The Five Dumbest Things on Wall Street This Week

No trades on 2DoTrade, Treasury follies, H-P-Compaq melodrama, no NYSE spies and Enron -- again.
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1. Mangia, Mangia! Er -- Scratch That

The

Securities and Exchange Commission

has suspended trading in

2DoTrade

(TDOT.OB)

, doubting the company's claim that it is prepared to distribute a disinfectant for anthrax. No wonder the agency is skeptical: Biotechnology seems a bit far afield from 2DoTrade's goal of developing a business-to-business platform for the African continent.

It's even farther removed from the company's original mission: According to a report filed with the SEC, it wanted to start a chain of full-service, white-tablecloth Italian restaurants "based on authentic Italian regional recipes." That plan was abandoned last spring.

In the meantime, it still has no revenue. 2DoTrade says it has cumulative losses of $29,000 because it's still in the development stage. A report on its Web site suggests the stock is "an exceptional ground-floor opportunity

for the investor with vision." But the SEC has publicly questioned the company's prospects, the existence of its alleged contracts, and the identity of its managers.

2. Treasury Department At It Again

Chalk up one more blunder for the Treasury Department. In the current fiasco, the SEC has said it's investigating the early release of news that the Treasury Department would stop selling 30-year bonds.

The Treasury apparently screwed up on two counts: Not only did it allow the news to leak out early through a third party (a consultant who attended a department briefing without press credentials), but it also posted the information on its own Web site before it was publicly announced. So it can't simply blame the premature disclosure on someone else's bad judgment.

Disclosure of the mistake is sure to further annoy bond traders, who were already piqued that the government had given no hint at the policy shift. According to press reports, many bond trading desks suffered big losses because they were caught unawares.

3. It Doth Protest Too Much

Hewlett-Packard's

(HWP)

affirmation of "enthusiastic support" this week for the merger with

Compaq

(CPQ)

rings a bit hollow, given that H-P's stock has seen double-digit losses since the merger was announced.

The board's recent frozen-smile commentary came on news that some of the company's most influential investors, members of the Hewlett and Packard families, oppose the deal and will vote against the merger if given the chance. The move by H-P heirs was all the more damaging because they control a large chunk of stock: According to press reports, the Hewletts own over 5%, while an institute affiliated with the Packard family holds more than 1%.

Even before the family members weighed in, investor disapproval of the merger was manifest. As

TSC

has

reported, stocks of both companies have dropped sharply after the deal was announced, slicing $6 billion off the deal's initial value of $25 billion.

But after news that the Hewlett family would oppose the deal, cheered investors bid up H-P 17% in just one day.

It's not often that the board of a company and its investors are at loggerheads -- and regarding the board's mood, we're reckoning panic might be more accurate than enthusiasm.

4. NYSE Lagging In Surveillance

Two years after the NYSE was embroiled in an illegal trading scandal, oversight of floor brokers is still too lax, according to government regulators.

Their report, released to members of a congressional committee in September, was made public this week. It says the Big Board has made "significant progress" in regulating brokers, but deficiencies remain: Among other things, the NYSE needs to improve surveillance of floor members, ensuring that regulators are on the trading floor to watch for potential violations.

In 1999, nine brokers pleaded guilty to criminal charges related to schemes in which they took a share of trading profits. At least 64 brokers took part in profit-sharing arrangements until 1998, according to the SEC.

No doubt the NYSE's regulatory improvements are commendable -- just hope it doesn't take another two years for the exchange to get its practices completely up to par.

5. Enron, Once Again

Enron

(ENE)

to shareholders: "Heyyyyyy, guys? You know all those financial statements we've been giving you for the last five years? Uhh ... they were totally wrong. Sorry."

Yes, just when it seems Enron has exhausted its considerable reserves of dumb things, the company surprises and produces yet another. This time Enron announced it would restate earnings from 1997 through the second quarter of 2001. "Financial statements for these periods ... should not be relied upon," the company said, in a statement likely to obliterate any lingering vestiges of credibility.

The adjustments to its financial statements reduced profits over the period by a total of over a half-billion dollars, while the accounting changes magically produced an additional $628 million in debt.

The announcement comes amid reports that

Dynegy

(DYN)

is in talks to buy Enron. With Enron's stock down about 90% from a year ago, at least it's likely to be cheap -- though it would be a stretch to call it a bargain under these circumstances.