Corrections Corp. of America ( CXW) better give Idaho taxpayers a "Shawshank" redemption for all those phony prison hours it's been billing the state. Shares of the private prison operator suffered a minor, well, correction last Friday, after the company admitted to falsifying nearly 4,800 hours of staffing records over seven months last year at Idaho's largest penitentiary located just south of Boise. An internal review mandated by the Idaho Department of Correction showed vacant positions during hours when prison staff and guards were supposedly manning security posts. The company's stock fell nearly half a percentage point to $40.25 before recovering to finish the day's trading just under $41 on news of the scam. Idaho Department of Correction spokesman Jeff Ray said the agency will perform its own review of the situation, and then "explore how to go forward from there." Corrections Corp. announced it will reprimand its workers for their shenanigans and reimburse the state for the time they didn't serve. "We will take appropriate disciplinary action with the involved personnel, and we will work to enhance the staffing, training and record keeping processes at the facility," said company spokesman Steve Owen, proudly adding there "was no apparent increase in violence" during the period in question. Hey! That's great news guys. Maybe we should let the inmates run the asylum all the time. Who needs the financial burden of imaginary, no-show guards when you have real life criminals keeping the peace? Perhaps the real reason why both Ray and Owen are desperately trying to contain the scandal -- lock it up, if you will -- is that Correction's Corp.'s annual $29 million contract is at stake. The pact, which expires in June 2014, has come under scrutiny after a recent slew of successful inmate lawsuits showed the prison to be chronically and dangerously understaffed. On that note, maybe Corrections Corp. should pay those crafty convicts for their good behavior rather than reimburse the state for its role in the fraud. Think about it. They were the unsupervised lot working hard not to riot, escape, play Mozart over the loudspeaker or eat 50 hardboiled eggs, now weren't they?
4. Ramey's Ridiculous Reversal
Note to competitive Twister players. Steer clear of D.A. Davidson analyst Tim Ramey. Forget spineless, the guy has no skeletal system at all! In a stunningly quick about face, Ramey said he was upgrading Herbalife ( HLF) from neutral to buy last Friday and "reestablishing" his price target on the embattled supplement seller to $78 from $38. The head-turning move came a mere three days following the longtime Herbalife bull's decision to downgrade the stock over concerns about the company's exposure to the KPMG insider trading scandal. "Earlier this week we downgraded shares of Herbalife to Neutral from Buy, concerned that the withdrawal of KPMG's audit opinions for the past three years could have material negative impacts on the shares. After our action, the company made assurances that they did not see the risk of a delisting notice from the NYSE, nor do they believe they are, or expect they may be, in violation of their loan covenants," wrote Ramey, adding that he was "relieved to have these assurances" from Herbalife. "Relieved"? Why is that Timmy-boy? We know we've asked you this before, but are you distributing Herbalife on the side? Otherwise, there is no plausible reason save insanity for a Wall Street analyst to be this unabashedly upbeat about such a controversial company unless investment banking fees were at stake . . . and even by those standards you've gone overboard! "Chalk it up to the heat of battle. These are unique circumstances," wrote Ramey about his embarrassing to-ing and fro-ing. Get a grip Tim. That "battle" talk is so ridiculous. This silly fight over a highly questionable stock is between a pair of hubristic hedge fund billionaires named Icahn and Ackman. Normandy it's not. As for the stock, Herbalife closed slightly above $38 last Thursday night prior to Ramey's reversal. It finished down almost 4.5% Monday at $35.75. In other words, Ramey could have saved his shareholders a fair bit of money -- and us a whole of whiplash -- if he could have only held out a full business week before changing his tune. Again.
3. Gold Bulls Gored
Sometimes market participants voluntarily say silly things or make dumb moves. Other times -- like this week -- the market's unforgiving uncertainty simply makes them feel dumb. Yep, gold bugs, we're talking about you. You've had a nice decade-long run, so suck it up. The yellow metal was suddenly and unexpectedly shellacked Monday, sending panicked gold investors scurrying. Gold for June delivery on the COMEX dropped $140.30, or 9.3%, to $1,361 an ounce, marking the largest percentage drop in gold since Feb. 28, 1983, when the price dropped 12.1%. "You had a perfect storm of circumstances prevailing: you had technical chart patterns being broken, you had the Cyprus situation, you have the GDP in China, you had the backwardations in crude oil beginning to narrow dramatically . . . you have a new crop of corn that looks like it's going to be sizable being planted," Dennis Gartman, editor of The Gartman Letter, told TheStreet. In your face gold bugs! You got creamed by corn! What's next, getting bitchslapped by Bitcoins? Furthermore, it's not like you weren't warned. Goldman Sachs ( GS), the gold-standard of investment banks mind you, lowered its gold price forecast last Wednesday before the deluge. Goldman lowered its average 2013 gold price forecast to $1,545 an ounce from $1,610 an ounce, and reduced its 2014 average target to $1,350 an ounce from $1,490 an ounce. Nicely done Goldie! If only you served up the same prescient "sell" calls on eToys and your other crappy internet IPOs, not to mention your homemade toxic mortgage bonds, then maybe you wouldn't find yourself spending so much time looking up Sen. Carl Levin's (D., Mich) nostrils during Congressional hearings. Don't you think? Anyway, speaking of toxic mortgage bonds, Paulson & Co.'s John Reade said in a statement that it established its gold position in April 2009 at an average cost of $950 an ounce and was continuing to hold the metal. John Paulson, if you remember, made billions shorting faulty mortgage bonds in the so-called "greatest trade ever" and subsequently plowed much of those winnings into gold. "While gold can be volatile in the short term, and is going through one of its periodic adjustments, we believe the long term trend of increasing demand for gold in lieu of paper is intact," added Reade. "Periodic adjustments"? Are you serious, man? This was no regularly scheduled chiropractic appointment. There was no minor back-cracking here. This was a complete and utter spine-crushing selloff. The kind where so-called brilliant hedge fund managers appear stunningly stupid -- like the rest of us -- because they haven't been tipped off by their literally "fabulous" Goldman brokers.
2. Carnival Bruises
Hey Micky Arison, you are so fine for finally repaying the government the costs of towing Carnival's ( CCL) less-than-luxury cruise liners back to shore. You are so fine, in fact, that you blow our mind. Hey Micky. (Clap Clap) Hey Micky. (Clap Clap) (Sorry Dumbest fans. We couldn't help ourselves.) Anyway, the world's largest cruise line company announced Monday it will indeed pony up an unspecified amount to taxpayers for the Coast Guard and Navy's services in saving its Triumph and Splendor cruise ships, both of which stranded thousands of passengers at sea for days. Carnival said the payments were being made voluntarily to the U.S. Treasury and that no government agency had requested remuneration for either embarrassing incident. Fine. We'll grant them that if it makes them feel better. But we all know the real reason for their sudden reversal is that Sen. Jay Rockefeller (D., W.Va) was publicly attacking Carnival and its CEO Arison for trying to avoid the bill. Ain't it amazing how quickly a company will reach for its wallet once the chairman of the Senate Commerce Committee accuses it of "bloodsucking off the American people" and threatens an investigation? Rockefeller estimated the Coast Guard's costs in dealing with the Triumph's failure this past February at nearly $780,000. He pegged the 2010 engine fire that left the Splendor adrift off the coast of Mexico at $3.4 million because the aircraft carrier USS Ronald Reagan had to pitch in with the rescue. "I'm glad to see that Carnival owned up to the bare minimum of corporate responsibility by reimbursing federal taxpayers for these two incidents," Rockfeller said in a statement Monday. "I am still committed to making sure the cruise industry as a whole pays its fair share in taxes, complies with strict safety standards, and holds the safety of its passengers above profits." Right on Rockefeller! We applaud your moxie even though we doubt you'll bring a lot of those tax dollars back home. The cruise industry cleverly stashes its treasure across too many foreign ports to count. All the pirates in the Caribbean couldn't locate that booty, let alone one solemn Senator. That said, it really would be a trip to see Micky Arison testify in front of Congress on the subject. Never before have we seen a CEO remain so far behind the scenes while his company's troubles are so far out in the open. Here's an idea. Maybe the Navy can send in some SEALs to locate Arison. Now that Rockefeller has found Micky's wallet, Uncle Sam can tack the search and rescue costs onto Carnival's bill.
1. Boston Uncommon
The Dumbest Thing that occurred this week unquestionably took place on Boylston Street in Boston, not Wall Street. And our hearts and sympathies go out to the victims of the bombings that occurred on Monday at the city's famed Marathon. Like New York in the wake of 9/11, however, Boston will be back. The only thing its smart, irrepressible citizens can't do -- other than pronounce their 'R's' of course -- is surrender. Anybody that's ever been to Beantown knows this full well. That said, life will be different for our neighbors 200 miles to the north in the aftermath of Monday's tragedy. Sadly and subtly so. And in a way we here at TheStreet ( TST) depressingly know full well. For those unaware, TheStreet is literally located on Wall Street. Every morning our staffers walk past the armed police officers and bomb-sniffing dogs outside the New York Stock Exchange to arrive at our offices. All that extra security was added in the aftermath of al Qaeda's attack on lower New York. Every morning we are reminded of the lingering mental, physical and financial toll of terrorism. The terrorists, as is their cowardly way, are long gone. The literal concrete reminders of their despicable act, nonetheless, remain. The check points erected over the past decade force financial district employees like ourselves, as well as tourists and area residents alike, to take inconvenient routes to our final destinations. We often walk north to go south, passing unsightly gates and machine-gun wielding militia along the way. The barricades are admittedly a minor inconvenience. Nevertheless, during a busy workday, when time is at a premium and it's easy to forget their original intent, they become more obstructive than protective. To be candid, when you are in a rush -- as New Yorkers always are -- the security measures put in place are a plain and simple pain in the ass. While not oppressive, they stir a gnawing feeling that human beings should not live this way in the 21st century. Not here. Not anywhere. Sadly, that's life in a post 9/11 world. And even more sadly, it's a world the good people of Boston are now being pulled into against their wills. We wouldn't wish it on anybody. Still, there's no people we New Yorkers would rather share it with, and nobody that can adapt to it better than our brethren in Boston. Lack of "R's" and all. Follow @5gsonthestreet-- Written by Gregg Greenberg in New York City.