Turnabout is fair play. Sometimes.

The Chinese government is making a long list of US goods and services that are no good. According to The Wall Street Journal the items include turbines from GE (NYSE: GE) and everything from pacemakers to cotton pickers to ultrasound scanners from other companies.

Of course, some things made in the US don't work or are broken. But the fact that senior China officials are making these lists now does seem a bit odd. Especially after Chinese-made toy cups from Starbucks (NASDAQ: SBUX) and toys from Mattel (NYSE: MAT) have been recalled by the hundreds of thousands.

No one is fooled here. It is strange that the Beijing government believes that pointing the finger at the US will take the spotlight off its country's failings. But Chinese trade officials have to to something to keep their jobs.

Douglas A. McIntyre is a partner at 24/7 Wall St.

The latest from the China-linked recall department: The federal Consumer Product Safety Commission on Tuesday announced that Starbucks (NASDAQ: SBUX) has voluntarily recalled 250,000 children's mugs, which it sold from last May until this August. Apparently the colorful plastic faces of Dot the ladybug and Dash the turtle can break off, posing an inviting and pointy choking hazard for your youngest. The latte empire has so far gotten just seven reports of the cups breaking. No injuries have been reported, thankfully.

Were you even aware that Starbucks was marketing to children?

No one will be surprised to learn that the mugs were of course manufactured in China, adding to the long list of Chinese-made toys, scooters, and knickknacks that have been recalled for choking hazards, high lead levels, electrical shock risks, likelihood of catching fire and so forth.

Dating back just to Thursday, 14 of the CPSC's last 15 recall announcements concern products manufactured in China (the P3 IonizAir air purifier was made in Taiwan). And, your favorite domestic companies are surely striking new contracts for Chinese outsourcing right now, so start your boycotts or brace for more recalls going forward.

(This is not terribly related, but it's worth wondering whether recalls of products that might find their way into higher-class homes get more press than cheap tchotchkes, such as these fun but excessively leaden keyrings, which sold for a buck at the KKR-held Dollar General.)

Back on August 16, with the Dow opening under 13,000 for the first time since April, our BloggingStocks experts outlined a number of stock plays to ride out this volatile market. Picks ranged from Dow components and other household names to obscure business-to-business giants and foreign market leaders. Here, we review our picks weekly.

In the seventh week since our Volatile Markets stock recommendations, only a few of our picks have seen significant movement.

After stalling last week, South Korean steelmaker Posco (NYSE: PKX), has jumped another $7.39. The 4.08% gain brings Peter Cohan's tip to $188.52, 52.02% higher than its August 16 opening price of $124.01.



Sheldon Liber's recommendation, Huaneng Power International Inc. (NYSE: HNP), gave back some of last week's 18.08% gain this week. Despite the Chinese utility's 6.53% knock, Huaneng still stands a formidable 30.40% higher since our volatile markets feature ran.

Doug McIntyre noted earlier this week that McDonald's Corp. (NYSE: MCD) is upgrading its coffee selection to include lattes, cappuccinos and other specialty drinks. It looks like the golden arches is trying to steal some market share from the green goddess of Starbucks (NYSE: SBUX). Mickey D's says that the new coffee drinks could bring in over $1 billion in sales. Put that in your cup and drink it!

The expanded coffee selection raises the question of whether this is part of a larger shift in McDonald's strategy and brand positioning. Zac Bissonnette noted a few weeks ago that McDonald's stores in Europe are going upscale, with leather seats, soft lighting and real silverware. Zac scoffed at the idea of high-end McDonald's here in the U.S., and it is hard to imagine why anyone could want to spend quality time in a restaurant saturated with the smell of McGriddles and fries, no matter how nice the lighting or shiny the spoons. It's also worth wondering whether the average McDonald's employee will be willing and able to make a good cappuccino. (It isn't that McDonald's employees are incompetent, but rather that the company likes to keep training to an absolute minimum and is loathe to provide any real skills lest the employees demand higher pay.)

Billboard reported yesterday that Starbucks Corp. (NASDAQ: SBUX)'s Hear Music will re-release Paul McCartney's Memory Almost Full album next month, with "new" tracks and a live DVD. The album was originally released in early June and debuted in the Billboard 200 at number 3, before going gold in the United States and achieving similar status around the world. For Starbucks, the album signaled a promising start for the coffee chain's music label, which enjoyed another high chart placement last week with Joni Mitchell's Shine debuting at #14 (Mitchell was the second artist to sign up with the label).

This second release of the McCartney album features three so-called "unreleased" tracks, but careful fans and listeners should note that "In Private," "Why So Blue" and "222" were originally released as a limited edition bonus disc upon the original June release. For the new release, these tracks are added to the original 13 and bundled with a live DVD that features the performance from a June concert at London's Electric Ballroom. It also comes at a time when McCartney is only performing at limited venues and is not embarking on the same kind of stadium world tour that followed the release of his two previous albums in 2002 and 2005.

Though the album signaled success for Hear Music and gave McCartney his highest charting album in ten years, it is all too clear that the coffee chain is hoping to gain more from this second release of Hear Music's initial success. The live DVD is a nice addition, but forcing fans and listeners to buy another copy of the album is far too reminiscent of what music lovers have been subjected to in the music industry. And it seemed like Hear Music was going to break that mold and be more in tune with listeners.

Citigroup (NYSE: C) said it would buy out minority shareholders in scandal-hit Japanese brokerage Nikko Cordial Corp for $4.6 billion, as part of its push into the world's second-largest economy. Citigroup spent about $8 billion to buy a 68% stake in Japan's third-largest securities firm earlier this year and would offer its own shares to buy the remaining 32% it does not own.

According to BetaNews, Microsoft (NASDAQ: MSFT) will hold a event today in Redmond to launch the second generation of Zune music players. Bill Gates will be on hand for the event with the main part of the announcement to be the players, which will include the first flash memory based Zunes. Engadget adds that the rumors concerning the Zune launch may be for today or October 16, and it looks like retailers are starting to receive display units. It looks like, Engadget says, there will be two flash models and a slimmed-down hard drive edition.

Nokia (NYSE: NOK) has signed partnership deals with seven companies including CNN (NYSE: TWX) and Sony Pictures (NYSE: SNE) to bring video content to its top-of-the-range multimedia phones.

Many investors would say that it's about time eBay had admitted it had paid too much for Skype. It happens, but the key is to realize it so the company could move forward. Well, yesterday eBay Inc. (NASDAQ: EBAY) announced that the co-founder and chief executive of its Skype division was stepping down, and that the parent company would take $1.43 billion in charges for the Internet phone service division. Of that, $900 million will be a write-down in the value of Skype. The rest, $530 million , is payment for certain shareholders to settle future obligations.

If anyone still wasn't sure McDonald's (NYSE: MCD) was going after Starbucks's (NYSE: SBUX) market, yesterday the company said that it plans to make specialty coffee drinks available in all of its U.S. restaurants by the end of 2008. Yes, that means lattes too.

Some analyst calls this morning:

• Deutsche Bank downgraded CBS Corp. (NYSE: CBS) to Hold from Buy, saying disappointing rating trends and poor local advertising growth are likely to offset much of the political advertising previously expected.
• Goldman Sachs analysts resumed coverage of Bank of America (NYSE: BAC) with a Buy rating, citing "enormous unrealized equity gains."
• J.P. Morgan upgraded UBS (NYSE: UBS) to Neutral from Underweight, saying the bank is giving up on building a fixed-income business at the peak of the cycle and will concentrate on its strength of traditional investment banking flow business. UBS shares are up over 3.5% in premarket trading.
• Merrill Lynch downgraded Walgreen, Co. (NYSE: WAG) to Neutral from Buy after the company reported results below expectations. Merrill said that management's explanations didn't provide a high degree of clarity specifically as to the expense line. WAG shares, which already closed down almost 15% yesterday, are down half a percent in premarket action.

The management at Starbucks (NASDAQ: SBUX) will have more restless nights. According to documents from McDonald's (NYSE: MCD), Crain's Chicago Business says that the fast food company "plans to sell lattes, cappuccinos and other specialty drinks in all of its 14,000 U.S. restaurants next year. McDonald's predicts the new drinks will add more than $1 billion a year to sales."

One billion dollars. Starbucks did $2.3 billion in its last quarter, so if McDonald's can pick up that much of the market, it may be hard on Starbucks' same-store sales.

Howard Schultz, the founder of Starbucks, recently told The New York Times that his company had only scratched the surface of the premium coffee market. That may or may not be true, but he does have a much larger company that wants the same market, no matter how big it is.

Starbucks shares trade about $26, near their 52-week low and down from a 52-week high of $40. It does not look like those shares will be moving up.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Starting tomorrow, according to the New York Times [registration required] at certain Starbucks Corp. (NASDAQ: SBUX) stores, owners of Apple Inc. (NASDAQ: AAPL) iPhones will be able to hear a song while sipping their coffee and immediately purchase and download it to their iPhones.

This reminds me of an episode from Seinfeld in which George Costanza says: "Food and sex, those are my two passions. It's only natural to combine them." Here, the two needs are a little different -- overpriced coffee (Starbucks) and music on a phone (Apple). Before these companies came along, people didn't realize they had these needs. But now, they realize they need both and appear poised to pay to have them combined.

Specifically, anyone with an iPhone or iTunes software loaded onto a laptop will be able download the songs they hear over the speakers at these Starbucks stores directly onto those devices. The price will be 99 cents a song. The concept is being introduced in around 600 cafes in New York and Seattle only. Users sign onto the cafe's WiFi network to discover what song is playing over the Starbucks speakers. With a few taps, users can download the song onto their iPhones.

Unlike George Costanza's twin passions, this combination of two services will be something that is apparently OK to do in public. Whether it's profitable for both companies remains to be seen.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Apple or Starbucks.

McDonald's Corp. (NYSE: MCD) and Starbucks Corp. (NASDAQ: SBUX) have been trying to cut into each other's businesses for a while now, with McDonald's introducing premium coffee and Starbucks its breakfast sandwiches. After test-marketing iced coffee and cappuccinos in various markets, McDonald's is ready to take its rivalry with Starbucks to the next level by rolling out a makeover of all its U.S. restaurants by 2009 to feature specialty beverages such as coffee drinks, smoothies, energy drinks, and other bottled beverages.

Specialty drinks have higher profit margins than sandwiches, and McDonald's estimates this "Made for You" campaign could boost sales by as much as $1 billion a year. Results from test markets in which the plan has already been tried suggest that it doesn't require additional staff and that it doesn't slow down service, but counters and drive-thru areas do have to be remodeled to make room for new equipment. Some franchisees are concerned about the costs of such renovations.

This has to be better news for McDonald's investors and watchers than Moody's downgrade of McDonald's last week due in part to competition and labor and energy costs. Shares fell 54 cents, or 1.1 percent, to $54.26 after the Moody's announcement, but closed Sept. 28 at $54.47. On the other hand, a Goldman Sachs analyst has McDonald's as a top pick in the otherwise mixed restaurant sector, for its global strength. Starbucks was downgraded last week as well.

Back on August 16, with the Dow opening under 13,000 for the first time since April, our BloggingStocks experts outlined a number of stock plays to ride out this volatile market. Picks ranged from Dow components and other household names to obscure business-to-business giants and foreign market leaders. Here, we review our picks weekly.

Week six was rough for a couple of our stock picks -- chiefly Target Corp. (NYSE: TGT) -- but Huaneng Power International Inc. (NYSE: HNP) just had a phenomenal week. Read on.

Posco (NYSE: PKX)'s gains have tapered a bit -- Peter Cohan's pick followed up last week's 10.41% run with a modest 1.30% rise this week. Still, just six weeks since our Volatile Markets feature, the South Korean steelmaker stands 46.06% higher! Incredible.



This week's big story, however, is Huaneng Power International Inc. (NYSE: HNP), recommended by Sheldon Liber. The Chinese utility nearly doubled its gains as of last week, shooting 18.08% higher, closing Thursday up 39.51% in the last six weeks!

Before the bell: Futures slip ahead of economic data, after Greenspan warns

The blogosphere is abuzz over Apple Inc.'s (NASDAQ: AAPL) iPhone. The company had said that hacked phones will not work following yesterday's software update. Guess what? The company didn't lie and depending on which unlocking program was used, certain modified phones no longer worked after they installed the software update. Many are furious. Is this going to be a PR nightmare? Will Apple fans actually speak out against the company?

According to Detroit News, Ford (NYSE: F) may seek even deeper cost cuts from the United Auto Workers union than those that the union agreed with General Motors (NYSE: GM) as these cuts it may not be enough for Ford, which is in worse financial shape than GM.

A college student, Ahmed Abdellatif Sherif Mohamed, who made a video showing how to detonate explosives using a remote-controlled toy and uploaded it to Google Inc.'s (NASDAQ: GOOG) YouTube is facing a terrorism-related charge. No doubt, debates will ensue on YouTube's responsibilities and controls of such videos.

Starbucks Corp (NASDAQ: SBUX) and PepsiCo Inc (NYSE: PEP) said yesterday they were expanding their bottled coffee business into countries outside North America, including a first into China. No financial terms were disclosed or what other countries they are targeting, except that they could include those that do not yet have Starbucks stores.

Sirius (NASDAQ: SIRI) and XM (NASDAQ: XMSR) shares are declining in premarket action this morning after FCC Chairman discusses the proposed merger, saying there is a "higher burden" to examine the transaction carefully.

MOST NOTEWORTHY: Starbucks Corporation, Brinker, Healthways and Fluor were today's noteworthy downgrades:

• Banc of America downgraded Starbucks Corporation (NASDAQ: SBUX) to Sell from Neutral, and lowered their target to $23 from $27, as they see downside risk to estimates due to slower growth. The firm is concerned that expectations for a near-term recovery are too high.
  
• Goldman downgraded Brinker International (NYSE: EAT) to Sell from Neutral citing macro economic pressure on sales.
  
• Credit Suisse downgraded Healthways Inc (NASDAQ: HWAY) to Neutral from Outperform on valuation.
  
• Fluor Corporation (NYSE: FLR) was downgraded to Hold from Buy at Morgan Joseph on valuation.

OTHER DOWNGRADES:

• Nokia Corporation (NYSE: NOK) was downgraded to Hold from Buy at WestLB.
  
• Goldman downgraded Cnooc Ltd (NYSE: CEO) to Neutral from Buy.
  
• Credit Suisse downgraded Statoil (NYSE: STO) to Neutral from Outperform.
  
• GameStop Corp (NYSE: GME) was downgraded to Neutral from Buy at UBS.

Starbucks (NASDAQ: SBUX) is recently down 69 cents to $27 in pre-open trading.

• Banc of America says: "Lowering rating to Sell as Inflection point on slower growth ahead."
  
• SBUX over all option implied volatility of 29 is near its 26-week average of 27 according to Track Data, suggesting non-directional price fluctuations.

Volatility Index S&P 500 Options-VIX at 17.62; 10-day moving average is 21.15.

Volatility Index NASDAQ 100-VXN at 20.59; 10-day moving average is 23.38.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

U.S. stocks futures were higher this morning indicating a continuation of yesterday's trend: markets are poised to start higher. Reports that Warren Buffett may be buying a stake in Bear Stearns helped sentiment as investors await several economic reports due today.

Yesterday, stocks rallied after General Motors (NYSE: GM) and the UAW reached an agreement to end the two-day strike. GM finished the day 9.36% higher. Bear Sterns (NYSE: BSC) also contributed to the rally when it climbed 7.67% yesterday after the New York Times reported it is in talks with a number of investors including Warren Buffett. Overall, the Dow was up 119 points or 0.87%, the S&P 500 8 points or 0.54% and the Nasdaq composite added 15 points or 0.58%.

Today, several economic reports are due:
- At 8:30 a.m. EDT, final second-quarter GDP reading will be reported and economists expect a revision to 3.9% from 4%.
- At the same time, a key inflation figure, the PCE deflator is expected to come within the Federal Reserve's comfort range for inflation for the past 12 months. If that is the case, many will view this as potential for future rate cuts and markets may see further gains. If it comes above that range, markets may reverse the current bullish direction.
- Still at 8:30, weekly initial claims are due.
- At 10:00 a.m., investors can get yet another indication of the ailing housing sector with August new home sales. The rate of sales is expected to drop to 825,000 according to Briefing.com.

The dollar slipped to yet another all-time low against the euro on speculation a government report will show a drop in U.S. home sales, according to Bloomberg. This would strengthen the case for further rate cuts.
Overseas, Asian markets rallied with several of them, including Hong Kong and Australia, hitting new record highs. European stocks were also higher so far today.

In some major corporate news, a group of investors led by private-equity firm J.C. Flowers & Co. that had planned to buy student lender Sallie Mae (NYSE: SLM) for $25 billion now wants out of the deal due to the current economic environment and legislation.

Starbucks Corp. (NASDAQ: SBUX) is down over 3% in premarket after a downgrade to Sell from Neutral at Banc of America Securities, lowering target from $27 to $23. The analyst said that expectations for a quick recovery are too high amid slowing growth.

Google (NASDAQ: GOOG) is planning to expand its staff by a third over the next couple of years, mostly in Europe.

Microsoft (NASDAQ: MSFT), which had launched Halo 3 yesterday, says the important video game sold $170 million in the first day, a record for any game.

In my series on the top 25 stocks for the NEXT 25 years, I recommended Chipotle (NYSE: CMG) as one of the picks. The stock was at $82 per share on May 21 when I wrote about the company. The $82 price represented a market capitalization of $2.6 billion. Today the stock is at $114.65 with a market cap of $3.7 billion, up over 40% for investors who bought the stock.

But, I have to admit that short-term I am nervous about Chipotle. I still believe the concept is becoming the new rave in the fast food service sector. I still believe that Chipotle could take on McDonald's-like proportions in the years to come -- but I am nervous about the short-term prospects. Why?

I have two reasons. First, higher commodity prices: The price of wheat and dairy has gone up in the United States, which, I believe, could affect Chipotle's pricing structure and general margins. In this consumer-wary environment, restaurants are not about to raise menu prices and risk losing customers. Therefore, I think the food cost expenses for Chipotle's (and many other fast food chains) are going up and will stay high for a while. The second reason I am nervous is Chipotle is a domestic company with no international sales. It is purely reliant on American diners for its revenues.