The 5 Dumbest Things on Wall Street This Week: Nov. 1

5. Muddy's Return

Welcome back Muddy Waters to that same old place that you thrashed about.

NQ Mobile ( NQ) publicly slammed a highly critical report of its accounting by Muddy Waters, aka short-seller Carson Block, last Friday, calling it "false and inaccurate." The Chinese mobile security software company blasted Block's claims that the company is a "massive fraud" by releasing details of its bank accounts and threatening legal action.

The company did, however, agree to form a special committee of independent directors to investigate Block's assertions. Shares of NQ continued to plummet this past week after tumbling nearly 50% last Thursday from $23 to $12 when Block alleged that at least 72% of NQ's purported 2012 revenue from sales of its security products in China fictitiously came from a shell company called Yidatong that was controlled by NQ. NQ lost $500 million in market value when the report was first released.

"We know no better method than to just completely open up the kimono and say, 'Here's our cash balances by account,'" NQ Mobile co-Chief Executive Omar Khan told Reuters. NQ published a list of 14 bank accounts in mainland China and Hong Kong Friday that showed deposits totaling approximately $295 million.

Unfortunately, market watchers were unmoved by NQ's kimono-opening. The company's stock sank 20% last Friday and another 10% Monday after Block once again doubted NQ's cash balances and sales figures, maintaining they should be confirmed by an independent source, not its own special committee. On Tuesday Block was at it full bore once again with a report: "NQ's Top Ten Lies Since Friday". (Full disclosure. We love the title.)

First of all, we here at the Dumbest lab are pleased as plum wine to once again have Block stirring up big trouble in little Chinese stocks. We were somewhat disappointed this summer when he tried his bombastic shorting strategy on a domestic name, American Tower, to less than stellar results.

And while the names have all changed since Block last hung around the shady world of Chinese stocks, the schemes have remained and the responses are still less than sound. NQ's decision to form an independent committee, for instance, is the same knee-jerk response Sino-Forest made in 2011 when a similar Muddy Waters report accused that company of fraud. Much better was its decision on Tuesday to transfer $16.4 million in real money to a recently-opened Standard Chartered Bank account, a move which helped the stock regain some of its losses.

Now we're not saying that NQ will follow the likes of Sino-Forest and Longtop Financial Technologies into bankruptcy and ignominy. The company still has its share of supporters on Wall Street -- it recently sold $173 million in convertible bonds -- and Kahn, who was Samsung's Mobile Chief Product and Technology Officer before coming to NQ, also maintains a high level of Street cred.

In other words, it's still early in the game and as much as we love Block's Sino-rabble-rousing, we're not giving him the win just yet.

That said, Kahn needs to come up with a whole lot more than a denial, some obligatory money-moving and a silly special committee because right now Block has certainly got him on the spot.

4. Lost & Blankfein

Farewell, cruel Goldman ( GS). Hello Saint Lloyd.

Goldman Sachs announced Monday it is discouraging entry-level investment banking analysts from working weekends. The move is not only the investment bank's latest attempt to regenerate the once-pristine reputation it thoroughly impaired during the financial crisis, but also a play to maintain its lock on prized recruits who are increasingly getting overtures from private equity firms. Goldman created a "junior banker task force" earlier this year to improve the budding bankers' work-life balance, said company spokesman Michael DuVally.

Goldman took the first step in ameliorating the working conditions for its highly compensated (up to $140,000 a year!) indentured servants last year when it made its incoming investment banking analyst class full time employees instead of giving them two-year contracts. DuVally said the bank will have 332 analysts in its 2014 class, up 23% from the previous year.

Oh, man! As if all those sleep-deprived medical residents needed one more reason to regret their decisions to spend all those extra years both in school and debt. If only they chose a career in M&A like their banking buddies, they too could be spending their weekends getting bottle service at the Boom-boom room followed by a late brunch at Balthazar instead of serving double blood-soaked shifts in the ER.

"The goal is for our analysts to want to be here for a career," said David Solomon, Goldman's co-head of investment banking, in an emailed statement to Bloomberg. "We want them to be challenged, but also to operate at a pace where they're going to stay here and learn important skills that are going to stick."

Did you hear that future doctors of America? He said "important skills." Stop wasting your lives! Ditch those scrubs and buy some Hickey Freeman suits already!

Furthermore, you don't even have to feel guilty about pursuing a job as a Goldman MD (Managing Director) as opposed to an MD (Medical Doctor) anymore. CEO Lloyd Blankfein has turned Goldman Sachs into a philanthropic powerhouse since the financial crisis, giving away more than $1.6 billion since 2008.

"You have to be interesting, you have to have interests away from the narrow thing of what you do," Blankfein told interns earlier this year. "You have to be somebody who somebody else wants to talk to."

Somebody to talk to? Like a pastor or a rabbi?

Holy cow! He said it once before, but now Lloyd apparently really means it. He wants his Goldman flock to do "God's work"!

So go young Goldmanites! Venture forth into the valley of the Meatpacking District clubs! Spread the gospel of Blankfein to the supermodels, rock stars and Leonardo DiCaprio if you see him at Jay-Z's 40/40 club. And do it with all the speed, alacrity and energy you can muster.

We're not kidding about the speed part. Lord knows you better live it up before Saint Lloyd changes his mind and sends you back to work.

3. McDonald's Ketchup Caper

Ease up, Ronald McDonald! It's not like the Hamburglar is stealing the recipe for your secret sauce. We're talking about good old Heinz ketchup here!

McDonald's ( MCD) announced its plans to replace Heinz as its ketchup supplier last Friday, ending its 40-year relationship with the condiment company. Mickey Dees management took the drastic step as a result of Bernardo Hees, the former CEO of competitor Burger King, being installed as head of Heinz this past June after Berkshire Hathaway and 3G Capital bought the company for $28 billion.

"As a result of recent management changes at Heinz, we have decided to transition our business to other suppliers over time," said McDonald's in a statement. "We have spoken to Heinz and plan to work together to ensure a smooth and orderly transition."

Orderly transition? We're not talking about changing presidential administrations here. We're talking about ketchup!

Or catsup, depending where you buy your fries. Either way, it's still a draconian resolution to a less than pressing problem for the stagnating 34,000 plus restaurant chain, which continues to blame its flat sales on the economy instead of its own very real problems.

McDonald's shares have returned 11% in the past year vs. 26% for the S&P 500 as its salads just aren't selling enough to keep up with fresher food alternatives like its own spin-off Chipotle ( CMG). Meanwhile, on its super-high calorie flank, McDonald's is fighting off Wendy's ( WEN), which has a hit with its Pretzel Bacon Cheeseburger and Taco Bell which continues to expand its Doritos Locos Tacos line.

And while Chief Executive Don Thompson is desperately trying to shake-up the menu by adding things and chicken wings, it's still enough to make a shareholder grimace.

"As a matter of policy, Heinz does not comment on relationships with customers," said company spokesman Michael Mullen.

That's certainly a smart move since McDonald's may very well reconsider its decision in the not so distant future. Lucky those Heinz guys understand the value of anticipation.

2. Sears Tears

Gosh darn it! We spent so much time this year focusing on Bill Ackman's undoing of J.C. Penney ( JCP) that we totally forgot about another hedge fund manager's ruination of another American retail icon.

Forgive us, Eddie Lampert. Your destruction of Sears ( SHLD) once again has our undivided attention.

Shares of the struggling department store spiked 7% Tuesday on news that the company will split off its Lands' End clothing and Sears Auto Center businesses. The bounce in Sears stock -- more than half of which it gave back the following day -- was widely attributed to the fact that it soothed Wall Street's worries about the company's liquidity, as opposed to any affirmation of Lampert's operating strategy.

Sears stock has outperformed the market so far in 2013 primarily due to Lampert's financial engineering squeezing the hordes of shortsellers trapped in the stock. Sears has seen declining sales since 2005 when Lampert merged K-Mart and Sears in an $11 billion deal. Lampert was cheered at the time as a visionary who saw Sears as a real estate play as opposed to a retailer.

Unfortunately, the reclusive Lampert head-faked Wall Street and hung onto the company instead of selling it before the property bubble got punctured. In the latest installment of bad news at the 120-year old company, the company said this week it expects a net loss of between $532 million and $582 million in its third quarter, wider than last year's $498 million loss.

Lampert latest purge of Sears assets, therefore, is less than surprising even if we have been ignoring the company of late. In case you may have forgotten, Sears already spun off its Orchard Supply Hardware Stores unit in December 2011, and last year it annonced its intention to cast off Sears Hometown and Outlet businesses.

To sum it up, Lampert is selling off the parts but Sears underlying business remains less than whole. At least Ackman and his hand-picked CEO Ron Johnson attempted to invigorate Penney's stores by jazzing them up with brand names like Martha Stewart and Joe Fresh. Johnson may have totally alienated Penney's core customers with his haughty ways and insane pricing strategies, yet at least he tried to give them a reason to come to his stores. We'll give him credit for that. Lampert, on the other hand, never put much money or thought into the Sears brand. The stores are rotting away as a result of underinvestment.

To be honest, we still have no clear idea what compelled him to get into the thankless, low margin world of retail in the first place. If it's not the real estate keeping holding Eddie's interest, then what on earth is it?

Frankly, we'd really like to know before the last asset is sold off and the Sears name joins Gimbels, Bambergers, Alexanders, Abraham & Strauss and a host of others in department store heaven.

1. Tough Times at Teva

Somebody better slip the folks over at Teva Pharmaceuticals ( TEVA) a chill pill before things really get out of hand.

The world's largest generic drugmaker saw its stock get shellacked Wednesday after it revealed that its CEO Jeremy Levin was leaving and CFO Eyal Desheh was taking his spot on an interim basis. Teva shares were halted in Tel Aviv following the announcement and finished 8% lower in Nasdaq trading. Levin, who took Teva's top-spot in May 2012, denied an Israeli media report earlier in the week that Levin was clashing with the company's board of directors over Teva's strategy.

There you have it. Sometimes you should believe what you read in the papers.

And if you don't want to believe the media, then perhaps give Wall Street's scribes a perusal.

BMO Capital said it has less confidence in Teva following the CEO scuffle. BMO's analyst criticized the company's governance and said the last time Teva searched for a CEO its R&D and earnings suffered. Elsewhere, Piper Jaffray said the positive outlook from Teva on its CEO resignation call "does not square with the realities" of its underlying business.

Teva's CEO skirmish also couldn't have come at a worse time for the company. Teva announced it cutting 5,000 jobs earlier this month, or 10% of its workforce, as part of Levin's cost-cutting plan as it prepares for stiffer competition to its multiple sclerosis drug Copaxone. The board, the Israeli government and labor unions clashed with Levin over his handling of the layoffs, which some say led to his abrupt departure. On Thursday, Teva was back in the spotlight, reporting flat earnings that beat analysts' estimates by a cent.

"It just got to the point where the slight differences couldn't really be resolved. We thought it was better to part ways," said Teva board Chairman Dr. Phillip Frost on Wednesday's conference call.

We appreciate your honesty Dr. Frost. Chill pill, yes. Truth serum, no.

-- Written by Gregg Greenberg in New York

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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