by Paul Springer

While equity markets were looking up Wednesday, continuing volatility makes the current environment a dangerous place in which to release bad news.

For those looking for distressed buys or short selling opportunities, the companies bear watching:

Netflix (NFLX) affronted users again, only days after announcing that it parted ways with Starz Entertainment. Now the company has limited online streaming, which was recently repriced in a way that also aggravated users and investors alike.

The limitation of streaming was announced along with the repricing, but Stop the Cap! reported that over the Labor Day weekend a glitch caused Netflix users to suffer streaming limitations more restrictive than what was indicated in the new pricing plan. Inaccurate reports about the extent of the limitations continue to inflame subscribers.

Shares were down 2.5% mid-day Wednesday, after dropping 9% in one day the previous week when the breakup with Starz was announced.

BofA has plenty of problems already, FOX Business Network’s Charlie Gasparino questions the company’s efforts to heal itself. Listen to a report here, and read Gasparino’s contribution at The Huffington Post here. See also Ft.com/alphaville’s report on BofA’s “de-layering bloodbath.

This list of down-in-the-dumps stocks from Minyanville ranges from HP (HPQ) to Netapp (NTAP) and First Solar (FSLR).

Enterprise software company Deltek faces dismal prospects due to government cost cuts and other factors, a Seeking Alpha blogger says. “My only recommendation to investors holding this company is to make sure they are checking the news on a daily basis,” the post says.

VASCO Data Security International also faces a murky future after receiving a one-two punch combination in the form of a security breach and an analyst downgrade. The company said in a regulatory filing at the end of August said the “intrusion” did not affect its core technology. On Wednesday, Wunderlich Securities downgraded the company and chopped its target price by more than half.

Zack’s says VanceInfo Technologies (VIT) is in a downtrend, which today involved a downswing while the S&P 500 was heading up.

Some stocks in the hardy utilities sector have taken a whupping too, according to Wall St. Cheat Sheet. Among that minority of utility issuers is

In other asset class news, gold got pushed down by a stronger dollar Wednesday. “Just when everyone had left the U.S. dollar for dead, abandoning the world’s reserve currency for alternatives like the Swiss franc and gold bullion, it has risen from the dead,” msn.money reports.

by Todd Shriber

The past week on Wall Street has provided plenty of memorable mathematical moments. Without further ado, Trader Daily takes a look at 10 of the craziest numbers of one of Wall Street’s most volatile weeks:

1) Two: Including last year’s rejection, the number of times Peabody Energy (BTU) has tried to get its hands on Australia’s Macarthur Coal and thus far failed.

2) Five: We mean $5, the price nearly a third of the respondents in a poll on The Street think shares of Bank of America (BAC) will bottom at.

3) 63: As in percent. That’s the premium to the closing price Motorola Mobility (MMI) Google (GOOG) is paying to acquire the maker of mobile phone handsets that run on Google’s Android operating system. That’s nearly double the average premium paid in over 360 wireless sector deals in the past five years, according to Bloomberg.

4) 77: That’s the percentage of turnover in high-frequency trading accounts for some U.K. markets, The Wall Street Journal reported.

5) 2.4 Million: As in dollars per day. That’s what BP (BP) is spending on rigs in the Gulf of Mexico that are not currently looking for oil, according to OilSlick.com.

6) 37.1 Million: The White House payroll for 2011, InvestorPlace said.

7) 63.2 Million: The number of Bank of America shares sold by John Paulson’s Paulson & Co. during the second quarter. Paulson now holds 60.4 million shares of BofA, according to Bloomberg.

8) 627.7 Million: That’s the value of call options on the SPDR Gold Shares (GLD) purchased by Steven Cohen’s SAC Capital, according to Benzinga.

9) 1.63 Billion: The amount in dollars that the Swiss government may forgo in francs to help the country’s export and tourism industries following the franc’s recent surge as a safe-haven currency, Bloomberg reported.

10) 1.8 Billion: The lead in dollars the SPDR S&P 500 Trust (SPY) held over GLD at the end of last week for the title of world’s largest ETF by assets.

by Paul Springer

A short selling ban lifted European markets at the end of the week, but the regulatory move – which has yet to prove successful for any market in which it has been tried – may just be providing short-term comfort at the expense of fair and liquid trading.

The temporary U.S. short selling ban on some 799 banks during the global financial crisis gave preferential treatment to one industry and rewarded poor management. It also did not prevent their stock prices from falling.

While it’s not surprising to hear poorly managed microcaps blaming their woes on short sellers, it’s pretty pathetic when a big, badly run bank makes the same pitch to politicians — and gets away with it.

Even the regulators had their regrets, as CNBC notes:

At the end of his tenure as chairman of the Securities and Exchange Commission, Christopher Cox said the biggest mistake of his term was to implement a three-week ban on short-selling bank stocks at the height of the financial crisis in 2008.

With the U.S. ban in the rear view mirror, to some it looks like it was part of a “too rich to fail” policy that spared banks from price discovery that should have been allowed to take place.

Some banks effectively used the bailout and shorting ban to stabilize, but now we’re seeing the gradual implosion of some perhaps should have been put out of their misery.

But European markets loved the ban today. Dow Jones correspondents did not find monolithic support of the idea, about which traders and bankers expressed doubts. “While the ban on short selling equities may support share prices for a day or two, unfortunately it is highly unlikely to prevent a further selloff,” ETX Capital senior trader Manoj Ladwa told Dow Jones.

The European ban covers much ground but seems better organized than the U.S. efforts, The Financial Times says:

The ban affects equities, convertibles and equity derivatives of more than 60 bank, insurance and financial companies in Belgium, France, Italy and Spain. Credit default swaps, a form of insurance against default that are linked to debt, are not included.

At the same time, The Times and others found a variety of critics. “Everything says that the short-sale bans don’t have very much effect other than creating turmoil and uncertainty in the market. . . It takes liquidity out of the market and has pernicious effects without really accomplishing much,” a hedge fund manager told The Times.

The Guardian surveys commentary on the ban. One respondent, Atif Latif of Guardian Stockbrokers actually felt the move could have unexpected consequences:

After 15 days then what happens? This can have the opposite intended effect by volumes being decreased and pricing being more volatile. Not shorting banks is clear but last time there was confusion regarding “financial companies” classification, same again.

BGC Partners’ David Buik had stronger views:

Until the EU’s politicians wake up to the fact that there is a stench of fear and uncertainty in the air, much of it down to their ineptness, markets will continue to behave irrationally with seismic levels of volatility . . . [the ban]  may also make investors even more nervous about the debilitating state of European banks‘ balance sheets.

In contrast to the recent four nation ban, Reuters notes, Germany took its own steps. This nation banned naked short selling only, allowing covered shorting to continue. This leads to the real problem: naked shorting is allowed in the EEU.

Maybe what needs to happen is for all parties to follow the U.S. trend towards making naked shorting illegal. If it’s legal to sell unlimited quantities of stock without controls, any company can be pounded into the ground regardless of market conditions.

In the meantime, Europe’s ban will make it difficult to know what some of these banks are worth. If they aren’t worth nearly what they appear, it might be better to find out sooner rather than later.

by Paul Springer

With the Aug. 2 default deadline looming, U.S. lawmakers are finally getting close to a deal to raise the national debt ceiling.

And what a deal. It’s being referred to as a compromise, but an agreement has to have substance to effect a compromise. Still, Sen. Claire McCaskill, D-MO, told NPR that she is “ecstatic about compromise.”

The deal is not so much a compromise, but rather a fairly complicated  acknowledgment of a refusal to compromise — and doing it in a way that won’t bring about a default right now.

However, what it exactly will bring about is uncertain. The big elements are no tax increases, $900 billion in budget cuts, and another $1.5 trillion in tax cuts to be named later from sources that could include Medicare.

Imagine this scenario from the point of an investor. You’re thinking of putting money into an entity that’s going to straighten out its balance sheet…  later… with $1.5 trillion in cuts… in something or other, it’s not quite sure yet.

The world is looking at this as an investor, and it’s not liking what it sees.

Markets reacted uneasily to news of the deal, according to a report from The Guardian that says the arrangement will probably see the end of the AAA rating on U.S. debt. Nobody wants more taxes, but knocking $2 trillion off the books would seem to create an ungodly vacuum in the absence of cash inflows. It seems likely that ongoing problems with unemployment will keep personal income tax revenues down, while increasing numbers of jobless and homeless people will compete for services that are being slashed.

Meanwhile, analysis from The Washington Post delineates five ways the bipartisan debt commission might whittle away at both Medicaid and Medicare.

In seemingly unrelated news today, it became known that Obama’s healthcare regime will require health insurers to provide women’s wellness and contraceptives at no cost.

This development highlights the unreality of the debt agreement – let’s mandate free stuff even as we agree to chop $1.5 trillion in mystery costs.

The current deal, which seemed to be faltering ahead of a crucial vote Monday afternoon, will get us through tomorrow. In reality, the problems that proved insurmountable have just been shoved down the calendar for a bipartisan committee to attack in coming months. Just imagine the pork barrel politics and partisan games that will go on then, behind closed doors and out of the media spotlight. Gladiatorial contests will seem more civil by comparison.

Economist Paul Krugman blasted the deal in The New York Times:

It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.

While it comes as no surprise that spend-happy Krugman is critical of reduced outlays, the response at the other end of the spectrum is equally chilling. Republicans, ranging from Mitt Romoney and Tim Pawlenty to Michelle Bachman, are claiming the deal doesn’t go far enough, according to The Wall Street Journal.

In terms of actually reaching an economic compromise, the current plan is just scary – especially when viewed from a bit farther back. Seen from across the Atlantic, the “compromise” is just causing further rifts in the Democratic party. Democratic critiques of the proposal have been aired in the U.S., but the harshness of the sentiments come out a lot more clearly in a report from The Telegraph.

“On the surface it looks like a Satan sandwich,” Representative Emanuel Cleaver, D-MO, told the paper.

Russian Prime Minister Putin called the U.S. a “parasite” on the global economy and told the media that the plan is “not that great overall, because it simply delayed the adoption of a more systemic solution,” The Australian says.

Krugman and others in the media argue with some force that while bipartisan politics drove the messy argument leading up to the deal, the real problem is simply that the president allowed himself to get played in a big way by dodging the debt ceiling and taxation issues last year.

From the International Business Times:

It’s true that Democrats would have faced public ire in 2010 by raising the ceiling. Republicans had made the issue a lightning rod in mid-term elections and beyond, despite the fact that they had no better solution. There was just one option all along — raising it — but Obama and the Democrats didn’t want to address it in late 2010 because they wanted to pass the buck of responsibility.

They effectively did just that, thrusting upon this nation one great embarrassing mess.

Sadly, that buck will likely be worth less tomorrow regardless of how the current compromise proposal pans out today.

by Todd Shriber

Corporate bankruptcies are no fun for the main parties involved. But in some of the more spectacular bankruptcies in U.S. corporate history (think Enron and Lehman Brothers), the ensuing auctions of assets are not only an effort to partially repay creditors, they also provide great opportunities for auction hunters to get some unique items on the cheap. Not to mention, these auctions make for great fodder for financial writers.

For better or worse, there have been enough of these auctions to provide enough data to compile a Trader Daily list of the most interesting items sold at these events.

1) Gimme an “E”

One of the now infamous E’s found outside of Enron’s corporate headquarters in Houston was sold at a bankruptcy auction in September 2002 for $44,000. The E didn’t go far. It was bought by someone in Houston, as CNN reported then.

2) Lay’s Ride

Remember when Dynegy was in talks to buy Enron when the latter was on the brink of bankruptcy? The late Ken Lay, former Enron chairman and chief executive officer, was ushered to and from meetings with Dynegy in a shiny black Lincoln Navigator, which was also sold at auction in 2002.

3) Home Sweet Home

Former Tyco CEO Dennis Kozlowski was known for lavish spending habits and grandiose parties, two traits that were contributing factors to his company’s downfall and some jail time to boot. Last year, a property formerly owned by Kozlowski on the Hamptons was sold for $4.2 million. Whoever bought it got a steal. Town records showed the assessed value was $9.4 million, according to Seacoast Online.

4) Gross, Really Gross

The U.S. Marshals held an auction of Bernie Madoff’s stuff in Miami last weekend, and someone paid $200 for 14 pairs of the fraudster’s underwear and $4,600 for a picture of his uncovered tush, according to WPBF, an ABC affiliate in Florida. Seriously.

5) Bernie’s Booze

At a more tasteful Madoff auction in New York last month, bidders had the chance to scoop up Bernie’s liquor, including a case of Chateau Mouton-Rothschild, a Bordeaux from 1996, valued at more than $3,000, CBS reported.

6) Bernie’s Bling

When one swindles investors out of as much cash as Madoff did, one acquires some pretty swanky possessions. In November, someone dropped $550,000 on Ruth Madoff’s engagement ring, Reuters reported. No word on whether there is a lucky gal out there wearing it today.

7) Did Steven Cohen Buy One?

In 2006, Sotheby’s put two paintings from the 1880s by Renoir and Monet on the auction block that were formerly owned by Kozlowski, according to Bloomberg.

8) More Art

Lehman Brothers auctioned off 450 works of art last year following its spectacular fall from grace during the financial crisis. Some were pretty fancy, but the whole collection was expected to raise only $10 million for the fallen bank, a mere pittance compared to its $400 billion financial obligations at the time, Art Info reported.

9) Sign of the Times

Did you ever steal a street sign as a prank in high school or college? If you did, an auction in London last year would have been for you. There, you could have bid on the Lehman Brothers sign from the bank’s Canary Wharf office.

10) For the Aviation Enthusiast

Primaris Airlines may not have been a household name in the airline business, but the company went bankrupt. The subsequent auction didn’t offer up any black boxes, but bidders could have gotten their hands on real pilot uniforms, and those always make for interesting conversation starters.

In some ways, being an investment banker can be a quixotic job. What doesn’t happen, in this case big mergers and acquisitions, is almost as interesting as the deals that do see the light of day.

Plenty of the big, potential deals that have never come to life are no secret. While some probably will never close, a couple of others might have a chance of one day making the transition from rumor to consummated deal. With that, here’s Trader Daily’s list of top five rumored deals that haven’t come true… yet. In no particular order…

The Oil Rumor with Nine Lives

As Trader Daily has noted, rumors of a marriage between Royal Dutch Shell (RDS-A) and BP (BP), Europe’s two largest oil companies, have been nothing if not persistent. The scuttlebutt started in 2004, picked up again in 2007 and has been in and out of the press ever since the Gulf of Mexico oil spill in April 2010. While probably not imminent, it’s hard to rule out Shell acquiring BP.

Probably Not Gonna Happen

Remember when Google (GOOG) tried to acquire daily deal website Groupon for $6 billion and was rejected in December? That would have been high robbery as Groupon could be worth $15 billion to $20 billion, according to Reuters, or up to $25 billion, as Bloomberg reported. It seems unlikely these two will ever go to the altar.

A Tasty Rumor

Rumors of Nestle (NSRGY), the world’s largest food company, acquiring rival General Mills (GIS), the second-largest U.S. food company, have been around about as long as the Shell/BP rumors. Seriously. Put the phrase “Nestle General Mills acquisition” into your search engine, and you’ll get plenty of results. The rumor resurfaced again earlier this month, thanks to a report in the Nutrition Business Journal.

This One Should Probably Die

Rumors of Wells Fargo (WFC) acquiring regional banking giant SunTrust (STI) have been around for nearly a decade, as the South Florida Business Journal reported. Duration of a rumor doesn’t mean much, and Wells Fargo acquired Wachovia during the financial crisis, dealing a blow to the SunTrust rumors. Wachovia operated in many of the same markets as SunTrust does, meaning Wells Fargo has no need for it.

Mr. Softie Hearts BlackBerry?

Rumors of Microsoft (MSFT) moving on BlackBerry maker Research In Motion (RIMM) have been around for several years, dating back to at least 2008, as Reuters reported. The rumor has been in the news as recently as this month, and the deal could materialize over the next year, according to KitGuru.

RIMM has a market cap of more than $23 billion, so Microsoft has more than ample cash on hand to make this deal happen if it wants to.

Disclosure: Writer owns General Mills stock.

by Todd Shriber

PIMCO’s Bill Gross, founder and co-chief investment officer of the prestigious bond house, has a well-documented disdain of U.S. Treasuries, a posture highlighted by his decision to slash the Total Return Fund’s exposure to debt issued by Uncle Sam to zero last month, according to CNN.

Dumping Treasuries is one thing, but shorting them is another endeavor altogether. Yet, that appears to be exactly what Gross is doing. The Total Return Fund took what Zero Hedge calls an “active” short position in Treasuries in March. The particulars of that short position are as follows: -3% (or $7.1 billion) on a market value basis and a -18% on a duration-weighted exposure basis, Zero Hedge reports.

PIMCO being short Treasuries is significant not only because Total Return is the world’s largest bond fund, but also because the firm doesn’t frequently short U.S. government-issued debt. The last time the firm shorted Treasuries was when the financial world was flirting with apocalypse in 2008, Zero Hedge notes.

Then again, it may not be all that surprising that Gross has ratcheted up his bearish view of Treasuries. One needs only to look at his most recent monthly missive titled “Skunked” posted on PIMCO’s website:

“…the true but unrecorded debt of the U.S. Treasury is not $9.1 trillion or even $11-12 trillion when Agency and Student Loan liabilities are thrown in, but $65 trillion more! This country appears to have an off-balance-sheet, unrecorded debt burden of close to 500% of GDP! We are out-Greeking the Greeks, dear reader.”

Gross said that “…if the USA were a corporation, then it would probably have a negative net worth of $35-40 trillion.” Not surprisingly, that means Uncle Sam would have a hard time locating creditors. Assuming Gross is right, inverse bond exchange-traded funds may have just become an even more compelling idea.

by Todd Shriber

Wall Street firms often dole out bonuses that raise eyebrows among the general public. But the latest round of bonuses that will make the average person go, “Hmmmm,” doesn’t come courtesy of a big bank or hedge fund. Rather, it comes from the energy sector.

Transocean (RIG), the world’s largest provider of offshore drilling services, shelled out millions of dollars in bonuses to high-ranking executives for 2010. The fact that the company was granting bonuses isn’t the issue. The issue is why Switzerland-based Transocean was rewarding some of its executives: safety. Apparently, 2010 was the best year in terms of safety performance for the company, Forbes reports, citing Transocean’s annual report.

That’s interesting when considering it was last April when the Transocean-owned Deepwater Horizon rig exploded in the Gulf of Mexico, killing 11 workers and creating the biggest oil spill in U.S. Not surprisingly, Transocean appears to be taking a big-picture view of its safety record, according to its annual report:

“Notwithstanding the tragic loss of life in the Gulf of Mexico, we achieved an exemplary statistical safety record as measured by our total recordable incident rate (‘‘TRIR’’) and total potentials everity rate (‘‘TPSR’’). As measured by these standards, we recorded the best year in safety performance in our Company’s history, which is a reflection on our commitment to achieving an incident free environment, all the time, everywhere.”

Even with the tragedy in the gulf, Transocean’s safety record was deemed good enough to give Chief Executive Officer and President Steven L. Newman a raise. Newman’s total compensation for 2010 equaled $6.6 million – almost $1 million more than he earned in 2009, according to Forbes.

Transocean’s decision to grant bonuses to executives on the basis of safety appears all the more questionable when considering that BP (BP), the operator of the Deepwater Horizon and the company regarded by many as the chief villain of the gulf spill, denied bonuses to its top executives, according to Reuters.

Perhaps it’s OK to give safety bonuses when the accident isn’t your fault or when you’re not going to face legal liability from it. Transocean said in its annual report that it thinks it’s “contractually indemnified” from spill claims.

by Todd Shriber

Some stocks just don’t know how to go down. Their charts are things of beauty, marked by series of higher highs and long-running uptrend lines. They come from a variety of sectors, and being short these names isn’t the brightest of ideas.

Often times these are the stocks of companies that produce simple goods or services, not the cure for cancer or some other complex fare. They’re often highlighted by rich valuations that seem to go ignored for long stretches of time.

Yet every good run eventually comes to an end at some point, or at least pauses. The trick is pinpointing when. With that, here’s the Trader Daily list of five unstoppable stocks and what it might take to stop them. In the essence of caution, please note that these are not buy and sell recommendations, nor advice of any kind, not are we saying these scenarios will actually play out the way we have described.

1) Apple (AAPL):

Less than 10 years ago, Apple traded for less than $20. It would now need to split 18-for-1 to see $20 again and don’t bet on that happening. Apple’s dominance in the consumer electronics business is widely documented, and despite a lofty price tag on the shares, the stock actually isn’t expensive by traditional metrics (about 14x forward price to earnings and a price/earnings-to-growth ratio of 1).

So what could derail this juggernaut? Perhaps the only answer is the health of co-founder and CEO Steve Jobs. Even on leave, Jobs is still running the show from his home, according to The Wall Street Journal, but if his health dramatically worsened, and Apple couldn’t keep it quiet, that would be a near-term issue for the stock.

2) Chipotle Mexican Grill (CMG):

This McDonald’s (MCD) spin-off has become a star in its own right, surging more than 150% in the past year and really breaking out after last week’s earnings update. Just look at the price action in the span of a week on Financial Visualizations. What is the kryptonite for a stock in this business on this kind of run, trading at 47 times earnings?

Why, it’s commodities prices. Philip Davis notes on Seeking Alpha that Chipotle, by its own admission, is staring at rising costs over the next several quarters. With livestock and vegetable prices expected to rise this year, Chipotle will have to sell a lot more burritos to sustain its current share price and valuation.

3) Netflix (NFLX):

Neither a price to earnings of over 81 nor Whitney Tilson have been able to stop Netflix as the stock has nearly quadrupled in the past year, leaving many to wonder what it would take to knock this stock down. Probably an act of a God or some type of internal scandal, and we’re not betting on either. Or the market could grow suspect of the valuation, certainly a reasonable reaction at this point. But when is it going to happen?

4) OpenTable (OPEN)

Perhaps the next member of the Nasdaq triple-digit club, OpenTable has taken a simple idea, online restaurant reservations, and served it up. Now we have a stock trading at 160x earnings and almost 56x forward earnings. OpenTable is forecasting five-year growth of 54%, according to The Motley Fool, and any negative adjustment to that guidance would make the stock vulnerable to a pullback. Negative consumer sentiment would also hurt, but with the economy improving, that’s not a near-term concern.

5) Panera Bread (PNRA)

Panera is another restaurant name that enjoyed a recent post-earnings gap higher after pleasing investors with some appetizing guidance. Panera’s commodities costs, at least 80% of them, are locked in for the year, according to The Wall Street Journal, and the company isn’t shy about passing costs along to consumers. If food inflation doesn’t stop this stock, it’s hard to figure out what will.

by Paul Springer

While the old Soviet Union recoiled at the thought of capitalism, the new Russia has becoming increasingly dependent on capital from other nations. But as Russia seeks investors to fuel its growth, the safety of its political climate is receiving increased scrutiny.

Russia’s treatment of Mikhail Khodorkovsky, one of the nation’s richest men, has led many critics to wonder if Russia’s government is as bad as the USSR’s totalitarian regime.

Khodorkovsky and business partner Platon Lebedev have been in jail for years on bizarre charges that they embezzled oil from Yukos, their own oil company, and now the pair have been found guilty of embezzlement and money laundering charges that could keep them behind bars for another seven years.

The charges against the pair came during Vladimir Putin’s time as the Russian Federation’s president, and many critics of the countries legal system say the trial was emblematic of a government where toxic influence rules. The Moscow Times observes:

Khodorkovsky fell foul of the Kremlin during Putin’s first term after he aired corruption allegations, challenged the state’s control over oil exports and funded opposition parties.

After his arrest in 2003, Yukos was bankrupted by back-tax claims and its assets sold off, most ending up in state hands, deepening Western concerns about property rights and the rule of law in Russia under Putin.

U.S. Embassy cables also reveal discussions with an unknown source who said Yukos’ business practices were common and legal—and that Khodorkovsky would probably remain in jail as long as Putin was in power.

Now Dmitry Medvedev is technically in charge as president, but Putin still looms large in his official capacity as Prime Minister. But his reach goes considerably farther. The Telegraph U.K. considers the recent guilty verdicts as symptoms of Putin’s control:

The convictions of Mikhail Khodorkovsky and Platon Lebedev, his former business partner, come as further confirmation that Vladimir Putin still holds the reins of power in Russia in spite of ceding the presidency to Dmitry Medvedev.

The Guardian was even blunter:

Vladimir Putin’s unforgiving brand of vendetta politics today claimed another prominent victim with the guilty verdict against Mikhail Khodorkovsky, the former oil magnate who dared oppose the Kremlin strongman.

There was never going to be any other result. In modern-day Russia, challenging Putin is like standing in front of a tank. Either get out of the way or expect – sooner or later – to be flattened . . . .

But the lengths (and depths) to which the former KGB spy appears ready to go have fuelled claims, such as those publicised by WikiLeaks, that Russia has become a corrupt “mafia state” under his tutelage.

Yuri Schmidt, one of Khodorkovsky’s attorneys, said in a New York Times piece that an appeal is in the works, though an appeal may be fruitless within a corrupt legal system. Schmidt says Putin effectively announced the verdict ahead of time:

It’s hard to say whether the judge himself was embarrassed by the verdict, but Prime Minister Vladimir Putin made it clear several days ago how the Khodorkovsky trial would unfold when, responding to a question on national television, he declared: “A thief should sit in jail.”

The situation highlights the challenges facing investors seeking to invest in Russia, and it is not the most dire. Sergei Magnitsky, an attorney for Russian-focused Hermitage Capital, died in a Russian prison after accusing the government of massive financial fraud involving companies Hermitage in which it was an investor.

From an account in The Record:

Indeed, Magnitsky’s job at a Russian-American law firm had drawn him into a battle between William S. Browder — once the largest foreign investors in the Russian stock market — and the Russian Interior Ministry, which oversees law enforcement. In 2007, Browder’s company, Hermitage Capital, based on Magnitsky’s research, accused police investigators of an immense act of corruption, charging that they had seized three of Browder’s subsidiary companies and used them to receive a $230 million tax refund.

Magnitsky ended up dead, and justice seems to be on a hit list in Russia. This clearly spells out caution for investors, and it also provides a reminder that Russia-intensive ETFs and mutual funds allow  investment in more than just companies. The may also give you a stake in corruption.