What Was Wall Street Thinking? Kardashian Sues, Wynn Rants, and More

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KimCompanies do the darndest things, such as these surprises, blunders, and just flat-out boneheaded moves from last week.

Kardashian's Naval Maneuvers

Celebrity gossip site TMZ.com is reporting that Kim Kardashian is suing specialty retailer Gap (GPS) over an Old Navy ad that aired this year starring a Kardashian lookalike.

The initial public reaction has been outrage -- at Kardashian. How can someone trademark a look? Doesn't she already have enough money? Kim's the pretty sister. Right?

I wonder how many of the Kardashian-bashers have seen the televised spot. It's not just a dead ringer for Kardashian; the commercial's actress sings about being a celebrity. A lot of people apparently genuinely believed it to be Kim, and it's easy to see how appearing to endorse "super cute" jeans at apparel discounter Old Navy can get in the way of her existing endorsements.

TMZ is claiming that Kardashian is suing for as much as $20 million. The sum does seem outlandish, but what was Gap thinking when it went with a Kardashian lookalike and supposedly posted as such on Twitter?

Wynn or Lose

Everybody loves a charismatic CEO, but can a politically charged helmsman take things too far?

Casino mogul Steve Wynn took some jabs at President Obama during Wynn Resorts' (WYNN) quarterly conference call last week.

"The business community in this country is frightened to death of the weird political philosophy of the President of the United States," he said during his rant to analysts and investors. "Until he's gone, everybody's going to be sitting on their thumbs."

He also went on to call the Obama administration "the greatest wet blanket to business and progress and job creation" in his lifetime, solely blaming Obama for the fear in this country.

Do you agree or disagree with Wynn? You're welcome to chime in with your opinion in the comment box below, but you're probably not the CEO of a gaming giant that may have just alienated half of your investors and a decent chunk of your clientele by taking political sides in a corporate forum.

A Taxing Dilemma

Are some companies hiding behind kinder taxing situations? Microsoft (MSFT) and Travelzoo (TZOO) posted quarterly results last week where the bottom lines were padded thanks to sharply lower effective tax rates. Since too many investors -- and financial journalists -- like to boil things down to ultimate profitability, are they accurately reporting the full picture?

Let's start with Microsoft. The world's largest software company seemed to impress analysts by posting a 30% spike in profitability. However, not too many of the outlets covering Mr. Softy's financials bothered to point out that Microsoft paid less than a third of the taxes that it did during last year's quarter. (That didn't get by our own Eric Bleeker, who pointed out Microsoft's tax dodge right here on these pages last week.) Eliminate the taxing difference by going a couple of lines higher on the income statement, and the company's operating profit rose by a less than inspiring 4%.

Travelzoo's 51% bottom-line pop wasn't enough to please analysts that were expecting profitability at the travel deals publisher to nearly double. It could have been even worse. Travelzoo's European operations recently turned profitable, yet losses it was incurring overseas a year ago can't be used to offset taxable gains closer to home. Its effective tax rate has gone from a deceptively high 46% during last year's second quarter to 36% this time around. If I've lost you on the taxation differences, all you need to know is Travelzoo's pre-tax profits only climbed 28% higher in its latest quarter.

I'm certainly not taking Microsoft or Travelzoo to task over this, though the companies could be doing a better job of getting these points across. Financial reporters aren't sleuths.

Crossing the Borders

The fire sale for bankrupt bookseller Borders is now officially an inferno. After failing to land a buyer with plans to keep the bookstore chain in operation, Borders is in the process of closing down its remaining 399 stores.

Shares of Barnes & Noble (BKS) surged on the news, but why? Liquidating hundreds of Borders' locations will hurt Barnes & Noble in the near term. Anyone looking for books will gravitate to the place marking them down in a "going out of business" sale. Bulls will argue that Barnes & Noble will thrive once Borders is gone, but isn't this really proof that real-world books are going the way of CDs and DVDs toward a slow path to extinction?

Circuit City's vaporization didn't help Best Buy (BBY). When Tower Records closed up shop five years ago, it didn't exactly open the door for Virgin megastores.

Barnes & Noble has the popular Nook e-reader, but the company will be in a bind when it has to begin closing stores, too.

Longtime Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this story. The Motley Fool owns shares of Microsoft, Best Buy, and Gap.

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29 Comments

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Frankie

Steve Wynn has had enough and so have a lot of people. We need more successful businessmen to have the courage to come forward and stand up to this tyrant. Things are getting worse and worse ladies and gentlemen. Gas prices aren't coming down and neither is unemployment. We cannot make the producers in this society as our scapegoats. This president uses scare tactics in order to continue his ungodly spending binge. The US Govt takes in $2.4 trillion a year and we cannot spend $3.9 trillion or better year in and year out.

All presidents have spent too much but this is out-of-control and unnecessary. The buck stops here. The spending is not helping us. It is hindering us. Where is our money going ? To study the drinking habits of Chinese prostitues ? A study on how fast shimp run on a treadmill ? Building a tunnel under a road for some turtles ? Government is incredibly wasteful and inefficient. In the private sector we cannot operate this way or we will fail and rather quickly. We don't have public taxpayer money to throw about.

We will not go into default. Our Govt borrows 41 cents out of every dollar so they will have to close some parts of our government. That's fine. Our government is far too large, cumbersome, and expensive. Do you remember what our constitution states ? Limited Government and limited intervention into our lives. Personal responsibility.

I find it humorous that the usual suspects are attacking him. How dare anyone do this ! Hey...he is a democrat and former supporter for Barry. Things must be bad for him to lash out.

Steve Wynn hit the nail on the head. Our economy starts with people like him to invest and create jobs. The economy does not go from the bottom up. Look at the reality we are in. How many reports do we see that state that the economic reports were "unexpected" ? Supposedly "Trickle down" economics does not work but the pink slips are coming down and so is the misery. Capitalism spreads wealth. Socialism spreads poverty and misery.

For this country to return to success we need to go back to our roots. Big Government is not the answer nor is high taxation, Big Labor, and a high regulatory environment. We need to bring back common sense. This country will not survive another four years of this administration. The socialist welfare state has failed mankind time and time again and it will fail here.

July 26 2011 at 10:09 AM Report abuse rate up rate down Reply
msporlando

Wynn's comments were spot on. He also mentioned in his speech that he has been a lifelong Democrat and I believe voted for Obama.

July 25 2011 at 4:45 PM Report abuse rate up rate down Reply
Russell Bennett

Gogle says Obama sued Citi Bank to force them to make Sub Prime Mortgages.(Buycks-Roberson V.Citibank Fed Sav. Bank Fair) Why do they keep blaming Bush. Look it Up

July 25 2011 at 4:27 PM Report abuse rate up rate down Reply
ratliff123

from afar, i used to have a positive impression of steve wynn. when i've seen him interviewed on tv, he comes across as charming, bright, a good businessman, and sometimes he even does much good for charity. but after reading his recent anti-obama rant, i no longer have that view. what the hell could wynn possibly mean by obama's "wierd political philosophy"? exactly what is so wierd about it, mr. wynn? is it as wierd as a president launching two expensive, discretionary wars and cutting taxes so the national debt will balloon? where the hell does wynn get this stuff about obama being the "greatest wet blanket to business and progress and job creation"? it is increasingly obvious that bidness is doing everything it can to leverage the down economy to get any and everything it wants. and the evicence is that the bidness community is being at least somewhat successful. still, it is inordinantly wealthy folks like steve wynn who keep screaming "the sky is falling! the sky is falling!"

funny, it sppears mr. wynn has absolutely NO criticism for the house republicans who are trying to push the country's economy over the cliff.

no, obama doesn't want to hand all the keys to the country over to huge corporations -- at least not any more than they already hold, because they already wield enormous economic and political power.

maybe wynn is angry at obama because he supports a pay-your-fair-share tax policy for the wealthy. wynn doubtless doesn't want the govt to get any more of his money, not one copper cent, no matter how much he's got. i wonder how much money the bush tax cuts put in wynn's pocket. maybe it was enough to buy another pricesless painting. however much it was, it doubtless would be a veritable fortune for most of us.

July 25 2011 at 4:02 PM Report abuse rate up rate down Reply
spmazanek

Wynn has spoke out against Obama's policies for months and he hasn't yet "alienated half his investors and a descent chunk of his clientele". The investors are business people and the majority probably agree with Winn. As for his clientele, there aren't many Obama supporters who are high rollers. Many are just high.

July 25 2011 at 3:51 PM Report abuse +1 rate up rate down Reply
jpeconst

wynn was correct in his analysis. power full business people like wynn should speak out.

July 25 2011 at 3:41 PM Report abuse rate up rate down Reply
Johnson Family

The economy was already going down hill before President Obama was in office. Now all the blame lies on him because the economy is down now. What contributions did the previous president have to do with this situation except fund a war for about 6 of the 8 years he was in office.

July 25 2011 at 3:23 PM Report abuse rate up rate down Reply
ron

Poor Steve Wynn,the world is a lousy place ,not because of the pres.
But because you fire women because they are a little overweight,I
would say you have done a good job of helping unemployment rise.
You rich s.o.b.

July 25 2011 at 3:09 PM Report abuse rate up rate down Reply
1 reply to ron's comment
ugagentorange

Thats pretty ignorant on your part. If you have to keep a certain weight for your job, then its your fault, not the CEO's.

You selfish pr.i.ck.

July 25 2011 at 4:36 PM Report abuse rate up rate down Reply
borderlinedevill

THE AMERICAN WELFARE SYSTEM IS A COMPLETE UTTTER FAILURE
all it's done is to produce a population of totally dependent irresponsible people who have no idea how to be self sufficent and who teach their children to live the same way

July 25 2011 at 2:57 PM Report abuse +3 rate up rate down Reply
1 reply to borderlinedevill's comment
spmazanek

That is how it was designed and its intended result.

July 25 2011 at 3:49 PM Report abuse +1 rate up rate down Reply
Barry

If you think the economy is bad now wait until the Republican spending cuts take effect.
Also a reminder that it is up to the approriations commitee in the House to spend the money, not neccesarily according to the budget.
Cut spending (which the corporations of america are doing) and you cut jobs, both public and provate.
We will again see double digit unemployment, as a result of the lack of spending by Corps and layoffs of a whole lot of government employees.
Unemployed citizens do not spend money. The demand for american products will drop.
No demand, no jobs.

July 25 2011 at 2:57 PM Report abuse -2 rate up rate down Reply