Saturday, May 13, 2006

While I was out....

I spent most of this week promoting the book and doing other stuff, so I have neglected this blog! While I was away:

More hedge fund lunacy

The New York Times told the story of a small college in Ohio that has gone completely ga-ga over hedge funds. The College of Wooster puts "nearly 80 percent" of its endowment in hedge funds. This has resulted in -- surprise surprise -- "rich rewards."

One of these days, I'd like to read about an endowment or hedge fund that has not generated "rich rewards." Since hedgies don't have to report their returns, and endowments don't publicize their journeys into the Horse Latitudes, we never hear about those. I'd also like to read a story like this that actually names the hedge funds in which an endowment invests and -- if that info is not available -- says so.

In this case, apart from a reference to "14 long-short managers," we just don't know. As I described in Wall Street Versus America, college endowments are one of the last bastions of opacity in the investment world, and that picture gets murkier when hedge funds are involved. The media could help a little by at least saying that this picture is murky.

The Sound of One Soba Noodle Slapping

On May 10, the SEC settled charges with Morgan Stanley that it held back "tens of thousands" of emails from regulators investigating the IPO and analyst scandals. The agreed-upon penalty was fifteen cents -- sorry, typographical error. Make that read "$15 million or the equivalent of 15 cents to you and I."

The Overstock Hubris Watch, staunch standard-bearer of the anti-naked-shorting Baloney Brigade, announced on Tuesday that it was getting a wide-ranging subpoena from the SEC. With typical arrogance, it said it "celebrated" the subpoena. On Wednesday, the company announced it was withdrawing a stock offering, obviously because of the subpoena. (See this story, subscription required.)

Meanwhile, the head of the anti-shorting campaign, the bravely pseudonymous crackpot "Bob O'Brien" (outed by the New York Post as used medical equipment salesman Phil Saunders) was spinning the withdrawal on Yahoo message boards in posts like this one -- intimating that Overtstock had engaged in this stock sale in the first place for reasons other than the obvious one of raising cash.

The SEC should take a hard look at "O'Brien's" financing and his relationship to Overstock and its CEO Patrick Byrne. Byrne has promoted the former's website on CNBC, and has released transcripts of interviews with reporters on "O'Brien's" website. "O'Brien," meanwhile, has viciously attacked real and perceived "enemies" of Overstock and Byrne on his website and on the Internet.

The last thing this already overhyped stock market needs is "third party" websites and "independent" stock promoters, shilling companies and performing PR for CEOs with no transparency, and not even their names disclosed. "Swift Boat Vets for Truth"-type organizations might make sense in politics, but in the markets they are just another hustle.


Wall Street Versus America was published by Penguin USA on April 6.
Click here for its listing and here for more information on the book, from my web site.

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