The Five Dumbest Things on Wall Street: Feb. 8

1. Wanted: Ethics

As anyone with an MBA surely knows, basic fraud has been a reliable, naturally occurring profit center in industries like rooster-fighting or waterfront kickbacks since time immemorial.

The real trick for the fraudsters of the world is to weave common deceit into a moneymaking method in more respectable fields like banking, which brings us dear readers to Wachovia Bank(WB Quote - Cramer on WB - Stock Picks) and the contretemps that broke this week, which we'll just call the "Yikes!" and "Double Yikes!" scandal.

Last year, Wachovia was accused in what at the time appeared to be a frivolous lawsuit of letting creepy, crooked telemarketers to use the bank to filch money. According to the accusations, the nation's fourth-largest bank went out seeking business from telemarketers who dialed for every dollar steeped in nothing but depravity, because when a victim managed to spot an errant transaction in a bank account that was supposed to pay for items like their food and clothes, Wachovia got to hit up the fraud boys for big fine money.

It was hard to believe such accusations could be true, if only because crime this dumb is so obvious that you are bound to get caught. Surely, if the fourth-largest bank in America turned to crime, it could put its vaunted American ingenuity to better use that this, no? Apparently not.

Remarkably, we learned this week of an internal email from a high-ranking employee warning of what was going on (hence the serial use of the word "Yikes!") An even more damning email pointed out in response that the bank was raking in a lot of money from what sure looks to the untrained eye like a lame scam. Or, in retrospect, if you are scamming scamsters by making money off of their being caught, are you, in the end, doing good work? Paging an MBA student who specialized in business ethics! Hello? Anyone there?

Dumb-o-meter score: 95. Yikes. Double Yikes. That kind of captures it all, doesn't it?

2. Banking for the Collective Good

Within the loftiest confines of the American banking system, where righteousness over the free market ethos abounds, the idea that there can be a turn toward communism might result in a puzzled blink or six. But it's true. U.S. banks, those usurers that seek to profit off the deposits of Mr. and Mrs. John Q. Public, find themselves utterly willing to be collectivists when it comes to sharing their losses.

You don't like it? What are you, a loser wimp like Trotsky? This is a Great Patriotic War we are all in, saving the banks and homebuilders from their own idiocy. Either line up in the parade, or good luck pleading innocent to the Revolutionary Council.

That's right, political change is in the air. This week, a Senate committee, no doubt with a friendly little nudge from the pinkos at those banks and homebuilders that just happen to be carrying subprime loans like 10 sacks of rice on one of Mao's farms, came up with a plan.

Businesses can use losses taken in 2007 and 2008 (when, coincidentally, banks had losses of well over $100 billion and still counting) to claim tax refunds. Of course, to deliver this power to the people, we'll all have to share in footing the bill to pay them back.

But that's what a socialist society is all about. Publicly funded losses will serve to build civic pride, knowing we are all in it together. Of course, I don't remember getting a check for my share of the profits, but that is probably an oversight on my part. Collectivization in this one-party socialist republic of ours has to be a two-way street, right?

Anyhow, call it Washington's new containment policy. Instead of stopping dominos from falling, our government will make American citizens spend their Domino's(DPZ Quote - Cramer on DPZ - Stock Picks) money to bail out banks and homebuilders.

And, hey, the pair of troubled industries might not have lobbied for that provision, which would only mean that in the Senate's Finance Committee is a nest of closet commies. And rather than contemplate the dark pale of conspiracy, I'd like to rejoice in the purity of collectivization.

Dumb-o-meter score: 88. "Is important to our members because it helps smooth out earnings and provides needed cash in a downturn," one homebuilding lobbyist was quoted as saying. And whatever helps banks and homebuilders, we know, helps smooth out the finances of all those cogs in the revolution like you and me. Enjoy your pizza budget while it lasts, comrade.

3. Over-Zell-ous Listening

The newspaper industry -- which is so successfully converting profitable subscribers into near-profitless online readers that it can now be declared its own worst competition -- needed a new man, one who could lead it down the path of positive results. Or at least away from the path of shooting yourself in the foot.

Look, some egghead who earned his professional chops writing 400-word briefs before he rose through the ranks is not going to have the imagination or the outside perspective to reinvent an industry that calls to mind horseshoes. It needs a free thinking and salty entrepreneur.

It needs Sam Zell.

Zell became chairman of Tribune about a month ago and promptly began a listening tour, only it has involved a surprising amount of talk. Specifically: cursing. But this week, when Zell was lurking around the Orlando Sentinel offices (outside in a tent, to be specific), he was asked by a woman photographer what his stance on journalism was beyond finances.

Zell, ever the charmer, told her that his view on journalism was something that made money so it could stay in business, unlike all the arrogant journalists who think "puppies don't count," meaning articles about puppies. Perhaps Zell was laying out his strategy for all to see -- save a multibillion company mired in a dying industry by feeding the public a steady diet of articles about puppies. "Iraq and the Local Puppy Population: A Four-Part Investigation."

Smells like a sound theory to me, but Zell couldn't leave well enough alone. Perhaps after a month of saving newspapers from themselves, the pressure is getting to him. Because, standing at the podium looking at his female employee, he then said: "F*** you." Lest you think this expletive was a fluke, he also referred to a Tribune executive as a "Mother***r."

Dumb-o-meter score: 82. At least those strategically challenged leaders of the newspaper industry who came through the ranks learned one management technique from those 400-word briefs. Even when you are driving yourself off a cliff, stick to family-friendly language.

4. Diller Plays Both Sides

Barry Diller, Jack of All Trades and Master of Some, always had a (p)unny existence when it came to InterActiveCorp(IAC Quote - Cramer on IAC - Stock Picks), his online conglomerate.

Could Diller ever connect the dot ... coms?
Would he be able to cross-promote his far-flung digital properties right on into Diller time?

Well, this week we had an answer, only it wasn't too (p)unny. In making the case for his plan to spin off a batch of digital properties, Diller conjured up quite a justification.

He said that the company's lame earnings, reported Wednesday, was proof positive that the company should be split like a log. This a company he was always trumpeting as a dream of online communal grandeur. Even the front page of the IAC Web site waxes promotionally about the prospect of action when taken jointly:

Our sole mission is to make daily life easier, more productive, more fulfilling and more fun for people all over the world. We're proud to have so many great brands under one roof. After all, when it comes to all the possibilities the Internet holds, how could we possibly just chose one thing?

Forget Diller Time. This week was Diller's time to make the case that because his conglomerate reported hundreds of millions in losses, restated earnings and spoke about future challenges ... it was time to start throwing a bunch of those great brands under a bus. The unbraiding begins, Diller hopes, with HSN, Interval, Lending Tree and Ticketmaster. Where the bus stops, and how many it drags along with it, no one will know.

Dumb-o-meter score: 75. The spinoffs "makes more and more sense," said Diller, who, if you listen to anguished shareholders like Liberty Media(LINTA Quote - Cramer on LINTA - Stock Picks), is making less and less sense.

5. Disney's Secret Sauce

This one time I won't be catty, petty, caustic and cynical. OK, I can't do all that, but at least I won't name names.

An otherwise intelligent analyst (I swear) was flapping his gums this week about Disney's(DIS Quote - Cramer on DIS - Stock Picks) surprisingly good earnings report in an otherwise intelligent way when he was asked as an aside what he would look for in entertainment companies. And he replied that he would look for companies with hits. To which I channeled my 10-year-old daughter and shouted: "Well, duh!"

Investing made simple, huh? Just find a company with a hit. Advice like that really gives our decision making process a supporting lift. Never mind taking on the risk of investing in companies before it's obvious that they have a hit. That's s-oooooo 2007. Wait until they have the hit. Then you pounce, after everyone and his brother has bought in.

The strategy is at once so novel and flawless that we owe it to ourselves to expand on it. Let's promise each other just to buy retailers that have spring lines that sold. And bet only on football teams like the Giants that, despite the odds, scored more points than their favored opponents.

Dumb-o-meter score: 68. Nothing to do with the analyst here and his firm grasp for the obvious. Just wanted to end the week asking why Belichick (that's a name that as a Giants fan I'm obligated to name) went for it on 4th and 13 instead of kicking a 49-yarder? If the Super Bowl is big business, that was the move of a big dummy.