If you have ever wished you hadn’t taken the advice of a film critic, or cringed after purchasing a well-reviewed product that turned out to be junk, chances are you have since become a smarter shopper. Bad experiences teach us to be wary of the advice of others, especially those who are being paid to give us advice.

It seems that investors have begun to learn those same lessons. Bloomberg reports that, among companies within the S&P 500, those that were recommended increased 73% (on average) since March 2009. Meanwhile, the companies with the fewest “buy” recommendations were more than twice as successful, gaining 165%.

According to Bloomberg, retailers and restaurant chains are among the banks’ favorite investments. But investors who view the recommendations as a contrary indicator are buying into utilities, which disburse the highest dividends after telephone stocks. Wary investors are also turning to banks, which Bloomberg believes are likely to grow three times as fast as the S&P 500 this year.

“When you have a stock that has 15 analysts covering it and it has 15 buys, I can’t imagine it has much outperformance left,” said Don Wordell, a fund manager at Atlanta-based RidgeWorth Capital Management Inc. His $1.64 billion RidgeWorth Mid-Cap Value Equity Fund topped 98% of its peers in the past five years. “You’ve got a stock that has 15 sells on it, you’re set up there to have some strong outperformance.”

For the last six weeks, the S&P 500 has been moving upward. Bloomberg data show that the index has gained 88% (up to 1,271.50) since March 9, 2009.

In 2010, the index rallied 13%. Netflix, Inc. (NASDAQ: NFLX) earned the top spot for highest gains, rising 219% last year. Cummins Inc. (NYSE: CMI) scored an impressive 140%.

Previously, analysts predicted that health-care and technology companies would win the year, but they ended up having two of the three smallest rallies among 10 industries in the S&P 500, gaining less than 10%. At the same time, banks and real estate firms – which analysts did not rate very highly – performed the best, rising 19% and 28%, respectively.

Further gains were brought on by the Federal Reserve’s stimulus spending, which has poured a reported $600 billion into bonds. Bloomberg says that the companies that earned the most are the ones that are most closely tied to the economy. Cliffs Natural Resources Inc. (NYSE: CLF) is one such beneficiary, gaining 69%.

Still, David A. George, a bank analyst at Robert W. Baird & Co., does not believe that analysts could have foreseen the impending changes to financial regulations.

“A year ago today, financial regulatory reform was not even on people’s radar,” he said. “Going into 2010, a lot of investors were positioned in big banks. With the increased political and regulatory scrutiny, you saw money come out of those names and into the regionals.”

Investors: 1, Analysts: 0 [Benzinga]

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We are getting a bargain on this TARP business.

“The cost of TARP is likely to be no greater than the amount spent on the program’s housing initiatives,” Geithner said in prepared testimony to the Congressional Oversight Panel. He said the direct financial cost of TARP was once estimated as high as $350 billion by the Congressional Budget Office but was now “likely to cost a fraction of that amount” as investments are sold off and interest and dividends collected. The latest estimate from the non-partisan CBO estimated that TARP’s net cost will be as low as $25 billion. The Treasury’s most recent all-in cost estimate for TARP, including expected gains from AIG investments, is about $30 billion.

Geithner said the 1 percent of GDP cost for all rescues — including capital support to Fannie Mae and Freddie Mac. and actions taken by the Federal Reserve — is “remarkably low” compared to other past banking crises.

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As you may have heard, Representative Ron Paul, whose most passionate cause is abolishing the Fed, has been chosen to run the House’s subcommittee that oversees the Federal Reserve next year. And while one should never jump to conclusions about the intentions of others, based on the fact that Paul has previously introduced legislation to get rid of the thing, wrote a book called “End The Fed,” and, odds are, has ‘Federal Reserve’ at the top of the To Kill list posted to a wall in his basement, one might (involuntarily) draw some. Well, you couldn’t be more off base. Ron Paul loves the Fed! And he’s going to let it live a little while longer, unless Ben Bernanke really pisses him off, in which case, your’e finished.

Paul, a Texas Republican who next month will take control of the House subcommittee that oversees the Federal Reserve, said today that he will “not really, not right up front” push for an end to the U.S. central bank. “But obviously that’s the implication,” Paul said in a Bloomberg Television interview on “In the Loop” with Betty Liu. Paul said he was talking about a “transition.”

Rep. Ron Paul Says He Won’t Push for End to Fed `Up Front’ [Bloomberg]

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As promised. If you’re looking for some lunchtime reading material, check them out here. Do feel free to share your favorite passages with the group.

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Charles Gasparino is just going to cut right to the chase– he’s seen that YouTube clip. You know the one, with the bears talkin’ economics and calling the chairman of the Federal Reserve “The Ben Bernank”? Someone sent it to him the other day and not just some pissant from a bucket shop on Long Island but a real live BSD.

I should point out that I was told to download the YouTube video not by some dopey trader during a slow day in the markets, but by a CEO in New York City who runs one of the biggest financial firms in the world. Bernanke’s senior staff has seen it too, I’m told, though a spokesman wouldn’t say whether the chairman has. “This video is going fucking viral,” the CEO told me with a laugh.

You know who’s not laughing? Charles Gasparino. After he got the clip to work (there were a few false starts and he didn’t have the volume turned on) he became filled with rage at these furry little shits.

While it’s easy to blow off a YouTube video as nothing more than a cheap shot created by someone with too much time on his hands, the fact that Bernanke or any Fed chairman has gone from relative mainstream obscurity—fed chairman for all the power in navigating the economy through their control of the country’s money supply have never exactly been house hold names in the majority of American households—to an object of popular derision and scorn really says something about Bernanke’s ability to remain an effective Fed chairman…

To be sure, QE-2 will probably work as well as QE-1, which means it probably won’t do much to spark an incredibly weak economy staggering under the weight of 9.5 percent unemployment. But that doesn’t mean Bernanke deserves all the crap he’s getting. He doesn’t because attacking Bernanke obscures some of the big problems facing the American economy as we conclude the second year of President Obama’s hope and change agenda that clearly isn’t working.

So whoever is making these things, let’s get one shining a light on the real problem. Let Chaz know if you need ideas for dialogue, he came up with some good stuff last night.

Ben Bernanke: The Economy’s Fall Guy [TDB]

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Barclays Profit Drops, Capital Remains Strong (MarketWatch)
The bank said pretax profit was down 76% at 327 million pounds ($527 million) after it booked a £947 million charge in its Barclays Capital investment-banking arm on the changing value of its own debt. Excluding that charge and a smaller charge a year earlier, Barclays said pretax profit dropped 28% to £1.27 billion. Chief Executive John Varley also moved to reassure investors about the bank’s capital position, saying Barclays is “well equipped to deal with regulatory changes” as the new capital rules known as Basel III are phased in.

Morgan Stanley Topped $100 Million On One Day Trading In Quarter (Bloomberg)
That represents lowest number of $100 million days since 2006. MS made more than $100 million in trading revenue on 18 days in last year’s third quarter. The firm’s trading division lost money on 10 days during the quarter, compared with five days a year earlier, according to a filing yesterday with the U.S. Securities and Exchange Commission.

Fed Action Gets an Unexpected Endorsement From India (NYT)
“A strong, robust, fast-growing United States is in the interests of the world,” said Prime Minister Manmohan Singh. “And therefore, anything that would stimulate the underlying growth and policies of entrepreneurship in the United States would help the cause of global prosperity.”

Papaconstantinou Says EU Budget Cuts May `Choke Off Growth’ (Bloomberg)
“I am not one of those who thinks all the European countries should press on the brakes and do deficit reduction in the way that would choke off growth,” Papaconstantinou said at an event in London late yesterday. “There is a story to be told, whereby some countries have to do serious deficit belt- tightening, others less so…I worry very much if we simply all get into a situation where we are forced by markets to reduce our deficits,” it may “lead to a double-dip recession,” he said.

Junk-Bond Sellers Find Risk Too High (WSJ)
Mr. Makhija is among a growing number of hedge funds and other professional investors that are getting out of junk bonds and buying assets like mortgage debt and stocks instead. As they exit, mom-and-pop investors are flooding in, along with mutual funds that are usually dedicated to other investments, like stocks and government debt. All are lured by the outsize returns delivered by the junk-bond market over the past 18 months amid tepid gains in stocks and rock-bottom yields on Treasurys.

BP May Pay Billions for `Missed Signals’ That Led to Disaster (Bloomberg)
“BP has a broader corporate culture that does put profits ahead of safety, and that message permeates throughout the company and down through the rank and file,” Uhlmann said in a telephone interview. “BP will still have to pay tens of billions of dollars in natural resources damages and compensation to victims for economic losses.”

Kanye West Performs During Delta Flight (Billboard)
“He was like, ‘Yo, this your n***a, Kanye,’” a passenger said. “Then he couldn’t decide if he wanted to do ‘Good Life’ or ‘Gold Digger,’ so he was like, ‘I’ll just do a little bit of both.’ It was awesome… but I still have no idea how he got into the cockpit.”

Doctor In Insider Case Worked For Guidepoint Global (WSJ)
According to compliance policies on its website and interviews with health-care experts who consult for the New York firm, Guidepoint has strict rules forbidding its consultants from disclosing confidential information learned while advising clinical trials. So what Yves Benhamou did for Frontpoint would in fact be frowned on.

The Return Of The Risk Arbs (Dealbook)
Heidi Moore: So far this year, there has been a noticeable boom: nearly 40 banks and financial companies have started or expanded teams to advise hedge funds, according to an analyst at a major firm.

How A Fraud’s Value Affects Prison Time (WSJ)
The dispute is part of a growing debate over whether the sentencing system for white-collar crimes has come to rely too heavily on calculations of financial losses to fraud victims. Under the sentencing guidelines, legal experts say, an executive of a large public company convicted of a crime like securities fraud could be sentenced to life imprisonment on a first offense.

PIMCO’s El-Erian: Fed’s Move Is ‘Not Enough’ (Dealbook)
Mohamed El-Erian, Pimco’s chief executive, said in an interview with Dealbook that the Federal Reserve’s decision to buy up to $600 billion in government bonds does not go far enough. The plan…could reduce the risk of deflation and a double-dip recession, but will fail to overcome an “unusual” period of low growth and stubbornly high unemployment that may linger for years.

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Warren Mosler is running for Congress in Connecticut. Before he can be elected, however, he says we need to get a few things straight.

“I am running for U.S. Senate to see my policies implemented to create the 20 million jobs we need,” he said today. “And to do this it must be understood that there is simply no such thing as the U.S. Federal government running out of money, nor is the Federal government operationally dependent on borrowing from China or anyone else. U.S. states, individuals, and companies can indeed become insolvent, but U.S. government checks will never bounce. Yes, large Federal deficits that push the economy beyond the point of full employment can lead to inflation or currency devaluation, but not bankruptcy and not bounced checks. If lawmakers today understood this fact, they would not be looking to cut Social Security and we would not still be mired in this disastrous recession.”

Because lawmakers apparently do not understand this, Mosler, who also threw in an analogy about football (“When a touchdown is scored, the number on the scoreboard changes from 0 to 6. No one wonders where the stadium got the 6 points, no one demands that stadiums keep a reserve of points in a lockbox and no one is worried about using up all the points and thereby denying our children the chance to play.”) has said that if anyone can prove him wrong re the government not being able to run out of money, he’ll donate $100 million of his own money to “pay down the Federal deficit.”

While we appreciate the concept of this publicity stunt, obviously this $100 million doesn’t sufficiently express Mosler’s conviction.** The bet should instead be that if a congressman or senator can prove to him that the federal government can run out of money, Mosler will (choose one):

* Impale himself on something sharp on the steps of the Federal Reserve

* Pledge to indenture himself as Chris Dodd’s valet for a period of decades

* Given the apparent love of football, promise to buy the Detroit Lions and sit through all of their games until he dies

GIVE US SOMETHING REAL, WARREN– MAKE US BELIEVE.

Hedge Fund Senate Candidate Bets That U.S. Cannot Run Out Of Money [FINalternatives]

** Not to mention will pay for what, one-tenth of a second of our loan-servicing? Thanks, Uncle Warren!

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Big Win For Big Bear (WSJ)
Bridgewater Associates has scored a return of about 38% at its flagship fund, driven in part by a multifaceted wager that the U.S. economy would be in worse shape than many expected and the Federal Reserve would keep interest rates low, say people familiar with the matter…unlike other investors who have made a fortune trading on a single asset type, such as bonds backed by subprime mortgages or securities of big banks, Bridgewater essentially places bets on the entire world.

Evolution At KKR: Goldman’s Genetics (WSJ)
Led by 39-year-old Bob Howard, the team from Goldman hasn’t scored outsize gains in the past; people who have seen the group’s returns say their gains as of this summer were less than 5% this year. But the trading team’s ability to generate steady profits without any huge losses is expected to be enough for KKR to raise substantial cash, say private-equity executives. Many could be attracted to the cachet of the Goldman name, said one executive.

AIG Raises $17.8 Billion In Unit’s Stock Sale (NYT)
A.I.A., said Friday that it priced its shares at 19.68 Hong Kong dollars, or $2.53 — at the top of a previously-announced range — making the listing the largest initial public offering ever seen in Hong Kong and in the insurance sector as a whole.

Nomura, Goldman Move Investment Bankers to Asia to Tap Growth (Bloomberg)
A surge in fundraising by banks and insurers, along with competition for talent from smaller equity underwriters like Barclays Plc and Daiwa Securities Group Inc., has led to a shortage of financial institutions bankers in Asia. The region is home to the world’s five biggest initial public offerings by financial companies in the past 12 months, according to data compiled by Bloomberg. “These individuals are highly sought after and banks have been competing against each other in the war for talent to bring them in,” said James Carss, executive general manager of recruitment firm Hudson’s Hong Kong office.

Aircraft crashes after crocodile on board escapes and sparks panic (Telegraph)
The plane crashed into a house just a few hundred feet from its destination. The occupants of the property were outside at the time. According to the inquiry report and the testimony of the only survivor, the crash happened because of a panic sparked by the escape of a crocodile hidden in a sports bag. One of the passengers had hidden the animal, which he planned to sell, in a big sports bag, from which the reptile escaped as the plane began its descent into Bandundu. A report of the incident said: “The terrified air hostess hurried towards the cockpit, followed by the passengers.” The plane was then sent off-balance “despite the desperate efforts of the pilot”, said the report.

Mini-Madoff Nadel Gets 14 Years (Reuters)
“Arthur, you are an evil person,” said one of his victims, businessman Michael Sullivan, in court. “I assume you are a narcissistic psychopath” and “just a weak child seething with anger and loathing” who had “little success in life until you founded your fraudulent funds.”

NY Candidate Blames Cuomo For Housing Bubble (Reuters)
“The housing bubble occurred because of one man — that was Andrew Cuomo,” Paladino told Reuters in an interview Thursday.

The State Of Jay-Z’s Empire (WSJ)
In the early days of his entrepreneurship, there were awkward exchanges with white-collar guys trying to relate. “In the beginning it was ‘ ‘Sup, man!’ ” he says in his soft speaking voice. “But at this point, it’s pretty much accepted that I walk both worlds naturally.” And yet, he chafes at the lack of respect for a genre that some people still dismiss wholesale because of ugly words and violent imagery. W hen he shares strawberry malts with Warren Buffett, confers with the president, or even vacations in St. Tropez, he does so on behalf of “the culture,” he says, by which he means hip-hop.

Article courtesy of Dealbreaker

The last couple years have not been going, as they say, so good for Lenny Dykstra. He got thrown out of his house (but not before ripping out the bathroom fixtures and pissing on the wall), he filed for bankruptcy (representing himself in court, natch), and his he former friend, Jim Cramer, who nominated him for chairman of the Federal Reserve turned his back when times got tough. We never stopped hoping that things would get better for Nails, though. And it apparently, they have. Way better.

After living “like Gandhi, out of a bag,” Dykstra has somehow managed to land himself a 12th-story penthouse in Westwood. It’s there that he “plots a financial comeback,” the specifics of which of yet to be banged out but may include hawking old photos on Craigslist and working as a phone sex operator. He’s also said to have “several” projects planned, including bringing back the Players Club magazine, spends a lot of time “chugging Red Bull,” and has a personal assistant named Destiny. The best news, though, is that Nails has got his spirit back.

“I have been fighting my whole life,” Dykstra said. “That’s why I have a new theme song, dude, and I am going to play it for you.”

“I want to be a billionaire, so … bad, buy all of the things I never had,” he sang along, loudly and off-key, to the Travie McCoy song “Billionaire,” as it blared from his Bose computer speakers. “I want to be on the cover of Forbes magazine, smiling next to Oprah and the queen.”

Lenny Dykstra Envisions A Comeback [LATimes]

Article courtesy of Dealbreaker

SEC Vows More Action Against Wall Street on Crisis (FT)
US regulators told the Financial Times the SEC’s contentious civil fraud case against the Goldman Sachs over the sale of mortgage-backed securities was an example of the type of high-profile action its revamped enforcement division was working on. “Deterrence works in the white-collar world. Financial institutions look at cases like Goldman and review their own practices and risk-tolerance and think about how risky behaviour affects their brand,” said Robert Khuzami, SEC director of enforcement. Senior SEC officials said the regulator had a significant number of potential enforcement actions against banks and insurers still in the pipeline.

Private-Public Investment Program Reaps Rewards (NYT)
Nine months into the program, the eight investment funds chosen by the Treasury Department have generated an estimated return of about 15.5 percent for taxpayers, according to an analysis of their results through the end of June by Linus Wilson, an assistant professor of finance at the University of Louisiana, Lafayette. Two of the investment funds — one operated by an Angelo, Gordon-GE Capital consortium and another by BlackRock — have gotten off to even stronger starts, posting returns of more than 20 percent.

Banks’ Self-Dealing Super-Charged Financial Crisis (ProPublica)
“Over the last two years of the housing bubble, Wall Street bankers perpetrated one of the greatest episodes of self-dealing in financial history. Faced with increasing difficulty in selling the mortgage-backed securities that had been among their most lucrative products, the banks hit on a solution that preserved their quarterly earnings and huge bonuses: They created fake demand. A ProPublica analysis shows for the first time the extent to which banks — primarily Merrill Lynch, but also Citigroup, UBS and others — bought their own products and cranked up an assembly line that otherwise should have flagged.”

El-Erian Says `Alarming’ Data Show U.S. Economy Slowing (Bloomberg)
Unemployment is high, consumer credit is shrinking and small companies are having trouble obtaining bank lines of credit, wrote El-Erian. Increased government spending and additional debt purchases from the Federal Reserve are unlikely to spur a rebound, he wrote. “Throughout the summer, data signals have become more alarming,” wrote El-Erian. “Current policy approaches here and abroad are unlikely to deliver a durable and robust U.S. recovery.”

Tiger + Divorce = Six Strokes Under (WSJ)
Well, well, well, well, well, well, well. Not going to make too big a deal about this. Could have just been a fluke. He was due to break out soon—it’s been a messy slog of a summer. Despite everything—the self-inflicted personal crisis, the maddening inconsistency on the course—he’s still the No. 1-ranked golfer in the world. Technically. Which means he’s, you know, good.

Baby Tiger Found Stuffed In Bag At Thai Airport (AP)
Authorities at Bangkok’s international airport found a baby tiger cub that had been drugged and hidden among stuffed toy tigers in the suitcase of a woman flying from Thailand to Iran, an official and a wildlife protection group said Friday. The woman, a Thai national, had checked in for her flight and her oversized bag was sent for an X-ray which showed what appeared to be a live animal inside, according to TRAFFIC, a wildlife trade monitoring group.

Krugman: This Is Not A Recovery (NYT)
We can safely predict what he and other officials will say about where we are right now: that the economy is continuing to recover, albeit more slowly than they would like. Unfortunately, that’s not true: this isn’t a recovery, in any sense that matters.

BofA Economist: Bernanke Must Be Clear On Objectives (CNBC)
“In its recent statements, the Fed didn’t explain its actions after modestly changing policy,” Bank of America Chief Economist Mickey Levy told CNBC. “He (Bernanke) needs to lay out what the Fed’s views are on inflation by saying the objective is one to two percent. Implicit in that will be an understanding that it’s going to avoid deflation.”

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