Randomly Noted

Recently freed of pay restrictions imposed as part of being a benificiary of the government’s TARP program, the board of directors of Wells Fargo & Co.  decided some extra compensation needed to be dispensed to the bank’s chief executive and three other top executives.

These and other Wells Fargo executives are being “increasingly and aggressively recruited by competitors,” said Steve Sanger, chair of the board’s Human Resources Committee, in a press release.

It’s smart to retain talented people, no doubt. But this stock grant also is more evidence that the world as seen by the boards and executives of big American commercial and investment banks is a very different place than that perceived by many other Americans.

The board did do the by now politically correct thing, given the hue and cry about executive compensation, by removing cash from the retention grants. CEO John Stumpf will get stock that right now is worth about $10 million if he sticks around three years and certain financial goals are met. The other three each get stock worth about $5 million under similar conditions.

The U.S. Treasury just pumped another $3.79 billion into GMAC Financial, the struggling finance company that is now majority owned by you and me. GMAC got itself into a financial pickle by getting too heavily involved in the mortgage business and in particular, the subprime mortgage business.

As part of the cash infusion today, the company also reclassified some mortgage assets it hopes to sell. And to pretty those assets up for sale, GMAC took additional write offs on some of those assets. But a rough, back-of-the-envelope calculation makes one wonder if these assets have been written down enough.

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First, it was Wall Street that got hit hard. Then it moved to corporate America. Unemployment rose and recession set in. The last to get hit in these economic downturns are state and local governments. And there are indications that more is to come on that front.

The U.S. Census Bureau was out with a report today that showed just awful state and local government tax revenues. Click here for the summary report. Individual income tax receipts were down 11.7% in the third quarter from a year ago. General sales tax receipts were down 9%. Corporate income tax receipts were down 18%. Somewhat surprisingly, property tax revenue, the big driver of local government revenues, was up 3.5%. One has to believe, though, that as residential home foreclosures work their way through the system and more commercial real estate problems surface, this revenue source comes under pressure as well.

All of which is to say: we may have avoided a financial meltdown and we may be on our way out of a recession. But state and local governments have some very hard decisions to make. They can’t raise taxes and wil have to cut costs. And that means elimination of popular programs and perhaps even jobs.

Stock performance of Discover (DFS), Capital One (COF) and the DJIA since market lows in March

If you believe consumer confidence is returning and that it will translate into consumer spending, one investment play is with credit-card companies. That way, you aren’t making a bet on a particular industry where consumers may spend money. Instead, you are playing the economics of increased credit card usage. The chart above certainly shows that’s what some investors have been thinking. Those are eye-popping gains for two credit-card companies from the market lows in March. And they have significantly outperformed the Dow.

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PIMCO’s Mark Kiesel is out with a report that argues for investors to have corporate bonds in their portfolios in 2010. And not just corporate bonds – he says investors should own financial sector bonds. Kiesel sees credit quality improving as companies continue to go through a de-leveraging exercise. He says that, combined with increased corporate profits, stronger balance sheets and rising cash balances all spell a winning investment opportunity.

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In a way, you can understand why AT&T did it. The big phone company with exclusive carrier rights for the iPhone has reportedly stopped selling the popular smartphone on its own website in the New York metropolitan area. Several websites have tried to get a straight answer out of the company and have received different reasons – from credit-card fraud to capacity problems. (You can still apparently buy the iPhone from an Apple or AT&T store). For the CNET story, click here. AT&T has acknowledged that heavy iPhone usage on its network has slowed down performance. It may also have led to an increase in dropped calls. So, the thinking may very well be: don’t make existing customers suffer more than they have already.

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There’s a different kind of Sun King who rules Venezuela (the other sunny fellow was a guy named Louis and he was the 14th in France).   When thinking about the way Hugo runs things south of the border, remember that song said to be inspired by a vamp Lola Montez: whatever Lola wants, Lola gets. Replace the name “Lola” with “Hugo.”

My fellow blogger Gabriella Stern wrote earlier about Hugo Chavez and his threat to take over a Toyota production plant in his country. (Click here to see Gabby’s blog.) We now see Hugo & Co. is asking the U.S. to extradite a banker that a Venezuelan judge earlier this month released because the banker had been held in jail too long. Lola, I mean Hugo, wasn’t happy by that decision. The judge was arrested and the Venezuelan president with the sunny disposition said she (the judge) ought to be jailed for 30 years for letting him go. This isn’t to say this banker did good things. He’s accused of defrauding the central bank in Venezuela. But then again, he deserves his day in court and it hasn’t happened.

With all the flaws we think we have with our political and legal systems, we don’t have presidents jailing judges because they don’t agree with a decision. Happy Holidays, Hugo. And let’s hope the U.S. just ignores that extradition request.

Here’s the story from Newswires reporter Dan Molinski:

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Venezuela boss Hugo Chavez has struck again: now he’s threatening to seize Toyota Motor’s Venezuelan vehicle assembly plant if the Japanese auto maker doesn’t make a “rustic” car poor people in the country can afford to buy. The “Chinese,” he said, can produce a people’s car if Toyota fails to comply. This Chavism comes as the country’s power supply is so woeful that earlier this week the president had to order factories and shopping malls to cut electricity usage by 20%. Chavez has tended to expropriate or threaten to grab foreign oil assets. His attacks on foreign non-oil assets have tended to target small potatoes – such as coffee production plants. By shifting his sites to giant Toyota, Chavez takes his particular brand of economically ruinous populism to a new level. So, here’s a question: If you’re a foreign firm, do you invest in Venezuela or shift your money elsewhere? When China does something despotic, overseas investors adjust but persevere, knowing they can’t afford not to bet their futures on China’s vast, increasingly affluent population as well as its still-cheap labor force. Venezuela’s much smaller and less crucial; the Toyota gambit will hurt foreign direct investment.

This blogger is visiting family in Virginia Beach this week and was doing some last-minute holiday shopping today. I walked into a very crowded Best Buy and spoke with a floor clerk about what people are buying – the answer: two items in particular. Then when at the checkout, I asked the cashier the same question. And I got the same two-item answer. Now granted, this is one store and it’s one town. But it was the reasoning for these purchases that each employee offered that makes sense it could be a wider trend. The items were the iPod and the iPod Touch. You are “cool” if you have either one and the iPod in particular starts at a relatively low price point. The iPod shuffle starts at $59. The iPod Touch starts around $199 and is all about not only a big audio and video library, but WiFi access that lets you take advantage of not only the Internet but the Apple apps that make the iPhone so popular. So, you get those bells and whistles with no monthly cell-phone fee (but you need to have WiFi access…) Will be interesting to see if the Virginia Beach trend is seen around the country.

It’s that time of year – when thoughts turn to interminable summers with the kids. Or, if you’re a kid, painful summers with the ‘rents. Our kids, ages 11 and 13, never wanted to go to camp during the years we traipsed around the world. Now we’re back and they’re game for camp. And so our younger child will attend a day camp for gamers. The elder, a clarinetist, will attend overnight music camp in upstate New York. Truth be told, I’m a bit embarrassed about letting our little boy devote hot summer days to designing computer games – it would be more parentally responsible to sign him up for a summer of swimming and archery. But the little guy doesn’t enjoy those types of activities; he DOES love computer gaming. We’ll make an effort to get him to the local pool each afternoon after eight hours of creating, and slaying, virtual monsters. Colleagues who are into this stuff say they’re envious of the three week-long courses we’ve signed our son up for: “RPG Game Design-Graphic Art Hybrid;” “Game Creation-Arcade & Platform”; and “3D Game Design-Role Playing Games.” The stage mother in me hopes he will emerge from the experience as a budding Bill Gates or Steve Jobs.