The stock market

[gunnarthor]

So Wells Fargo got hit with a relatively small fine although it's been touted as the largest fine ever by the CFPB.

 

"Regulators said Wells Fargo (NYSE: WFC) opened roughly 1.5 million deposit accounts and 565,000 credit card accounts that may not have been authorized by consumers. The CFPB also said bank employees also requested and issued debit cards without consumers’ knowledge or consent, even creating PIN numbers without telling its customers. Financially harmed customers are eligible for restitution. The OCC order also requires Wells Fargo to take corrective action to establish an enterprise-wide sales practices risk management and oversight program to detect and prevent unsafe or unsound sales practices."

 

This pisses me off for a few reasons.  First, WFC is supposed to be one of the "better" banks so if they are doing this, all of them are doing this.  The others just haven't been caught yet.  So, bank profits (and, perhaps more importantly, bank services) are, again, artificially inflated.  Second, none of the 5300 employees who stole money from WFC customers (so far considered to be a bit north of 2m) to create these fake accounts will be charged with a crime.  Perhaps you've heard about the homeless lady who got 5 years in prison for sending her kindergartner to a better school for stealing 15k in 'free educational services'?  Third, I own a lot of WFC and have accounts with them.  

 

The stock market hasn't really been bothered by this.  WFC stock price hasn't moved much and they still are worth more than many small (or even medium) sized countries.  It has a strong dividend (over 3% now) and obviously it's one of the most important companies in the country so it's unlikely that something this small will make any impact going forward.  But it still sucks and might call into question WFC 'cross-selling' business plan.

 

http://finance.yahoo.com/news/wells-fargo-opened-couple-million-103004267.html 

 

[Willihammer]

Saw that. This is a sad story really. Not letting those 5300 employees off the hook, what they did was unethical. But, I reckon the vast majority of those employees setup the fake accounts with the specific goal of them not incurring any fees or impact the customers in any way at all. You have to understand how many customers still refuse to take their accounts online or do anything above rudimentary banking. Employees no doubt thought they could achieve the benefits of the incentive program without causing any actual harm to anybody. And if you look at the report, of the 565k ghost credit card accounts opened, only 14,000 incurred fees. Those fees included annual fees (which don't apply to all WF credit card account types), overdraft protection (which again doesn't apply to all account types). Thus I believe this small percentage (2.45%) is explainable by user error in opening the accounts incorrectly. The other 97.5% incurred no fees. (There were also late fees on some accounts which I can't explain).

 

Its sad because the punishment of termination is going to be made to appease shareholders, but I guarantee the vast majority of those who participated caused no actual harm to their customers, and were just trying to achive the bonuses of this program. Again, what they did was wrong but clearly the punishment doesn't fit the crime for those employees.

 

Full disclosure, I have a brother who works in retirement accounts for WFC. I'll just say, if you think your boss micromanages you, talk to a WFC employee sometime. Their account reps endure an extreme minute-by-minute tracking of their output along with regular performance reviews and quotas which impact their ability to schedule decent working hours, among other things. Its a hyper-corporate management structure and I think this type of thing is going to keep happening for WFC as long as they put the blame on employees and not this management style.

[Mike Sixel]

Opening an account in someone's name is fraud. Every employee, supervisor and others should face prosecution, imo.

[gunnarthor]

Yeah, that only a small fraction - which apparently still numbers in the thousands - were financially affected, those actions were illegal.  And they could have affected peoples credit ratings - esp if they weren't paying their unknown credit cards or someone else got a hold of a card (identity theft) they didn't even know they had.   

 

I think this sort of thing - while small potatoes - will continue unless they are prosecuted.  Merging this with the election thread, Clinton's website says that she favors prosecution of bankers who break the law.  I really wish someone would ask her if she thinks these 5300 employees should be prosecuted.  

[Willihammer]

It was fraud but I doubt prosecuting them would do much.

 

First of all, from an ethical standpoint consider the scale of damage.

2.1 million fraudulent accounts were opened, of which 100,000 incurred fees totalling $2.4m. An average of $452 of damage per employee.

 

Termination seems more than proportional for that level of damage I'd say. Prosecution would be unnecessarily punitive.

 

But, this has been going on since 2011. It went on for four years. The ghost accounts inched WFC towards its "Gr-eight" goal of increasing customer accounts by 33%. Middle management was certainly aware of it and it seems likely upper management was too to some degree. It was a systemic failure, not a case of 5300 bad apples.

[Mike Sixel]

Uh.....it was 2400 per customer, in fees alone, for those that incurred fees. That doesn't count any issues with credit scores changing, or anything else.

 

if someone stole $2400 from you, would you want them prosecuted?

 

should it matter, really? They committed fraud, and as I said, heads should roll up the chain more than they have.

[Willihammer]

I suppose you can quantify the damages differently. I may not be giving due weight to the non-fee damages like any identity theft that might have resulted from it.

 

If I were a shareholder, I would be less concerned about punishing the grunts who did the deeds and more concerned about what is going on that 5300 employees are independently breaking the law. Perhaps the sales quotas are unrealistic. Maybe the gr-eight objective is flawed, etc.

[Badsmerf]

I hate wells Fargo. Will never bank with them again. I detest the business practice and how they treat employees.

[Brock Beauchamp]

They need to be prosecuted. The corporate liability shield isn't impenetrable and the more we allow corporate employees to hide behind that shield to defend despicable behavior, the worse things will get.

 

At some point, someone needs to step forward and be punished for actions they willingly undertook.

[Brock Beauchamp]

 

more concerned about what is going on that 5300 employees are independently breaking the law

5300 people do not independently determine the exact same way to break the same law at the same time while working for the same company.

[Willihammer]

 

5300 people do not independently determine the exact same way to break the same law at the same time while working for the same company.

Are you saying they were organized?

[DaveW]

Prosecute the **** out of them. I don't care what their sales goals were and how crappy a company was they worked for, you can't steal

Peoples Identities, social security numbers etc and commit fraud. Just because you work for a crap company doesn't give you immunity from being a felon.

 

Leave the job and get a new one. Jesus.

 

 

Also I find it epic right now that a Wells Fargo ad is running an inch below the "post" button here.

 

I had a checking and savings account with Wells Fargo, I canceled it today and moved it to my chase account (until they get busted for this nonsense I will just use them and BoA) my banker here in the city for wells

Fargo was begging me to stay with them, it was clear he knew that this was only the tip of the iceberg with this crap.

Edited September 10, 2016 by DaveW

[Brock Beauchamp]

Are you saying they were organized?

Organized? Maybe. Maybe not.

 

But 5300 people don't do something without a BUNCH of people knowing about it, looking the other direction, and keeping their mouth shut. Usually management.

[DaveW]

Organized? Maybe. Maybe not.

 

But 5300 people don't do something without a BUNCH of people knowing about it, looking the other direction, and keeping their mouth shut. Usually management.

Yuuuuuup

 

It goes all the way to the near top. Either management knew, or they were the most ignorant bozos on the planet.

 

Either one should warrant firings.

[Brock Beauchamp]

Well, Apple is back on the offensive. Roughly a 9% gain in the past 3-4 days. We'll see if it lasts, though I suspect it will for awhile.

 

Bought about $700 more Disney stock when it dropped to $92. It jumped back to $93-94 and then dropped back down to $91.50 today.

 

Sigh.

 

A lot of fluctuation in the market over the past week, at least for my stocks.

[Mike Sixel]

Yes, very fluid right now.

[Brock Beauchamp]

Holy crap, I just looked at Yelp stock. At one point it had dropped to $15.

 

I wish I had known that when it was $15.

 

I'm not a big fan of Yelp in general but at $15, that was a steal. They have a secure market thanks to iOS and that stock was going to rebound at some point.

 

It now sits at $37.

[Willihammer]

The interplay between the market and the Fed has been really incredible to observe. There appear to be a range of viewpoints from voting and non-voting members. Yellen leads a group that is searching for reasons to raise rates. Kaplan and others seem focused on policies that are more globally consistent with China and European policy. Dudley, Kashkari, Tarullo and others are flat out dovish about holding rates low until inflation picks up. The latter group seems to hold sway for now but will be interesting to see what happens next year when we see turnover in voting members.

[Willihammer]

 

Well, Apple is back on the offensive. Roughly a 9% gain in the past 3-4 days. We'll see if it lasts, though I suspect it will for awhile.

 

Bought about $700 more Disney stock when it dropped to $92. It jumped back to $93-94 and then dropped back down to $91.50 today.

 

Sigh.

 

A lot of fluctuation in the market over the past week, at least for my stocks.

Yeah... do you know why is Apple on a run?

[Brock Beauchamp]

 

Yeah... do you know why is Apple on a run?

New phone, higher than anticipated sales, special carrier trade-in deals. Several things, really.

 

At least that's all I've heard about it thus far.

[Mike Sixel]

Wow the market is variable right now. A lucky options gambler could make tons.

[Willihammer]

Ah, didn't realize it was selling so well. Apple customers are incredibly prodigal loyal.

[Brock Beauchamp]

 

Ah, didn't realize it was selling so well. Apple customers are incredibly prodigal loyal.

It's a good phone getting loads of good reviews. Too much is being made of the headphone jack thing and it's easy to get sucked into the noise of internet bleating over inconsequential details.

 

Simply put, most people don't give a ****. Technology changes, new features added, old ones dropped. In six months, few will remember the headphone jack debacle. In a year, no one will care. In two years, over half the phones shipped will come without a headphone jack, including Android.

 

And the world will keep spinning.

 

As for overall sales of the iPhone 7, I think we've seen analysts drastically underestimate the cyclical nature of phone upgrades. Two year contracts/payments have created a tick-tock upgrade and it appears the 7 is going to be the recipient of tons of sales due to this cycle.

[Willihammer]

You are the resident tech expert, I'll defer to your opinion on the phone. I'm just amazed at the black-Friday type crowds that show up for the upgrades when perfectly functional, and much cheaper alternatives, are out there. Hell I'm still using a Galaxy 3!

Good point about the contract cycle.

[Brock Beauchamp]

 

You are the resident tech expert, I'll defer to your opinion on the phone. I'm just amazed at the black-Friday type crowds that show up for the upgrades when perfectly functional, and much cheaper alternatives, are out there.

I buy the latest and greatest iPhone but it's because it allows me to keep my phone for a minimum of three years without getting frustrated that it's too slow for my needs by the end of the lifecycle.

 

But I generally agree. I don't understand why people spend that much, especially people who buy into programs like the "12 month trade-in" system that has swept through carriers over the past couple of years.

 

Actually, I do understand it. People like to show off shiny new toys but can't afford to buy into the steep price every 12 months to own said device. It's like a car lease on a much smaller scale. It's dumb, wasteful, and unnecessarily expensive.

[Brock Beauchamp]

Took a small risk and dropped $1200 more into Polaris. Their stock dropped roughly 20% over the past month due to a recall, which forced a pretty severe adjustment to their upcoming quarterly report, and stagnating sales in the ATV segment, their primary profit center.

 

But they pay a solid dividend, a 3% yearly yield, and their motorcycle division continues to impress. Overall, I think they'll be back to that $90-ish mark within a year or two.

[Brock Beauchamp]

To absorb a bit of risk in my tech stocks - Amazon, Google, Netflix, Square, Facebook, Tesla, etc. - I've been putting more money into dividend stocks over the past year. I'm to the point now where I receive ~$1000/yr in dividends. Maybe more, I haven't really added them together in awhile.

[Willihammer]

I've been looking at AT&T for similar reasons. The stock is down a tick, they reported better than expected iphone pre-orders last week and they are a utility too so they pay a good dividend.

[Brock Beauchamp]

 

I've been looking at AT&T for similar reasons. The stock is down a tick, they reported better than expected iphone pre-orders last week and they are a utility too so they pay a good dividend.

I considered a similar move, though I've been in T-Mobile for 3-ish years so I figure I have my telecom bases covered with them. No dividend but they continue to grow at a much greater rate than other carriers, which has led to a 70% gain in the three years since I bought into the stock.

[Mike Sixel]

I bought DRGO, Microsoft, and GM....for dividend purposes. 

 

My adviser and I are discussing a long term play in a real estate effort....and my wife just met a guy that helps people buy RE in Portland.....what I'd like to do is set up an investment pool with about 10 others that buys 3-5 rental units out here....112 people move to Portland every day. RE is going up 15% a year. Even in a recession, I like buying some RE for passive income.