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The Financial Times reports on Wal-Mart's (NYSE: WMT) new Marketside store format, which the company describes as a "small community grocery store" (15,000 square feet). Wal-Mart is testing the format out in Arizona but has speculated that, if successful, the chain could grow to 1,500 stores with $10 billion in annual sales.

A look at the Marketside website is illustrative of what Wal-Mart's trying to do here: scanning around on the site, I can find exactly one reference to Wal-Mart, and even that one appears to be qualified: "Marketside is a small community grocery store owned by Wal-Mart Stores, Inc." In disclosing the ownership, Wal-Mart distances itself from its offspring.

Wal-Mart's purchasing power will give the new stores the same competitive advantage it has with its big box locations: lower prices. It remains to be seen whether the small size/lower sales will give Wal-Mart the scale it needs to earn out-sized profits. You have to think there's a reason Wal-Mart's been slow to test out smaller scale formats, opting instead to move into the uber-big box category with its Supercenter locations. This new format may be indicative of the company's pessimism about long-term domestic growth prospects with its bread and butter, and this diversification may be a sign of weakness rather than strength.

Wal-Mart's talent lies in logistics, not in building a great local grocery brand. I'll go out on a limb and predict that we won't hear too much more about Marketside after the initial push. I certainly wouldn't hold my breath waiting for one to open in a town nearby.

Mattel (NYSE: MAT) scored a big victory when it sued MGA Entertainment over the origin of the wildly popular Bratz dolls, and won. But it looks like the victory won't be as big as the parent company of Barbie would like.

Mattel was seeking $1.8 billion in damages but, on Tuesday, a jury awarded Mattel just $100 million in damages, but The Wall Street Journal explains that that award "could be further reduced by U.S. District Judge Stephen G. Larson because it contains duplicate damages for the same offense, according to Thomas Nolan, an attorney for MGA." Still to be determined is who will have the right to continue marketing the Bratz brand.

This is a big loss for Mattel. The company spent millions pursuing the litigation -- the amount was large enough that Mattel said it materially affected earnings, and Mattel is a $30 billion company.

This has definitely been one of the more entertaining lawsuits in business news of late and it looks like there will be a few more rounds to go, with MGA Entertainment planning to file an appeal.

With irresponsible borrowing and excessive leverage threatening the financial well-being of so many families, at least one county may be joining them in the soup line.

Jefferson County, Alabama, with a population of 662,047, according to the 2000 U.S. Census, is preparing for a possible bankruptcy filing, according to The New York Times.



The culprit? $3 billion in bonds with rapidly escalating interest rates resulting from the exact same short-sighted financial planning that got so many home owners into trouble: adjustable rate loans (In this case, auction rate securities) that require higher interest payments as interest rates move up. The current turmoil in the credit market has sent the county's rates as high as 10%.

If you recently sent your CEO packing in the wake of $17.4 billion in writedowns, you need to do something to stop the outflow of cash.

For some that might mean eliminating the dividend or cutting back on out-sized executive pay. For Citigroup (NYSE: C), that apparently means cutting back on color copying and BlackBerry use. The Associated Press reports that John Havens, the head of the company's institutional clients group, sent a note to employees admonishing them that "color copying and printing should only be used for client presentations," and "presentations should be printed double-sided to reduce unnecessary paper usage."

That's right: when you're pulling that stunt that involves sitting on the copier and printing 20 shots of your derriere, use the black and white machine, thank you very much. BlackBerry use will also be more closely monitored, and there will also be a cutback on outside management consultants and training, and functions held outside of the company's offices.

Of course the savings from measures like this are a pebble in the sand of hideously bad mortgage investments, but it's good to see that the company is clamping down on the waste of shareholder resources.

But doesn't it seem a bit, I don't know, hypocritical to be yelling at employees about wasting paper when the failed CEO left the company with a 9-digit parting gift?

I'm not normally one for union-bashing, but I'm puzzled by organized labor's record of private equity-bashing. The New York Post reports that the two million member Service Employees International Union wants increased government oversight of the private equity industry, with a special emphasis on the various banks that are in desperate need of cash.

"The biggest buyout firms are used to gaming the system to turn a profit -- it's no surprise they want special rules now to take over another sector of our economy," SEIU president Andy Stern told the Post.

KKR and other buyout shops counter that the SEIU is trying to unionize employees at companies acquired by private equity, and is grasping at straws to drum up support.

That may be the case, but I can't imagine one has to do with the other. Employees should join unions (or not) because they feel (or don't feel) that their pay, job security and working conditions will benefit from membership. Bashing buyout firms would seem to be an irrelevant sideshow and a counterproductive one at that. Many union pension plans are large shareholders in banks and other firms that stand to benefit from private equity involvement, and they may be shooting their members in the foot by fighting macro issues like banking regulations that have absolutely nothing to do with their members' interests.

Shares of Take-Two Interactive (NASDAQ: TTWO) are up about 3% today after the company disclosed that it has entered into a confidentiality agreement with Electronic Arts (NASDAQ: ERTS), in a sign that a deal may get done after all. Last week, Electronic Arts let its tender offer expire but said that it would listen to a confidential presentation on the company's operations.

In an 8-K filed with the SEC yesterday, Electronic Arts disclosed the confidentiality agreement and added that its terms prohibit the company from commenting publicly on the negotiations until a deal is reached or discussions are terminated.

It's hard to know what to make of this. By getting Electronic Arts to sign a confidentiality agreement, Take-Two has put an end to the tit-for-tat soap opera aspect of this takeover battle. Whether they're serious about getting a deal done remains to be seen. Given Take-Two's track record of filibustering and questionable governance, I'm skeptical. At this point, investors should be evaluating shares of Take-Two Interactive based on its prospects as a stand-alone business, not the chances of a deal that Take-Two's board has demonstrated a lack of enthusiasm about.

The Wall Street Journal reports (subscription required) that incidents of mortgage fraud rose 42% year over year, based on loans originated in the first quarter that have since been declared fraudulent. The Journal cites data from Mortgage Asset Research Institute.

That number is appalling, and it's hard to know what to make of it. There are two possibilities, as far as I can tell. Either:

• The tightening of the credit markets and the newfound conservatism of lenders is a myth, and fraudulent loans are being originated at a more rapid rate than ever before, with crooked consumers and mortgage salesmen thwarting the system even as national headlines warn about the huge problems caused by sloppy lending and mortgage fraud. Or
• The 42% jump is more a result of lenders actually doing the research to classify loans as fraudulent. Back when everything was going well, less energy might have been devoted to this.

It seems likely that the answer is some combination of the two. But based on this data, it's hard to conclude that lenders have cleaned up their act and stamped out bad loans. That doesn't bode well for the futures of the industry.

Famed studio MGM, which is owned by a bunch of companies including Texas Pacific Group, Providence Equity Partner, Sony (NYSE: SNE) and Comcast (NYSE: CMCSA), is considering a public offering as it looks to deal with its $3.1 billion debt load. The company has hired Goldman Sachs (NYSE: GS) to explore options for a way out of the 2005 buyout that left the company over-leveraged.

Studios have slowed production because of the credit crunch that is making financing films harder than it's been in a long time.

Other possible alternatives include a bond offering or some other form of debt refinancing, but the company says it's not for sale, although it remains coy on that topic, saying that that "there is no 'asking price' for the company."

Is that a veiled invitation for bids? Sounds like it. But in this environment, there might not be many takers. Time Warner (NYSE: TWX) made an unsuccessful bid back in 2004, but most the other interested parties ended up walking away with various sized stakes in the company.

Amazon.com (NASDAQ: AMZN) has told investors that it may soon start offering textbooks on the Kindle, its $400 e-book reading device. Portfolio's Tech Observer is bullish on the idea:

This may be the move that flings Kindle into the mainstream. If nearly all textbooks wind up on Kindle, then paying $400 for a Kindle would turn into almost a no-brainer decision for college students [...] A single textbook can cost $150 new -- and still maybe $100 or more used [...] If e-book versions cost even 25% less, that's a huge savings ...

I'm less excited: given that most college students don't buy a lot of books for pleasure, this $400 device would be used almost exclusively for textbooks: so you'd have to save a lot of money to make up for that $400 expense. Then there's the fact that the Kindle might not be so convenient for classes that involve flipping back and forth between chapters, appendixes and glossaries.

But the real downfall of the Kindle for textbooks is the fact that a lot of college students sell their books back to the store at the end of the semester, recouping as much as 50% of the cost.

A foray into textbooks will not take Kindle to the next level. It probably won't require a significant enough investment by Amazon to hurt shareholder value but it's definitely not something to get excited about.

Rep. Barney Frank, chairman of the House Financial Services Committee, is normally a voice of sanity and reason, but like much of Washington, he too has apparently fallen for the conspiracy theorists -- mainly failing CEOs and disgruntled shareholders -- who blame the problems of financially irresponsible companies on short sellers.

In an interview with Money, Frank was asked about Fannie Mae and Freddie Mac:

I believe Fannie and Freddie are better off than the market thinks. Over the long term the market is a very rational distributor of resources, but in the short term it can fall prey to hysteria. Sometimes you need to deal with that.

Part of the problem is rumormongering by short-sellers. Our hope is that just by making U.S. financial support available, we'll quiet the fears and eliminate any need for that support.

Apparently, Warren Buffett is one of the rumormongers. Last week he said that the two mortgage finance companies "don't have any net worth," and added that shareholders are likely to be wiped out.

It's unfortunate that Congressman Frank has fallen into the trap of name-calling, questioning the motives of the handful of savvy investors who were prescient enough to foresee trouble at Fannie and Freddie. We're in an era of financial McCarthyism, where anyone who raises questions about companies is a "rumormonger" or a "short seller." That's dangerous for the market in the long run because it squelches dissent and contributes to speculative bubbles.

The Observer reports that Lehman Bros. (NYSE: LEH) CEO Richard Fuld could be out of a job by the end of the year. The Observer states that "Whether a Lehman suitor emerges or not, well-placed sources within the bank are certain that Fuld is set to hand over the reins before the end of the year. 'He is involved less and less with day-to-day executive affairs, and his credibility is shot,' one senior Lehman source said."

The sources for the story are extraordinarily vague, and even if they are reasonably credible, it's hard to imagine who would be able to say with certainty that Fuld is on the way out.

It's not a difficult rumor to believe. The incredible part is that Fuld hasn't already been ushered out to a cushy retirement with a thoroughly undeserved severance package. The stock is off more than 80% in 2008, and Lehman's future as a stand-alone public company is very much in doubt.

While Fuld's firing would obviously be well-deserved, it's probably too late for it to matter one way or another. The distraction and expense of paying him to go away and finding someone else with nothing better to do than leap aboard a sinking ship makes it hard to say whether his departure would even do shareholders any good.

Bank of America's (NYSE: BAC) newly-acquired Countrywide Financial is being sued by yet another state attorney general, with Indiana's Steve Carter announcing on Sunday that he's suing the company for deceiving borrowers into loans that they could not afford and/or were not aware of the associated risks.

In a press release announcing the suit, Carter said that "These unfair lending practices may have harmed thousands of people and, in turn, negatively affected our communities and neighborhoods throughout the state." According to Carter, "The most common misrepresentations uncovered to date have been on 1) pre-payment penalty terms, and 2) the time period in which interest rates would be recalculated (resetting ARMs – adjustable rate mortgages)."

Carter is seeking penalties of up to $15,500 per violation, plus investigative costs and restitution.

Countrywide had been sued many times before the Bank of America acquisition, and BofA knew that there would be more to come. But for a deal that is widely considered to have been too expensive and too risky, the distraction and headache of all these lawsuits would seem to make this a deal Ken Lewis probably regrets. Of course, he won't say that publicly.

With China's once red hot stock market in the toilet, the China Securities Regulatory Commission has decided that it's time for some new rules.

The Wall Street Journal reports (subscription required) that draft rules posted on the CSRC's website will require that public companies looking to raise additional funds will need to have paid out dividends on 30% of their net income over the past three years, up from the current 20%.

Here's what's so stupid about this: it's stupid for a company to pay out dividends when it needs to raise cash -- the rule is completely counter to any notion of sound finance. Paying out dividends and then heading back to the capital markets to raise cash dilutes shareholders and wastes shareholder assets on investment banking and administrative fees.

The Journal also reports that profitable companies that don't pay a dividend will be required to provide an explanation. That's not such a bad idea; American companies do the same thing, but it's usually boilerplate like this: "We have never declared or paid any cash dividends on our non-redeemable common stock and do not intend to pay dividends on our non-redeemable common stock for the foreseeable future. We intend to invest our future earnings, if any, to fund our growth."

General Motors (NYSE: GM) and Ford (NYSE: F) want you to pick up their tab for their decades of excess and managerial incompetence.

The Associated Press reports that the Detroit automakers are likely to ask Congress for $50 billion in low-interest loans to fund modernization efforts, and help them build more fuel-efficient vehicles.

What a load of crap. In 2007, Ford paid cash-burning CEO Alan Mulally $21 million, and GM's Richard Wagoner got a 41% raise to over $14 million for the same year. In effect, our tax dollars will be subsidizing this pay for pulse orgy of bad governance. GM also paid out more than half a billion in dividends in 2007 -- if the company needs billions to invest in modernization, why didn't it cut the dividend a long time ago?

It appears that the auto industry has been counting on a bailout all along, and why not? It looks like they'll be getting it.