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The 5 Dumbest Things on Wall Street: July 8

4. St. Joe Melts

It's summertime in Florida and the battle over St. Joe (JOE) is once again heating up. St. Joe's bullish chairman Bruce Berkowitz is telling investors not to sweat an inquiry by the Securities and Exchange Commission. Meanwhile, his hedge fund manager nemesis David Einhorn is playing it cool while shorting the stock.

As for us, we think this war over Northern Florida's largest landowner has officially boiled over into foolishness. And as everybody knows, that's our territory.

Berkowitz, the formerly market-beating manager of the Fairholme Fund (FAIRX) who bullied his way onto St. Joe's board in March, told Bloomberg there is "not a lot new" in last week's announcement of a formal investigation into the company's business practices.

Berkowitz said he made the call to disclose the probe which "covers a variety of matters", including internal controls and financial reports, so that he would not be hindered in resuming a stock-purchase program.

Lucky for him. He can now buy the stock a whole lot cheaper. Shares of the company sank more than 9% on Tuesday, the first day of trading after news of the investigation was released.

It was also lucky for Greenlight Capital's Einhorn. Einhorn, who famously called Lehman's demise, e-mailed Bloomberg that he "would love to see [St.] Joe use its limited cash resources by overpaying to repurchase its stock."

Einhorn will profit handsomely from deterioration in St. Joe, which he says grossly overvalues the land on its books. Berkowitz, on the other hand, maintains the land is fairly valued.

So, which big-hitting money manager are we to believe?

Well, Berkowitz was not fibbing when he said the government's review of St. Joe's business practices was nothing new. Back in January, the company told investors that the SEC was informally reviewing its real estate impairment practices. That means that regulators have been peeking into the company's books for a while now.

That said, just because Berkowitz is not lying does not mean he is telling the whole truth. Why all of a sudden did the investigation get upgraded, meriting a market disclosure? Are the government watchdogs now asking tougher questions?

Or is Berkowitz finally wilting not just from Einhorn's glare, but extra heat from the Feds?

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