The 5 Dumbest Things on Wall Street: Oct. 15

(5 Dumbest article updated with new information on Bank of America resuming foreclosures, a report on Yahoo turning the bidding tables on AOL and Starbucks testing alcohol in stores.) 5. Super-Size My Foreclosure!

When U.S. mortgage lenders saw the housing market going down the tubes and a wave of foreclosures headed their way, they of course staffed up with the most highly qualified accountants and mortgage processors they could find. So qualified, in fact, they found an honorary name befitting their learned stature: Burger King Kids.

Ding! Fries are done -- and please vacate the premises by sundown Friday!

Indeed, the Burger King Kids moniker, according to The New York Times, came courtesy of JPMorgan Chase ( JPM), which was joined by the likes of Bank of America ( BAC), Citigroup ( C), GMAC and Goldman Sachs ( GS) in hiring squadrons of processors who couldn't define the most basic terms of the mortgage industry, much less accurately process the tsunami of documents that overtook them. And tsunami is anything but an overstatement, as the Financial Times discovered when it dug up court testimony from a midlevel Wells Fargo ( WFC) employee who said she signed off on up to 500 "foreclosure-related documents" daily.

Yes, when it came to seizing property and removing people from their homes, it's so reassuring to know that lenders were just as careful as they were when they issued the mortgages in the first place. Of course, at President Obama's next town hall meeting, you can be sure he'll be asked how long he intends to unjustly pound on Wall Street fat cats to score political points. The answer is: as long as Wall Street keeps setting itself up to be the piñata. As far as banks' handling of mortgages, they keep handing the public the stick while inviting them to forgo the blindfold.

All 50 state attorneys general have joined forces to investigate big banks' foreclosure practices, causing an overhang of uncertainty for many stocks. On Friday, Bank of America shares hit a 52-week low of $11.74. Despite this Bank of America announced on Monday that it would resume foreclosure proceedings in 23 states next week, after modifying 102,000 foreclosure affidavits that were called into question.

But let's say you don't buy into the populist rage of it all, and prefer to focus on the fact that these people didn't pay their bills and that's that. Fair enough. But there's plenty that should raise investors' eyebrows. FBR Capital Markets analyst Paul Miller said in a note to clients on Thursday that the cost of foreclosures could reach $10 billion. "We would note this is an earnings issue and not a capital problem, and although $6 billion-$10 billion is a large amount, we believe the industry could comfortably absorb these losses," Miller said.

Then again, noted Miller, between Basel capital requirements, regulatory reform, mortgage repurchase expenses and now the foreclosure issues, banking hasn't been the smoothest of industries as of late.

"Investors are becoming exhausted hearing about one issue after another," Miller writes. "Even though we believe that this foreclosure issue could be overblown in the media, we have to wonder: what is the next shoe to drop for the industry?"

Or the next BK Broiler, as the case may be.

TheStreet Says: Oh, you silly banks. You just make it so hard to, you know, trust you with our money.

4. AOL and Yahoo!: Because the Last Merger Went So Well

Yahoo! ( YHOO) and AOL ( AOL) don't exactly have the best track record when it comes to mergers and acquisitions, so forgive us if we scoff at the rumor and the odds of success if AOL makes a bid on its much larger rival. How often does a company with a market cap of around $2 billion take over its $20.5 billion rival?

Yahoo! is certainly making a good show of it. The company hired Goldman Sachs ( GS) to defend against hostile takeovers. And fighting buyouts has worked really well for Yahoo! in the past -- like the righteous foresight by Yahoo!'s board two years ago to walk away from Microsoft's ( MSFT) $31-a-share merger so that it could ride the share price down to almost half that today.

Following on a story last week by Silicon Alley Insider, The Wall Street Journal reported late Wednesday that private equity investors have considered financing AOL in an acquisition of Yahoo!.

To be fair, Yahoo's go-it-alone strategy isn't working out so well for anyone other than CEO Carol Bartz. The latest search ad market share info from ComScore shows Yahoo! dipping nearly a percentage point in the standings as Google and Microsoft pulled in more business in September.

And in a total pants-on-fire move, Microsoft buddied up Bing with Facebook Wednesday to add some of that social networking stuff that half a billion people like to do.

By the end of the week, the market didn't know which was a better deal, AOL taking aim at Yahoo! or maybe the other way around. A report issued by Evercore Partners on Friday, Oct. 15, said the companies would be better off if Yahoo! did the acquiring. Sounds like some bad poker. We'll see you one bad idea, and raise you another.

So, yes, Yahoo! may be vulnerable. And when companies can't right themselves, outsiders start to itch for a chance at the helm. That said, even if it put together a successful bid, does anyone have confidence that AOL could capitalize on the synergies it sees so clearly on paper?

There was once a company that saw similar synergies in AOL and put together a can't-lose package to lead the world into the modern age. It was called Time Warner. That worked out well.

TheStreet Says: Yahoo! can put as many exclamation marks as it wants on the end of its name. We refuse to get excited about "synergies" -- or M&A-speak for "we're gonna fire a bunch of people and claim we just increased efficiencies."

3. Green Energy = Jobs! We Think!

You've read it in a headline somewhere and probably taken it for granted: green energy = job growth. Sounds simple enough. It also makes one feel good about the direction in which the country is headed at a time when national unemployment remains at a dangerously high level and we're melting the polar ice caps faster than polar bears can swim toward Santa's house.

Yet the green energy = job growth formula is lacking in one important quality: actual labor data. Other than annual reports from trade groups that are paid for by the green energy-sector companies, there hasn't been any accepted economic model or nationwide census to study the actual trends in green energy hiring.

In fact, it wasn't until this year -- and a recetly announced Obama Administration green-jobs study -- that the Bureau of Labor Statistics even received money from the federal budget to actually study the green energy-job market.


The reality is that many of the U.S. green energy companies are facing significant challenges. A recent report from Vice President Joe Biden's office highlighted the jobs that companies in the green energy sector are creating as part of the federal stimulus funds they have received -- but raised as many questions as it answered.

Take Beacon Power and its 20 megawatt innovative flywheel energy storage plant in Stephentown, New York, which will create 20 construction jobs and 40 permanent jobs. On the same day that Beacon Power put out a press release heralding its inclusion in Biden's list, the company also announced that it had received a letter from the Nasdaq Stock Market that its common shares failed to comply with the $1.00 minimum bid price required for continued listing. Beacon Power shares, currently trading at 35 cents, haven't eclipsed the $1 mark in more than a year. Just this week the company said it was denied a second loan commitment from the federal government.

Wind power was another focus of the Biden report, and yet, 2010 has been one of the worst years on record for the U.S. land-based wind power market. The American Wind Energy Association's 2010 mid-year report said 700 megawatts of wind power were installed in the U.S. during the second quarter, bringing the total up to more than 1.2 gigawatts installed at the mid-year point. That's 57% below the 2008 level, and 71% below the 2009 installed base. The AWEA projected that wind power would decline somewhere between 25% and 45% this year.

The pain in the wind power sector was certainly reflected in the stock price of Recovery Act project company Broadwind Energy ( BWEN), down more than 70% this year, and that's after a recent rally in shares.

The reality is that the headlines over the past year have all been about solar companies shipping jobs elsewhere. Save for

First Solar ( FSLR), which on Thursday, announced a manufacturing expansion that will create 600 jobs in the United States, there's been something of an eclipse in solar job growth. Evergreen Solar ( ESLR) moved its manufacturing operations to China in a bid to remain competitive. Energy Conversion Devices ( ENER) recently announced that it was shipping more than 100 jobs from its Michigan plant to Mexico.

TheStreet Says: We love green energy as much as the next polar bear, but nobody said it was the WPA.

2. Huuuuuu....luuuuuuu??? Where Are You, Hulu?

Hulu doesn't seem to have gotten the memo on the whole Internet TV thing.

When Sony ( SNE) announced its lineup of Google ( GOOG) TV products this week, Hulu was notably absent from the discussion in much the same way it's been absent from most platforms for some time now.

Though a long-rumored feature of Google TV, Hulu stood on the sidelines as NBC, Pandora, the NBA and primary rivals Amazon ( AMZN) Video on Demand and Netflix ( NFLX) sidled up to the next big thing in Internet TV. When asked why the Hulu Plus subscription service was nowhere to be seen, even though Hulu partner NBC made the lineup, Hulu spokespeople responded "The Hulu and Google teams are currently in discussions to bring the Hulu Plus subscription service to Google TV enhanced environments."

Given Hulu's track record, it should talk faster.


If Hulu is hoping that it's $9.99-a-month subscription service will help it fight off other video providers, the GE ( GE)/NBC, Disney ( DIS)/ABC and News Corp. ( NWS)/Fox joint venture should know it's already way behind on the cards. Hulu Plus is accessible on Samsung TV and Blu-ray players and will be available on certain Sony and Vizio products this fall. Netflix is also there. Hulu Plus just returned to Sony's PlayStation 3 after blacking out its service there last year and plans to jump on Microsoft's ( MSFT) Xbox 360 next year. Netflix is already on both systems and the Nintendo Wii. Hulu says Hulu Plus service for Roku and TiVo devices is "coming soon." Netflix will eagerly await its arrival.

Hulu's platform deficit is what makes the service's absence from Google TV particularly egregious. Google TV takes an enormous step toward full media integration -- which one assumes Hulu would embrace as a Web video provider. Still, Hulu never acts like a Web video provider but, rather, like an old, withered network exec clinging to his product with a bony, wrinkled, arthritically frozen hand. It clings to its ad-driven model even as it places a monthly subscription fee atop it. That approach assumes Hulu's content is so rare and inherently valuable that platform producers should kowtow to its demands.

Hulu has a wealth of content and, to users who've taken advantage of the service to catch up on their favorite series, it's an asset. It is, however, one asset among many that such platforms as Google's TV and Android products, Apple's TV and iproducts and entire lines by Samsung, Panasonic and Philips can accommodate. While Hulu Plus operates under the old network premise that we'll provide it and you'll like it, device manufacturers are flipping the content equation on its head when it comes to Web video and spelling out the terms.

TheStreet Says:Hulu's handlers just need to swallow their pride and realize one thing: Nobody ever got rich by doing nothing.

1. Starbucks: Slow Steam Ahead

Starbucks ( SBUX) has spent years transforming its baristas into java jockeys capable of slinging out increasingly overpriced drinks at breakneck speeds. All that production has done little for quality, and now corporate seems to be having its Bridge Over the River Kwai, "What have we done?" moment.

After installing new machines and ingraining the principles of lean manufacturing into its highly caffeinated DNA, Starbucks is now asking its baristas to take a step back and prepare two drinks at a time at most, and to take more care in preparing each beverage, according to a report in the Wall Street Journal. The report also said baristas are being informed to steam milk for one drink at a time instead of a whole pitcher for multiple drinks, as well as rinse pitchers after each use, remain at the espresso bar at all times and use one espresso machine instead of two.

If implemented properly, the new system should not slow down the process too drastically according to the Starbucks Corporate Overlords, but debate about that point among workers on blogs like Starbucksgossip.typepad.com is raging.


No doubt, Starbucks needs to address a growing quality issue, and this may be a good way to go about it. That said, spending years insisting baristas become the Terminators of the coffee world and then one day asking them to, oh yeah, be more human is an example of the identity crisis that seems to plague Starbucks. The company wants its customers to stay and spend more, but its campaign to produce baristas that are efficiency machines has jumped the counter and infected the larger atmosphere. The result is anything but cafe-like.

Check out the Starbucks on Broadway near Wall St. on any given day and you'll see baristas juggling a lineup of eight or more drinks while both blenders roar behind them. After shouting your order, the cashiers engage in their own wind sprints to grab cookies and pastries from the display case while another blasts breakfast sandwiches in an oven and doles out oatmeal.

Starbucks is going a step further. The company is now testing a new format that offers wine, beer and cheese. So desperate are they to get away from the frenzied vibe they've created in their stores and to capture some later hour sales that they've gone so far as to downplay the Starbucks branding in the test locations.

But the majority of Starbucks' customer are being asked, on a daily basis, to ignore the chaos. Stay. Enjoy the free Wi-Fi. Listen to the latest indie band, if you can hear it over the blenders and the order shouting. Oh, would you like to try our instant coffee? And here's your $5 latte, in a to-go cup. Always in a to-go cup.

TheStreet Says: Is Starbucks jumping the shark? Or is that just us, jumping the line.

In light of all this dumbness, we now ask you: Which is this week's dumbest of the dumb stories? Take the poll below to see what TheStreet has to say.

Which is this week's dumbest of the dumb stories?

Fast Food Foreclosures
AOL and Yahoo: Made For Each Other?
The Myth of Green Job Growth
Where For Art Thou, Hulu?
Starbucks: Slow Steam Ahead

This article was written by a staff member of TheStreet.