Tobacco & Beer Stocks Show True State of Economy

NEW YORK (TheStreet) -- Call it a sign of the times -- tobacco stocks are considered best buys by at least one fund manager, Charles Norton who oversees the Vice Fund(VICEX).
Granted, Norton's specialty is investing in companies that capitalize on bad habits such as smoking and drinking.
Yet it still says something about the state of the economy that stocks such as Philip Morris International (PMI) are delivering great returns. (To read more of Norton's comments, click over to Gregg Greenberg's interview.)
According to Norton, global cigarette demand is "proving to be exceptionally resilient."
That explains the 7% jump in Philip Morris International, which holds the international rights to the top-selling Marlboro brand, and the 17% jump in shares of Altria (MO), which peddles Marlboros and other smokes in the U.S.

Click here to read more of Today's Outrage.

Preplanning Bank Burials

The Obama Administration wants the biggest of the big banks to start planning their own funerals.

Any bank such as Citigroup (C Quote), Goldman Sachs (GS Quote) and Bank of America (BAC Quote) that is considered too big to fail because of its size, leverage or the degree that its operations are interwoven into the fabric of the entire financial system would need to draft detailed plans for unwinding their operations should it ever come to that.

An analysis of the administration's proposed regulatory overhaul by the Associated Press concludes that the new scrutiny, larger cash cushions and asset requirements that the administration desires are intended to limit the number of systemically risky financial institutions by making it unappealing to get that big.

Essentially, the proposed requirements would pressure the financial system to deconsolidate -- a classic knee-jerk reaction to the financial bailout intended to make it less likely to be repeated.

Much like the bailout itself, these hastily concocted hangover cures may have many unintended side effects. The cure may eventually make us all feel worse than the sickness ever did.

It reminds me of the environment of corporate misdeeds that prompted the onerous Sarbanes-Oxley rules. What a mess that turned out to be -- even former Sen. Paul Sarbanes (D., Md.) and former U.S. Rep. Michael Oxley (R., Ohio) later told me that they regretted the extent of the regulatory changes they championed.

So here we go again. This time, everyone should all read the fine print and fully understand what they are signing, in particular the consequences.

What will happen if General Electric (GE Quote) is forced to exit from its GE Capital unit because of proposed limits on combined banking and commerce operations? How will the struggling car industry be impacted if Ford(F Quote), General Motors(GMGMQ Quote), et al. aren't able to provide financing to prospective buyers?

And just how many major institutions do we want to be trying to unload sundry parts of their operations to escape excessive government interference?

It seems like quite the muddle already with AIG (AIG Quote), Bank of America, Citi and others all trying with varying degrees of success and failure to sell pieces of their far-flung empires in order to repay taxpayers.

Pretty soon, President Obama may need to grab a gavel and add a new title to his resume -- "Auctioneer in Chief."

Or maybe "Undertaker in Chief" -- considering his desire for banks to plan their own burials.

Citigroup Takes Cash to Spain

Thanks for nothing, Citigroup .

Treasury Secretary Henry Paulson gives the U.S. bank $45 billion in taxpayer money to keep it afloat and get it to pump some money into the emaciated U.S. lending system and what does Citi do?

Buy a Spanish highway operator.

Yes, you heard right. A Citigroup infrastructure fund agreed to take over Spain's Itinere from Sacyr Vallehermoso in a deal valued at about $10 billion, which includes about $6.3 billion in debt that Citi will take on.

Just what Citi needs: more debt.

Of course, Citi officials will tell us this is good debt, unlike the $306 billion in risky assets U.S. regulators agreed to backstop last week as part of a $20 billion taxpayer-funded cash injection to shore up the bank. That's on top of the $25 billion in federal bailout money Citi received earlier this year.

U.S. taxpayers are definitely getting a great return on that investment.

I'll bet Paulson just can't wait to hand over another $10 billion to Citi when the bank complains that the global recession is eating into the tolls it thought it would be collecting in Spain.

Be Thankful It's Not Worse

It may seem like there's little to be thankful for this Thanksgiving, but that depends on your perspective.

Consider Tiffany . The luxury retailer said today that third-quarter sales slipped only 1% and profit declined by about half. Yes, that's bad. But the jeweler is still profitable, right?

At the other end of the spectrum, farm equipment maker Deere reported a 21% jump in fourth-quarter sales today, and its 18% drop in profit was due to costs for closing a facility in Canada. That sounds solid, doesn't it?

So you see, it could be worse. It could be a whole lot worse.

We may be in a recession, but this is no depression.

The unemployment rate is rising, but it's only at 6.5%. Compare that to 7.5% in Germany, 8% in France and 11.3% in Spain. Or how about 23% in South Africa?

Inflation, meanwhile, is relatively tame at 3.7%. How about 4.7% in Britain, 6.4% in Singapore, 14.2% in Russia and 35.6% in Venezuela?

Combine those two indicators and you get the so-called misery index, which for the U.S. stands at 10.2%, up from 8.3% a year ago. That's just about the global average, with Thailand's 5% misery index at the low end and Venezuela's 42% marking the high.

So enough with the doom and gloom, already. This whole crummy stock market and economic slowdown is in large part a crisis of confidence. Consumers represent 70% of U.S. GDP, so it's no good if they get too spooked and stop spending. Lucky for us, consumers don't seem to fully realize how dire things could get. Some have cut back on spending, but so far not nearly at the level of the recession in the 1980s.

Ordinarily, I'd be outraged about the economic and political ignorance of the American populace, but this year I'm thankful for it. Please keep spending, folks.

Google-O-Meter Signals Doom

Forget about the OECD report saying we're in for the worst recession since the early 1980s.

The true sign of how bad it's going to get comes from Google, which is throwing its contract workers to the wolves.

The Internet search giant and ultimate barometer of consumer behavior says it will significantly reduce the number of its roughly 10,000 contractors in anticipation of a worsening economy.

It may be the right thing to do from a fiduciary perspective, but the folks at Google don't seem to realize how damaging it is to the psyche of consumers and investors alike to see the ultimate growth machine scaling back.

Now we're doomed. The only ray of hope is that Google isn't planning to cut its internal staff. So my reading of the Google-O-Meter is that a bad recession is coming, but maybe it won't last too long.

If Google starts laying off its own people, then all bets are off.

Citi’s Not Worth $45 Billion

Remember when Citi was looking for deals and ready to buy Wachovia ? How about Citi shares at $23 last month? Or $35 a year ago. Or even $55 in May 2007.

Now Citi’s the latest bailout story, with the U.S. government donating $20 billion to the cause. That’s on top of the $25 billion in taxpayer funds Citi received last month.

So why doesn’t the government own all of Citi now? For $45 billion, it should -- the bank was only worth about $20 billion at Friday’s closing share price of $3.77. (For what it’s worth, Wachovia’s trading above $4)

It makes the Feds look foolish to have allowed Wells Fargo to scuttle the government-brokered marriage of Citi and Wachovia last month. That dowry would have been cheaper. But then again, maybe the government would be bailing out Wells Fargo now. I guess it’s money out the window either way.

I just feel bad for the folks at Lehman Brothers, the bank that died before our government decided not to let any more banks die.

The Five Dumbest Things on Wall Street: Nov. 21

By Greg Greenberg, TheStreet.com

We Have Words to Describe Ken Lewis

One of them is ungrateful. Hypocrite is another.

Bank of America CEO Ken Lewis slammed a potential auto-industry bailout this Tuesday. The banking bigwig made his remarks just as auto executives from GM , Ford and Chrysler were on Capitol Hill begging for a $25 billion emergency bridge loan to avert a collapse of one or more of their companies.

"I think there's one too many" automakers, Lewis said to the Detroit Economic Club during a meeting in Cobo Center, the downtown convention center that's home to the North American International Auto Show each January.

"I think the American people are suspect of just giving more money and buying more time," he told reporters following the speech, according to The Associated Press. "They want to see that the companies have, in fact, changed and the strategies have changed."

Sorry Ken, but bankers in glass houses shouldn't toss grenades.

Lewis shouldn't balk at anyone getting a handout, after nine large banks, including Bank of America, Wells Fargo, Citigroup and JPMorgan Chase, received $125 billion last month.

Oh, and what did Lewis do with the $25 billion of the government's largesse that you said you didn't need? Instead of lending it out to Americans being crushed by the credit crisis, like he was supposed to do, he announced this week that Bank of America is buying more shares of China Construction Bank, raising its stake to 19.1% of the company.

If a Big 3 bailout fails, at least taxpayer dollars will be squandered over here, not half a world away.

Dumb-o-meter score: 95 -- Banks had their turn to beg Congress, let automakers have theirs.

No Double Dipping, Aegon!

Dutch insurer Aegon wants to dip into not one but two government bailouts.

Aegon applied for more than $1 billion in U.S. government support Tuesday. To qualify for the funds, the Dutch company, which owns U.S. life insurer Transamerica and generates three-quarters of its operating profit in the U.S., may buy Maryland-based Suburban Federal Savings Bank, Reuters reported. Without the purchase, Aegon can't hold out its corporate palm.

Hey, why not buy another bank to get some government aid? Everybody else is doing it. Just this week The Hartford Group, Genworth Financial and Lincoln National announced plans to buy small savings and loans in order to meet the requirements to get a piece of the $700 billion bank bailout.

The big difference is that Aegon already received 3 billion euros from the Dutch government last month. And now they want to go dutch with the U.S. taxpayer, too?

And get this, Aegon admits it doesn't even need the money -- CFO Jos Streppel said this week that the company "has a sufficient capital buffer given our recent actions."

How dumb is that -- admitting they don't need the money but asking for it anyway? They should be rejected from the government give-away for that reason alone.

At least U.S. banks are smart enough to tell the government how miserable they are.

Dumb-o-meter score: 85 -- The Bank of Five Dumbest would like to apply for federal funds, too!

Fannie Stock Faces Eviction

The New York Stock Exchange may soon send Fannie Mae an eviction notice.

Mortgage-financing giant Fannie Mae announced on Tuesday that its stock failed to satisfy NYSE price-related requirements and may lose its listing. The NYSE requires that the average closing price of a stock remain above $1 per share. Fannie Mae stock, which a year ago was trading as high as $40.45, closed at 47 cents Tuesday.

Let's get this straight because the irony is just too delicious to swallow. Washington-based Fannie Mae, which along with fellow mortgage player Freddie Mac owns or guarantees about half of the U.S.' $12 trillion mortgage market, may have its shares evicted from their home on the NYSE.

You just have to smile at that one, even if it sounds as sickening as the $29 billion third-quarter loss the company announced last week.

Fannie is likely to tap the $100 billion government lifeline from Washington early next year to remain solvent. Meanwhile, back on Wall Street, if Fannie Mae notifies the NYSE of plans to boost its share price, it has six months from the Nov. 12 date of the notification to bring the stock above $1 for 30 consecutive trading days and remain listed.

So will Fannie be kicked to the curb?

Mae be.

Dumb-o-meter score: 80 -- Talk about a kick in the Fannie

Parsons' Loser Email

Dick Parsons' sympathy plea for Citigroup Chairman Sir Win Bischoff is a real loser.

In a Nov. 13 email to employees worldwide, Citigroup board member, and former Time Warner CEO Richard Parsons set the record straight, denying a Wall Street Journal report claiming the board was considering him for Bischoff's job.

Parsons called the news coverage "irresponsible and completely inaccurate," adding that the board of directors and management are operating as "one team completely aligned on critical issues, opportunities, and the direction of the company."

Parsons then listed the company's so-called "accomplishments," like raising new capital and reorganizing its businesses, before signing off in his email with an inspiring "Keep the Faith!"

Um, sorry Dick, but we doubt the troops at Citigroup have any faith left in you, considering your mismanagement of what was formerly the world's largest bank. As for the direction of the company, well, we'll just point out that the stock price is down to $8 a share.

Soon, Parsons and his boardroom buddies may be the only "team" left at the company. On Monday, the besieged bank said it was cutting approximately 53,000 more jobs over the coming quarters. Citi's total headcount is being reduced by 20% from its peak of 375,000 at the end of 2007.

So Dick, we have to ask: How can Citigroup employees "keep the faith," when they can't keep their jobs?

Perhaps more Citigroup employees would keep their jobs if Parsons would eventually lose his.

Dumb-o-meter score: 70 -- There is no 'Group' left in Citi.

MGM CEO's Third Degree

MGM's CEO couldn't take the heat over his graduate degree. So he got out of the casino.

Terrence Lanni suddenly announced his retirement last week from the casino giant's top spot, spinning the same tired yarn about wanting to spend more time doing charity work.

Fair enough, we thought at the time. He's been on the job 13 years, and with the stock down 90% this year and Las Vegas on the mother of all economic losing streaks, it made sense for Lanni to pass the torch before things got any worse. (As in the Las Vegas Sands' flirt with bankruptcy.)

Then we discovered that Lanni's resignation was arriving just a few hours ahead of a Wall Street Journal report revealing that, counter to his corporate biography, the gaming CEO did not earn a master's degree in finance at the University of Southern California. At learning that, dear reader, we knew we hit the stupidity Jackpot.

A USC spokesman said Thursday that Lanni finished classes toward the degree between 1965 and 1967 but was never awarded a diploma. Lanni's spokesman says that he was awarded an honorary degree from the school at a ceremony in 1992, before adding that the academic inquiry had "no bearing whatsoever" on his retirement.

Unfortunately, the school says no honorary master's degrees in business have been awarded since 1933.

We couldn't make this stuff up; we'll leave that to Lanni.

Dumb-o-meter score: 65 -- Literally speaking, some CEOs never learn.