Unless you’ve been living under a rock, you know that Senator Dodd has come out firing in favor of industry reform — what you might not know (yet) is that the legislation he intends to propose will seek to legislate a fiduciary relationship between borrower and broker. It’s an idea that has become the Holy Grail of mortgage reform on Capitol Hill as of late, with Democratic Senators Hillary Clinton and Charles Schumer having recently made their similar agendas known in this area.

What is a fiduciary relationship? From Wikipedia:

A fiduciary duty is the highest standard of care imposed at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom they owe the duty: they must not put their personal interests before the duty, and must not profit from their position as a fiduciary, unless the principal consents. The fiduciary relationship is highlighted by good faith, loyalty and trust …

At Housing Wire, I get all sorts of press releases sent my way each day. When I read Senator Dodd’s proposal, I couldn’t help but think about an earlier release I’d seen from the National Association of Mortgage Professionals — which called for brokers to be voluntarily held to just such a standard.

The battle here should be intense. I know the MBA has come out against having brokers held to a “suitability standard,” which in part includes a fiduciary responsibility to borrowers ( see my post on this from January). I also seem to recall a regional spokesperson from the Colorado Association of Mortgage Brokers pushing back against a mandated fiduciary relationship as recently as a month or two ago.

IMHO, what will be more interesting to see in coming months will be the public versus private debate that is already beginning to take shape. Organizations like the NAMP want the industry to police itself and establish a fiduciary responsibility standard privately, while numerous legislators are out to use their public powers to force such a relationship into play.

Who wins? Time will tell, but two things seem certain to me: first, the NAMP will have some well-known industry company on its side soon, and the active broker lobby will finally be letting go of its inane “we aren’t in the business of looking out for borrowers, we’re in the business of providing access to funds” line.

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Filed under: Bad news, Starbucks (SBUX)

Starbucks (NASDAQ: SBUX) shareholders take note: Chairman Howard Schultz is predicting a global shortage of gourmet coffee beans as caffeine-drinkers the world over gain more sophisticated tastes.

In a way, this is bullish and bearish for the company. More people drinking expensive coffee is great for Starbucks and its shareholders, but a shortage of beans could lead to higher prices that may or may not be easy to pass on to consumers.

But wait! Schultz doesn’t think Starbucks will be effected. In an interview with Reuters, he said that “At the very top of the market where Starbucks plays, I do not believe that others will have access to the quality of coffee that we are buying because we have secured those sources.”

Access to beans that other can’t get could be a very strong competitive advantage for Starbucks. What if, in addition to the strong brand, people simply can’t get the beans the company is selling anywhere else? The interview is a must-read for investors, as Schultz also talks about advertising by other companies actually helps his. He also said China will become Starbucks’ second biggest market.

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Filed under: Launches, Microsoft (MSFT), Marketing and advertising

Microsoft, Inc. (NASDAQ: MSFT) continues to churn out products that are meant to bridge the divide between PC media and living room entertainment viewing (and listening). In the latest edition, the software giant has released new “media extenders” that up the ante in terms of getting content — in all those dozens for formats — off your PC and onto the TV.

Microsoft has had this technology since the days of Windows XP Media Center Edition. The media sending functionality is now built directly into Windows Vista Premium and Ultimate editions, and lets customers with appropriate hardware (slim TV set-top boxes) stream content from that PC to a connected television. Newer boxes, expected by Microsoft to be released by various hardware makers within a few months, will even stream protected high-definition content from PC to TV. Sounds great! Have we arrived to the connected home, where all digital content can be shared to any device, anywhere? As far as Microsoft goes, I’ll reserve judgment until I see these new devices in action.

One thing stands clear is that the sheer amount of video formats, audio formats, wireless hardware streaming boxes and all the other dozens of variables is confusing to the majority of customers this entire ecosystem is intended for. Although it is a closed digital ecosystem, the ease-of-use of the Apple, Inc. (NASDAQ: AAPL) AppleTV probably won’t be matched by Microsoft’s good intentions here.

If customers cannot buy the product, take it home, plug a few cables in and make things work, all these devices will never become best sellers. It’s a problem Microsoft has constantly faced, even as it has made its part (the software) very simplistic to use. It relies on so many differing hardware manufacturers for everything else. Apple controls the whole environment when it comes to its product, and it has made the process almost 100% foolproof. As new media technologies become more complex, customers require less installation and usability complexity. We’re still not there yet.

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Filed under: Bad news, Krispy Kreme Doughnuts (KKD), Stocks to Sell

Shares of Krispy Kreme (NASDAQ: KKD) tanked more than 38% today after the beleaguered donut chain reported a terrible quarter.

Revenue fell 7.5%, and the company lost $27 million, compared with $4.6 million in the same quarter of last year. Results were hurt by impairment charges and lease termination costs as the company closes underperforming locations. The shares closed at their low for the day, $3.91, which is roughly the lowest the shares have traded in the company’ history. The stock had traded at over $12 as recently as January.

Analysts quoted in the latest AP coverage of this mess have a hard time being optimistic. As BB&T Capital Markets analyst Andrew P. Wolf said, “the nascent turnaround at the company has (at best) stalled.”

Hmm. Krispy Kreme’s CEO Daryl Brewster talked about the company’s turnaround plans, and added that “The only things nonnegotiable are our consumers, our brand and our quality.”

But the company’s overly-aggressive expansion may have hurt its brand and quality: Are donuts available at grocery stores and kiosks really something you associate with a premium brand?

It’s great that the current management is focused on the brand, but overexpansion may hurt that image beyond repair. And although takeover rumors have surrounded the company since its decline began, it really doesn’t look all that cheap, even after the decline.

In a blog post today, MarketWatch’s Herb Greenberg wonders about the company’s solvency: “Especially troubling is the company’s concession that for the six months it’s not in compliance with EBITDA covenants with its lenders — not good when cash and cash flow are going down, as is the case at Krispy Kreme.”

Restructuring would appear to be a real possibility at some point, and dieters as well as investors would do probably do well to avoid Krispy Kreme for now.

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Filed under: General Electric (GE), Starbucks (SBUX), Coca-Cola (KO), Market matters, Target Corp. (TGT), Bank of America (BAC), Boeing Co (BA), Huaneng Power Intl ADS (HNP), Anadarko Petroleum (APC), Stocks to Buy

Back on August 16, with the Dow opening under 13,000 for the first time since April, our BloggingStocks experts outlined a number of stock plays to ride out this volatile market. Picks ranged from Dow components and other household names to obscure business-to-business giants and foreign market leaders. Here, we review our picks weekly.

Our third week following our “Stocks for a Volatile Market” feature finds a couple of our volatile market picks bruised, but as an index, our selections continue to lead both the Dow and Nasdaq.

At the front of the pack: How much longer can Peter Cohan’s pick Posco (NYSE: PKX) keep up its fortunes? Already sitting 19% higher as of last Thursday’s close, the South Korean steelmaker has since climbed 6.5% further, closing yesterday at $157.69, $33.68 higher than its August 15 closing price.

China’s Huaneng Power International Inc. (NYSE: HNP), Sheldon Liber’s tip, gave back some gains in the last week, retreating 1.71%, but remaining a healthy 18% higher than its August 16 opening price. Another pick from Sheldon, Anadarko Petroleum (NYSE: APC), is our last recommendation that’s outperforming the Nasdaq — since trailing both the Dow and the Nasdaq last week, Anadarko has padded its shares by $2.07, and fetches 6.57% more than on August 16.

Continue reading Volatile Markets: Checking our stock picks - Week 3

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Filed under: Law, Scandals

Jeff Skilling’s been arrogant and too talkative since the beginning of the Enron fiasco (testifying before Congress when everyone else took the 5th). Now he’s behind bars, but he still won’t go away.

In October, Skilling was sentenced to 24 years in prison after being convicted on 19 counts of fraud, conspiracy, insider trading, and lying to auditors.

Now he wants a new trial. According to the Associated Press Daniel Petrocelli filed an appeal today with the 5th U.S. Circuit Court of Appeals in New Orleans. He wrote that:

Profound, inherent weaknesses in the government’s case not just gaps in its evidentiary proof, but doubts about its basic theories of criminality motivated the government to resort to novel and incorrect legal theories, demand truncated and unfair trial procedures, and use coercive and abusive tactics.

In order to believe that Skilling is innocent of any wrongdoing, you essentially have to buy that former CFO Andy Fastow went deep into the bowels of Enron and cooked the books all by himself — and no one knew about it. You also have to think that Skilling decided to dump shares of Enron because of his uncertainty surrounding the events of September 11th — 5 days before it happened. Move over Nostradamus! Free Jeff Skilling! The CIA can use him to predict the next terrorist attack!

There’s no question that the Enron Task Force made some pretty boneheaded blunders in its pursuit of justice, and maybe Skilling should and will get a new trial. But he belongs in jail, and hopefully that’s where he stays for a long time.

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Filed under: Newspapers, Marketing and advertising, Agriculture

School cafeterias are getting healthier and, amazingly, some parents are complaining about that.

According to The New York Times, they’re upset that some school districts aren’t letting kids bring in cupcakes to celebrate birthdays. And without in-school sales of baked goods, however shall parent-teacher associations raise money?

Texas parents even lobbied for a “safe cupcake amendment” (no joke) to be added to the state’s school nutrition policy, to ensure that students could bring in the tasty treats for birthday parties. Their efforts were successful.

Given the burgeoning obesity epidemic, we should be applauding various school districts for removing deep fryers from their kitchens, using low-fat products, and switching from soda to water.

Are parents right to be complaining about the ban on cupcakes? I don’t think so.

The idea of celebrating accomplishments/milestones with unhealthy foods — and drowning sorrows with soda — is one of the things that has led to the current crisis (Yes, 60% of America being overweight is a crisis). Instead of cupcakes for birthdays, how about walks in the woods or extra-recess time to play kickball or capture the flag? It might sound corny, but I think a lot of kids would find that more fun. And their waistlines would thank them.

And if PTO’s can’t raise money without selling junkfood, then they have a serious creativity deficit.

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Today’s weaker than expected job report supposedly contributed to its 250 point drubbing. But the simple reality is that nobody knows why the market went down.

If the market had gone up today, so-called analysts would have been available to explain that the market rose because weak job market results meant that the Fed was more likely to lower interest rates than it otherwise might have been.

After all, some analyst could have argued, the risks of not cutting interest rates — in the form of a weaker economy — far outweigh the inflationary risks. In fact, those analysts might argue, a decelerating job market means that there is a bigger risk of deflation. And what better way to counter that risk than to cut rates?

So why didn’t the market rally today? Nobody who knows the answer is talking to the media. It’s safe to say that the wisdom of those who comment to the press on market movements is worth exactly what you paid for it — nothing.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

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Filed under: Rumors, Products and services, Google (GOOG)

Is Google, Inc. (NASDAQ: GOOG)’s ‘gPhone’ going to be a reality soon? Rumors of a Google-branded wireless handset have been floating in the air for more than a year in many circles, with everyone sounding off that it was a great idea or a completely stupid move. In my estimation, it’s a great move for Google to do this if, in fact, the company is looking towards the future. So, let’s run with that idea, shall we?

Although Yahoo!, Inc. (NASDAQ: YHOO) has had a stronger presence in the mobile space for years, Google has really ramped up its mobile efforts in the last few. The company, which derives almost every bit of that spectacular, current revenue from text ads on the web knows (like everyone) that there are far more mobile handsets in use than all the PCs in the world combined. The next frontier is the mobile one, and with Google probably frustrated at the locks and control many wireless carriers clamp on top of that mobile phone before the customer can use it, it probably wants “handset democratization” of sorts, kind of like the net neutrality it seeks regarding internet access for all.

Are current cellphones full of hard-to-use features and unnecessary complexity? By all means. Any current cellphone is so full of features that they are jacks of all trades — but masters of none. My guess is that Google seeks to end that nonsense with its own branded handset, free of complexity and clampdowns by wireless carriers. Will the company make a new mobile phone from complete scratch, though? That would be quite an undertaking by any company, but Google has the money and moxy to do it.

Google wants to free customers from the shackles of servitude most carrier impose, like long-term contracts, overly-branded handsets and limitations on what customers can do. If Google can pull it off, it’s next money-making machine may just lie outside web-based text ads. Wait — maybe it will give these new handsets away free for having wireless text ads delivered to all those new wireless screens!

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Filed under: Management, Newspapers

A piece (subscription required) in The Wall Street Journal links corporate success with executives’ private lives.

The article says “… according to a recent study by three finance professors. Mining a trove of Danish government data on thousands of businesses, they were able to track links between CEO-family deaths and the companies’ profitability over a decade.”

Interestingly, corporate performance tends to rise after the death of the CEO’s mother-in-law. No joke.

What’s interesting about the study is that, assuming the findings are valid, the death of a CEO’s family member would appear to be a material event: On average, it does indeed effect the future of a company, just as legal issues, sales shortfalls, and macroeconomic factors can.

Continue reading Should you be studying the CEO’s personal life?

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