The Five Dumbest Things on Wall Street This Week

Before we get to this week's "winners," the last word in the Steve Ballmer boogie matter: The people have spoken, and the clear victor in the name-that-dance competition was "The Corporate Jerk," with a stunning 39% of the vote.

Meanwhile, runner-up "The Orangutango" garnered 22%. And now for the low-end door prizes: A year's supply of oven cleaner and Brillo pads goes to "The Heavin' Steven," with 14%; "The Monopolist Monkeyshine," with 12%; and "The Ballmer Blitz," with 12%.

1. Abby's Road

It's a little awkward to be an unreconstructed bull these days. Just ask Abby Joseph Cohen.

The Goldman Sachs strategist, who two years ago rivaled Alan Greenspan as the guru Wall Street would most like to canonize, no longer appears quite so savvy. This week she revised down her forecast for the S&P 500, acknowledging that her original estimates for 2001 earnings were too high. Cohen, who kicked off 2001 with an S&P forecast for 1650 by year-end, later dropped that figure to 1550 and, as of this week, 1500.

The latest call means from Thursday's close through Dec. 31, Cohen expects the market to rise 29%. (As a frame of reference, in the last four months of bully '99, the S&P rose 11%.) That's like revising your prediction that the Mets will win the World Series this year down to saying they'll merely win their division -- when they've already knocked themselves out of contention.

At this stage, a revision that minor seems downright goofy. If you're going to revise the numbers, we're beyond the point of a tweak -- what's next, shaving off another 50 points on Dec. 15?

Cohen currently outbulls even steadfast market boosters like Credit Suisse First Boston's Tom Galvin, Lehman's Jeffrey Applegate and Merrill's Christine Callies. All have reeled in their near-term forecasts to below 1500 by now -- though some of them are still at the rainbow-colored end of the optimist spectrum.

Sure, anything can happen in four months. But given that third-quarter earnings warning are on pace to be the worst ever, according to Thomson Financial/First Call, "anything" means it could simply get worse.

2. Excite@Home's Bad Timing

With bad timing, a run-of-the-mill corporate decision can turn into a disaster. Unfortunately, that's a lesson Excite@Home (ATHM Quote) learned a little too late.

On Monday, the high-speed Internet access company disclosed that its independent auditors, Ernst & Young, had issued a "going concern" letter -- an expression of the accountants' substantial doubts about Excite@Home's ability to stay afloat.

If that weren't embarrassing enough, Excite@Home laid the grounds for more rumor-mongering by promptly firing Ernst & Young in favor of a new set of auditors at PriceWaterhouseCoopers. Not even Perry Mason on a good day got to introduce such an obvious smoking gun into evidence.

In reality, the story wasn't that simple. Excite@Home said back in June, as part of its annual proxy filings, that it was dumping Ernst & Young in favor of PricewaterhouseCoopers, and that it expected to make the switch sometime in the first quarter. (For the record, Excite@Home says it has neither had significant disagreements with its departing accountants, nor gotten any signals from the arriving ones regarding opinions they might render.)

Still, Excite@Home gets dumb kudos for its abysmal timing. Its clumsy reaction compounded what was already a worst-case scenario for any company: dealing with the possibility of its own demise.

3. Simon Scratched Off Over McDonald's Beef

Simon says ouch.

It's bad enough that an employee at promotions agency Simon Worldwide(SWWI Quote) was operating a multimillion-dollar criminal scam through the company. It's even worse that his scheme had the potential to sully the world's biggest brand name and Simon's biggest client, McDonald's(MCD Quote), thus guaranteeing relentless and embarrassing coverage.

Shares of Simon dropped 77% the day after the FBI arrested one of its employees on charges of rigging $13 million worth of McDonald's contests. The staffer allegedly sneaked out prize game pieces to people who agreed to pose as legitimate McDonald's "winners," in exchange for a cut of the proceeds. But the most damning part is, the con had been going on since 1995.

What's the appropriate corporate response to such a long-standing scam? Wounded professions of cluelessness don't cut it. In a statement, Simon's CEO said he "shared McDonald's shock" at the allegations, but the restaurant chain, unmoved, broke off its 25-year business relationship with the company anyway. And that's going to hurt: According to Hoover's, McDonald's supplied nearly two-thirds of Simon's revenue in 2000.

Meanwhile, McDonald's stock actually managed a gain the day after the arrests were made, on news that it would give away cash prices worth $10 million over the next week. Now that's smart.

4. Poor Visibility at the White House

In a move reminiscent of certain panicked tech companies, the Bush administration this week axed its earlier estimate for the budget surplus (think of it as national profit) by more than 40%. Not only was the estimate revision of gargantuan size, but it occurred only six weeks before the end of the fiscal year. Poor visibility, we assume?

The government steeply lowered last spring's surplus projection from $281 billion to $158 billion, blaming the shortfall on the "nearly stagnant" economy and the tax cut enacted after its initial projections.

There may be more revisions to come, too. The government's betting that interest-rate cuts and tax cuts will get the economy back on track by next year, but its growth forecast is distinctly on the hopeful side, at 3.2% for next year -- well above economists' expectations of 2.6% growth in 2002, according to a survey by the Federal Reserve Bank of Philadelphia.

Ironically, when President Bush first entered office, he and his aides irritated Wall Street with references to an impending recession. But his administration's forecasts for economic growth since have struck many economists as overly optimistic.

5. The Clown Prince of Brunei

It may seem like a lot of money got wasted on boom-era corporate frippery -- bacchanalian launch parties for Internet start-ups, premium office space, unseemly lunch budgets. But then something comes along to put it all in perspective.

Witness the recent Brunei auction aimed at covering the debts of the country's now-absconded Prince and ex-finance minister. The Prince of Brunei, now residing in Europe (safely beyond the reach of authorities), has been accused of embezzling around $16 billion from state coffers, according to press reports. What's worse, nobody wants the stuff he bought with the ill-gotten cash. The state's auction raised less than $8 million to offset debts.

If you thought Net companies frittered away money, consider the goods on sale in Brunei: gold-plated toilet brushes; a Comanche attack helicopter simulator; marble Jacuzzis; and two Mercedes fire engines, according to reports. Earlier, the government sold off the playboy prince's 50-meter yacht, the name of which isn't suitable for publication on a family Web site.

We're not suggesting the Internet bust is anything like the unsavory income transfer effected in Brunei -- just that when it comes to obscene capital spending, dot-commers weren't so impressive after all.