEW YORK (TheStreet) -- The media are not wrong in reporting on the Great smartphone battle. They are just not right enough. With numbers--as in concepts--it's always context that counts.

But don't tell that to The Los Angeles Times. They reported on global smartphone shipments numbers released by International Date Corp. and bore right in on the 2011 total, which was up an impressive 61.3%. From there, the LA Times went in the typical direction: talking about who was number one, Samsung for the year, Apple in the 4th quarter, as well as who was the year's biggest loser. Good guess: Nokia.

It was, from start to finish, a battle-of-the-smartphone story. That's typical of the media: report on who is up and who is down, as if smartphones were politics or the American League East. ...

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Greek Default: Why Now May Be Best Time to Do It

twocents@thestreet.com (CNBC) — Tue, 07 Feb 2012 17:00 GMT

By Jeff Cox, CNBC.com Senior Writer

NEW YORK (CNBC) --As sovereign debt defaults go, there may be no better time than now for Greece.

Global investors are clearly in risk-on mode, with the US stock market off to its best start in 15 years and equities in many emerging markets faring even better. ...

Bank of America Will Skip a Foreclosure Deal Rally (Update 1)

twocents@thestreet.com (Dan Freed) — Tue, 07 Feb 2012 16:13 GMT

Bank of America story updated to include information on a class action lawsuit in second to last paragraph.

NEW YORK (TheStreet) -- Bank of America bulls are hoping a $25 billion deal with the Obama administration and attorneys general across the U.S. will help the bank get some of the baggage of the housing crisis off its back, but a deal won't shut the door on the bank's housing-related headache.

Bank of America and other giant lenders, including JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial are reportedly planning to settle a wide-ranging investigation into foreclosure-related abuses by attorneys general in all 50 states. A deadline for a deal came on Monday, but it was not clear late in the day whether one had been reached. ...

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Bell Rings for Bond Bubble

twocents@thestreet.com (Michael Pento) — Tue, 07 Feb 2012 16:12 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- They always tell you no one rings a bell when a market top or bottom is reached. But a bell is now ringing for the end of the 30-year bull market in U.S. debt. And ironically, the bell ringer is our very own U.S. Treasury!

The U.S. Treasury Borrowing Advisory Committee, which brings together dealers and Treasury officials, met last week in a closed meeting at the Hays Adams Hotel. The committee members unanimously agreed that the Treasury should start permitting negative interest rate bids for T-bills. In other words, newly issued T-bills from the Treasury would offer investors a guaranteed negative return if held to maturity. ...

The Federal Budget Bombshell: Opinion

twocents@thestreet.com (Jeff Kleintop) — Tue, 07 Feb 2012 15:54 GMT

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheStreet) -- In one week, President Obama is due to submit his 2013 budget, which covers the fiscal year beginning Oct. 1, 2012.

The Congressional Budget Act of 1974 requires the president to submit a budget request to Congress on the first Monday in February, but the administration has scheduled the release for one week later, on Feb. 13. ...

Facebook's $100 Billion Valuation Unrealistic?

twocents@thestreet.com (Eric Jackson) — Tue, 07 Feb 2012 11:00 GMT

NEW YORK (TheStreet) -- For Facebook, which will carry a ticker symbol of FB, to receive a $100 billion valuation when it makes its IPO debut, investors will have to make a lot of assumptions about their future growth.

Do you remember when we were going to run out of oil in 1980? ...

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