A Day in the Life of A Naked Shorting Cultist

If you're Patrick Byrne, the naked-shorting-obsessed CEO of Overstock.com, what's on your mind is not running your money-losing company or satisfying your super-patient shareholders (share prices down 50% since last summer; 2.4% today alone).

No, what's on your mind is.... well, you figure it out. Here's an incoherent press release issued today by Byrne, ranting at the Depository Trust and Clearing Corp.

© 2006 Gary Weiss. All rights reserved.

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

CJR Daily Does it Again

Sheesh. This is now the second time today -- and third time this week -- that I'll be criticizing CJR Daily. I really do hate to nag, but the item today on the Wall Street Journal was awe-inspiring, in the most negative sense of that phrase.

The subject was a story on Warren Buffett's gift of $37 billion in Berkshire Hathaway shares to the Gates foundation. It was a routine article that examined the impact of the gift on Berkshire Hathaway share prices.

The Journal story was innocuous and, I must say, fairly obvious -- to everybody on the planet, I suspect, except CJR Daily, a journalism review website, in the "Audit" section of the website devoted to the business press.

One thing the financial press does, but which CJR Daily totally overlooks, is examine stuff like the impact of things on stock prices. It's grimy, it's sometimes a bit dull, but it is one of the reasons why the Wall Street Journal exists.

As a matter of fact, this article appeared in a daily column called "Heard on the Street" -- a feature devoted to examining things that impact on the market. Apparently that meant nothing to CJR Daily, which does not mention that this was a "Heard" column.

CJR Daily was puzzled and outraged by this article! So outraged that it slapped on an absurd, naive headline: "The Journal Reports That Good Deeds Are Bad." And, yes, puzzled (genuinely puzzled, I fear) why the article was run: ". . .there is only one question that really needs to be answered about this article," it said. "Why write it?"

The website continued with the following bizarre rant:

Is it because the Journal's sources actually stand to profit from the very fluctuations they claim to fear (and profit even more if they can whip up some market hysteria with an article in a prominent business newspaper)? We can only speculate, but there is no doubt that there is a deeply cynical strain of business reporting that has come to reduce everything to numbers, seemingly blind to the reality that business affects people -- real lives that are either trampled or uplifted depending on the decisions of market players like Buffett.

Jumping butterballs! What is wrong with these people? There is absolutely nothing in the article suggesting that dark, nefarious market players were feeding info to the Journal, hoping to "profit" from "market hysteria." Besides, it is beyond me how a story like this, a story so non-earthshaking, could whip up "hysteria" for a stock as large as Berkshire.

But that's not what I find bizarre. The obvious answer to the "why write it" was that an editor assigned it or that a reporter thought, with good reason, that it was a good story. For the CJR website to suggest, without evidence, that a couple of Journal reporters (this was a joint byline) were manipulated by market players is just plain irresponsible. (Oh, and full disclosure: I have never met either Journal reporter.)

The CJR Daily piece concludes with this sanctimonious cheap shot: "Maybe one day the folks on Wall Street will come to realize that good deeds add value, and maybe the journalists who cover that beat will report on the perfect negative correlation between the rise in Berkshire's stock and the demand for tasteless fortresses and marble statuary in Greenwich, CT."

Mark Mitchell

There are plenty of reasons to find fault with financial journalism. I criticize the media severely in my book for touting investment managers and being overly deferential to hedge funds, among other things. But this kind of snarky article seems only to prove that the folks at CJR Daily are having a hard time filling space.

They may want to try a house ad next time.

UPDATE: CJR Daily assistant managing editor Mark Mitchell sounds off -- first anonymously, and then under his own name! See the comments to this article. It should be noted that I've chatted with Mark in the past and consider him to be a fine fellow, although we do disagree on a bunch of subjects -- such as, for example, the role of short-sellers in the demise of Enron. Note the tail end of this article that I wrote for Salon a while back.

© 2006 Gary Weiss. All rights reserved.

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

The Senate Hearing: A Mixed Bag

As expected, the Senate Judiciary Committee hearing today on hedge funds turned out to be a mixed bag: One part troubling description of a possible coverup at the Securities and Exchange Commission, and one part ritual short-bashing dog-and-pony show.

The troubling part was the testimony of ex-SEC lawyer Gary Aguirre. Obviously the SEC has a lot of explaining to do about its handling of an insider trading investigation involving (maybe) Morgan Stanley CEO John Mack. Those allegations are troubling, and if they're true, heads should roll.

The dog-and-pony show component featured the usual cast of characters that one finds in such things -- the whining CEO, the "outraged" lawyer, and of course, clueless senators.

Utah Republican Orrin Hatch, for example, babbled incoherently about short-sellers "registering" stock on the Berlin exchange. (That was apparently a reference to Berlin exchange listings being manipulated by naked shorters -- something that the NASD investigated and, as was discussed at a state regulatory conference, found to be "hysteria.") My hunch is that a particular Internet-retailing, Sith Lord-ranting Utahan was delighted by the spectacle of his senator making a fool of himself.

As I indicated in a previous item in this blog, congressional hearings that cater to blame-shifting, short-bashing corporate types are nothing new.

Amid all the serious allegations and short-bashing, one little snippet of testimony stood out. It came from Jonathan Boersma, Director, Standards of Practice, at something called the CFA Centre for Financial Market Integrity. The subject was an issue -- a genuine issue, unlike naked shorting -- that Congress and regulators have completely avoided: the growing, troubling field of company-paid research.

Boersma testified forthrightly that "Client-sponsored or even issuer-paid research (whereby a company with little or no research coverage hires a firm to write a report on their company) is certainly not independent."

That is certainly true. Yet, as I pointed out in Wall Street Versus America, such research is routinely touted as "independent" by its purveyors, and foisted on investors as such.

Paid research is an area that Congress might want to investigate, once it satisfies its appetite for "naked shorting" baloney. I'd say it OD'd on that today.

UPDATE: Rounding out a day that positively reeked of baloney, the Depository Trust Clearing Corp. issued a press release concerning a central focus of the anti-shorting nuts -- "fails to deliver." Seems that the widely quoted $6 billion in "fails to deliver" is actually $3 billion, because that figure includes both failure to deliver and to receive. ("Fails to Deliver" are commonly mistranslated by anti-shorting loons as equivalent to "naked shorting," which they ain't, as the DTCC has pointed out a bunch of times.)

Nice of DTCC to clarify. But what I wonder is this: what took 'em so long? To me, this is a prime example of how the Street establishment feeds the conspiracy theorists, who thrive on seemingly conflicting data as they advance their flat-earth theories.

Something as basic as double-counting -- always an issue when quantifying trading -- should have been caught by the DTCC long ago.


© 2006 Gary Weiss. All rights reserved.

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

Two Little Oddities

Two little oddities crept up today in advance of the Senate Judiciary Committee's hearing on hedge funds.

The first, mentioned by Herb Greenberg in his blog, concerns one of the witnesses, a former employee of Gradient Analytics -- the research firm being sued by Overstock.com for supposedly having an unholy relationship with short-sellers.

Greenberg points out that this former employee's written testimony apparently originated from none other than Overstock.com. It will be interesting to see if any of the senators are awake enough to raise the issue today.

The other little oddity crept up in the CJR Daily blog, in an article on the hearing. The article says that the hearing's star witness, Gary Aguirre, has alleged a "scandal of gargantuan proportions" and urges readers to the "sanitycheck website," which has an eighteen-page letter he wrote to Congress.

"Sanitycheck" is, of course, a naked shorting conspiracy website devoted in large measure to anonymous attacks on journalists who write critically about companies (note this and this blog item). The site is run by a paranoid nut who goes by the phony name "Bob O'Brien" and has been identified by the New York Post as a used medical equipment salesman named Phil Saunders. Saunders/"O'Brien" is notorious for, again, smearing journalists -- such as raving that the editor of Forbes was paid off. Or smearing a Business Week reporter for daring to pose tough questions to Saunders's pal, Overstock's CEO Patrick Byrne.

Odd, don't you think, that a journalism review -- a site presumably devoted to advocating tough journalism -- would link to the financial world's leading enemy of tough journalism? Particularly since CJR could have linked to the place where "sanitycheck" got the letter -- the Wall Street Journal's website? As you can see, the Aguirre material is available there, at no charge, to subscribers and nonsubscribers alike.

No big deal. Just thought it was, well, an odd choice of links.

Actually there is yet another oddity noted in the New York Post today. One of the witnesses at the hearing today is a lawyer from a nonexistent organization who once rooted through the trash of one of his client's enemies.

UPDATE: Not surprisingly, the senators were too busy sucking up to anti-shorting nuts to deal with the origins of the ex-analyst's testimony. See my later item today.

© 2006 Gary Weiss. All rights reserved.

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

A Gap in the Witness List

The witness list for Wednesday's Senate hearings on hedge funds has just come out, and as expected the lead-off witness is Gary Aguirre, former SEC enforcement lawyer and whistleblower. This is terrific. What was expected to be a dreary anti-shorting dog-and-pony show is starting to get exciting.

Aguirre, of course, has raised serious questions concerning a possible high-level coverup in an investigation of alleged insider trading by the Pequot hedge fund. So I certainly would be curious to hear Aguirre's allegations, under oath, and the responses of SEC officials, under oath.

Only one problem: nobody from the SEC has been called to testify.

Seems like a pretty glaring omission to me. The senators should call Cox, and force him to respond to Aguirre's charges-- under oath.

While Aguirre's allegations may or may not have substance, he is making a serious charges and the SEC chairman should address them forthrightly, whether he wants to or not.

© 2006 Gary Weiss. All rights reserved.

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

A Horror Story of Co-opted Regulators

See the New York Times front-page article today. If true -- and this is all very much in the "allegedly" stage -- it would be one of the most awful stories in memory of the Securities and Exchange Commission being co-opted by the people it is supposed to regulate.

If he had any role in the firing of the SEC whistleblower described in the piece, SEC chairman Christopher Cox has got to go. Ditto if he stopped the agency from issuing a subpoena to Morgan Stanley's CEO John Mack.

As I described in Wall Street Versus America, the SEC and the self-regulatory "pyramid" are hopeless. Investors need to watch out for themselves against the Street's greed.

UPDATE: Houston Chronicle journalist Loren Steffy, in his blog, equates the above, with all its horrific implications, with Cox's previous decision to pull back on idiotic subpoeanas to journalists who fell afoul of blame-shifting CEOs. I wrote about that some months ago, here. I'm not sure that he entirely appreciates the difference between the two situations.

Anyway, we haven't heard much of the dumb journo subpoenas, and hopefully Loren will join me in seeing to it that they remains forever deep-sixed.

© 2006 Gary Weiss. All rights reserved.

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

CJR Daily: Those SEC Cops Mean Nothing

CJR Daily has a nice piece on the executive options media feeding frenzy. Or at least at was nice for a while.

After first noting that the Wall Street Journal has a "handy Options Scorecard, listing some 50 or so companies and noting which ones are currently being investigated by the SEC, the justice department, and so on," CJR says as follow:

But having your books looked over by the SEC no more makes you guilty of corporate malfeasance than having your block patrolled by a beat cop makes you guilty of kicking the tar out of your neighbor. With more than two-thirds of all SEC investigations resulting in clean bills of health, we humbly submit that the nation's greatest business paper should impose some minimum quota on its a priori insinuations of guilt.

True. However, the "scorecard" states very clearly that it's an "updated look at companies that have come under scrutiny in recent months for past stock-option grants." The Journal was simply recording the status of companies being probed on that issue. It has issued other "scoreboards" in the past, including a useful one on the mutual fund scandal.

I agree that coverage of the options scandal, such as it is, is overblown -- as was the mutual fund scandal and others. But overstating the case, as CJR Daily has done, doesn't help.

© 2006 Gary Weiss. All rights reserved.

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

Mark Cuban: His Righteousness Endureth

Mark Cuban today stoutly defended his much-criticized plan to trade -- in advance of publication -- on information his reporters dig up for his new investigative reporting website.

Cuban's response is that he has no choice. Otherwise he would have to dirty his hands with crude stuff like selling advertising. Not for this guy. You know advertising -- the conflicts of interest and all. Naah, just turn your reporters into a personal stock-tip service. Cuban concludes by observing that "right is its own defense."

Yup, it's important to do the "right" thing -- particularly when it means getting market-sensitive info unavailable to the public, extracted by his reporters from sources who may not be aware that they're helping some billionaire get even richer.

And I thought Cuban aimed to make a buck by throwing the basic ethical principles of investigative reporting (and reporting generally) out the window! How stupid of me. All the time he wanted to take a principled, moral stance, like Gandhi or Oskar Schindler.

Anyway, you can read all about it in his blog.

What makes this whole thing frustrating is that this is otherwise a good idea. A website on stock fraud would be welcome because of the media's indifference to the subject -- as I explored in Wall Street Versus America.

I still hope that Cuban comes to his senses and decides to act responsibly with his website. But so far he's acting like just another rich guy with a new toy.

(Related blog entries can be found here, here and here. )

© 2006 Gary Weiss. All rights reserved.

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

Cuba, again

I see that the New York Times picked up an item in this little author bloggie -- actually two items, this and this -- in which I decry Mark Cuban's approach to his new investigative journalism website. My problem is that he plans to trade on the stocks his reporters probe, and do so before publication.

I repeat, before publication.

That would seem to be legal, if disclosed, but it would rip down the barriers between journalism and stock research. It would hurt all financial muckraking by feeding paranoia that journalists are on the payroll of hedge funds and other mysterious market devils.

If Cuban wants to use his people's work as a trading vehicle, fine. But don't call it an "investigative journalism website," because that's not what it would be.

What's irksome about the whole thing is that the website that he describes is badly needed. As I describe in my new book Wall Street Versus America, the financial media has pretty much foresaken coverage of stock fraud in recent years.

The few practitioners remaining are under a constant barrage of criticism, McCarthyite smears, and even SEC subpoenas. I can only imagine the kind of regulatory scrutiny Cuban's new venture would get, if it were to be his personal short-selling research machine.

So I'm hoping Cuban comes to his senses, so I can cheer him from the sidelines and not throw tomatoes.

© 2006 Gary Weiss. All rights reserved.

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

A Pause That May Refresh

The Senate Judiciary Committee has postponed a hearing it had scheduled for June 20 on the "Short Selling Activities of Hedge Funds and Independent Analysts." Hopefully the senators will use this pause constructively, as this hearing was shaping up to be a dog and pony show for the benefit of blame-shifting CEOs.

Increasingly, corporate managers who can't run their companies competently have been shifting the blame to short-sellers, who bet on stocks declining. This is actually an old phenomenon, and certainly not the first time that Congress has obediently served as a PR conduit for such scapegoating.

In Wall Street Versus America, I describe how a House hearing on the same subject in 1989 left one congressman -- future SEC chairman Christopher Cox -- wondering something aloud. He asked if the committee hadn't been "snowed" by excuse-mongering CEOs. It had been. The whining CEOs who appeared before the committee came from three companies, two of which were later prosecuted for fraud.

Different era, different side of Capitol Hill, same snow.

Unless, that is, the senators decide to actually investigate something worth investigating.

They may want to use the extra time -- the AP says the hearing is off till the 28th -- to probe the anti-shorting conspiracy campaign, which is pushing a line of baloney in an apparently well-funded propaganda operation.

Or they could probe actual stock fraud. It's still a massive problem, and its practitioners have long cried the loudest about short-selling.

Indeed, the committee might want to devote its scarce time to hear about any actual problem facing the markets. There are a bunch.

However, as usual when Congress confronts subjects involving Corporate America, money talks -- and the clout of corporate interests is talking in favor of the bogus anti-shorting campaign. As I pointed out in Salon a few weeks back, its aim is to shift the blame from poor corporate performance to amorphous outside malefactors -- them.

The "them defense" was used unsuccessfully by the Enron defendants, and it is sweeping the nation. Next stop: Capitol Hill.

(revised 6/17)

© 2006 Gary Weiss. All rights reserved.

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

More on Mark Cuban's Folly

Business Week online today has a good piece on Mark Cuban's tin-eared approach to financial investigative journalism -- an otherwise laudable venture that he plans to exploit to trade stocks based on the stuff his reporters dig up. (Hat tip: Talking Biz News blog.)

Got to admit, it's handy having financial journalists on your payroll when you want to trade!

“There are a million ugly stories in the financial underground,” Cuban told BusinessWeek.com in an e-mail. “We plan on finding and sharing and profiting from them.” He declined to comment further.

Of course not. What more is there to say? I mean, when you're a billionaire and stuff like that, you can do whatever you damn well please, and I suppose that includes turning investigative journalism into a private money machine. “At first blush, it just sounds so weird it's kind of hard to get my mind around,” said one journalism dean quoted by BW.

What I find particularly noxious about Cuban's Folly is that it feeds all the misperceptions about journalism being promoted by the conspiracy nuts of the short-bashing Baloney Brigade. Of course, Cuban has got a nice basketball team and stuff to fall back on, so not to worry.

This episode is, I think, a good example of the mentality that I've encountered all too often on Wall Street. Making a buck is everything, and the rest of the world can go to hell.

© 2006 Gary Weiss

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

A Great Idea -- But Don't Screw it Up

I was delighted to hear about the new investigative journalism blog being started by a terrific reporter named Chris Carey, who wrote award-winning stories on global stock fraud for the St. Louis Post Dispatch. Carey's new blog, sponsored by Dallas Mavericks owner and blogger Mark Cuban, will focus on an area neglected by the media -- stock fraud.

It is a brilliant idea. So I was distressed to read an AP story that quoted from an item in Cuban's blog some weeks ago. In it, he said that he would profit from information uncovered by the new blog before the articles come out.

Here's what he said:

Business is an easy place for me to start because the fraud and sithlord wannabes uncovered can not only create great stories of interest for the webite and HDNet World Report, but also allow me to buy and the sell the stocks of the company. A journalistic conflict you say ? Not any more. Not in this world. It will be fully disclosed and explained. This site is for the profit of its owners and we will buy and sell stocks that are discussed, before they are made available on the site. So make any decisions based on this information accordingly.

A journalism conflict I say? Yes, it is a journalism conflict. A big journalism conflict. In this world or any other.

A bedrock principle of journalism, what distinguishes journalism from stock research, is that you carry out sleuthing for public enlightenment and only public enlightenment, not private gain. Sure, you can make a living at it, through advertising or subscriptions, if you can. But you don't trade on the info. Ever. It is not even at the level of Journalism 101, it is that basic.

True, if you disclose it the Securities and Exchange Commission won't get mad at you. As I pointed out in Wall Street Versus America, regulators view disclosure as a self-absolving confession. Disclosure=no fraud. However, the absence of fraud is no reason to chant hosannas. Freedom from conflict of interest is also a necesiity.

What makes that idea particularly bad is the lynch mob atmosphere surrounding short-selling, which has actually gotten worse since I described it in the book. I've written numerous blog items on the crazies of the naked short-selling conspiracy cult, many of whom have targeted Cuban -- whose blog is excellent, by the way -- as well as tough journalists like Herb Greenberg. But if Cuban trades in the stocks that are probed in his new venture, even if disclosed, it will simply reinforce the view that journalists and independent stock analysts are in bed with the shorts.

Take, for example,a hearing that will be held on June 20 by the Senate Judiciary Committee: "Examining Short Selling Activities of Hedge Funds and Independent Analysts."

I've said many times, such as in this Salon piece, that this campaign to shift blame from corporate incompetence and crookedness is gaining steam. The last thing we need is for the good guys to fuel the canard that investigative journalism is a profiteering tool for short-sellers.

© 2006 Gary Weiss

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

Naked and Proud

One of the nicest things to come out of the Securities and Exchange Commission recently is a brand new website feature -- one can now engage in full-text searching of SEC filings. To test out this new feature, just for the heck of it I searched for that loaded phrase "naked short selling" and -- lo and behold! -- I found a bunch of nudity spreading all over corporate America.

Yessir, there are folks out there who are naked and proud of it!

Take, for example, FORM SB-2/A that was filed for China World Trade Corp., registering just under 17 million shares of common stock, that was filed on Jan. 13, 2006. I have a special place in my heart for this company, as I have received several lovely unsolicited emails boasting of its virtues as an investment.

After observing that sales of stock under a "standby agreement" with the underwriters might encourage short-sales that would drive down the price of this over-the-counter stock, we get the following:

In addition to the possibility of short selling described above, [an underwriter] Cornell Capital may, itself, engage in naked short sales in the market, which would have the effect of driving down the price of our stock. Cornell Capital can do so, pursuant to the terms of the Standby Agreement, as long as the short sales are not in excess of the amount of shares owned. Notwithstanding this ability, Cornell Capital has agreed that it will not engage in short sale transactions in our common stock for the duration of the Standby Agreement.

Good to know, wouldn't you say? But mind you, that is just one example of fully-disclosed nakedness in SEC filings, now instantly uncoverable thanks to Edgar's new muscle. While most of the "naked" disclosures are routine discussions of underwritings and such (underwriters often go "naked" in the ordinary course of business), we also have mutual funds proudly conceding that they engage in this practice.

Thus the May 1, 2005 "statement of additional information" for Janus Aspen Series says that "In addition, the Equity Portfolios may engage in 'naked' short sales, which involve selling a security that a Portfolio borrows and does not own. The total market value of all of a Portfolio's naked short sale positions will not exceed 8% of its assets. Transactions in futures, options, swaps and forward contracts are not deemed to constitute selling securities short."

So attention all you naked-shorting conspiracy buffs! Crank up your crackpot websites. The plot is thickening.

© 2006 Gary Weiss

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

The Baloney Brigade Hits a New Low

I've posted occasionally in the past about the menacing, sometimes threatening conduct of the boiler room retreads and kooks who comprise the Baloney Brigade "stock counterfeiting conspiracy" cult. But a reader brings to my attention yet a new low -- a public death wish against a Dow Jones reporter.

It came in a comment on the cult's "sanitycheck"website. In a post yesterday, the anonymous crackpot who runs the site, "Bob O'Brien"(pseudonym of used medical equipment salesman named Phil Saunders) smeared Roddy Boyd of the New York Post and Carol Remond of Dow Jones News Service for failing to tow the party line. I'm also a frequent target of mudslinging by this creep, as is an illustrious group of journalists and commentators ranging from Jim Cramer to Herb Greenberg to Joe Nocera and, most recently, Bill Baldwin, editor in chief of Forbes. The usual paranoid line is that we don't kowtow to the Baloney Brigade because we are lined up for handouts from "miscreants."

Yesterday's Boyd-Remond smear was fairly typical until we come to the following comment, which had not been removed a day later, by a person who signed his name "FreddoCazzo":

I hope people like Carol all end up either behind bars, or better yet, dead. This gene pool could use a lil chlorine!

Not a single person contradicted this nut, and some hours later he opined:

there comes a time when eloquence and patience gives way. Its not about being filled with hate, as much as it is love for your fellow brothers and sisters who have been mercilessly raped, sodomized and choked.....such nefarious behaviors call for extreme measures sometimes......so please add a little bleach to the gene pool.....and wishing these people die is basically just wishing for the inevitable.....whats wrong with that?

Again, not a word in contradiction, and the two posts remain on the "sanitycheck" site (though something tells me they are about to disappear.....).

As anyone familiar with such things can attest, any time a real or perceived enemy is wished "dead," it is something to take seriously. Hopefully the appropriate law enforcement agencies will do so.

And these idiots influence state legislatures? The mind boggles. Time for the appropriate authorities to pay attention, and investigate the Baloney Brigade's funding and tactics.

© 2006 Gary Weiss

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

A Finlayson Moment in Class Action Law

Business Week's Tim Mullaney catches an embarassing boo-boo in a class action suit filed recently concerning the Vonage IPO.

Seems the plaintiff's lawyers (the esteemed firm of Motley Rice LLC) claimed the underwriters were getting a 17% commission -- much higher than the typical 7%! -- when it was just a goof. Really a bit over 7%.

I call this a "Finlayson moment," as in the great James Finlayson, foil to Laurel & Hardy, who on such occasions would say, "Dohhhhhhhhhhh!"


© 2006 Gary Weiss

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

Euronext as Euronothing

The media is rhapsodizing over the impending New York Stock Exchange-Euronext merger, which NYSE Group CEO John Thain describes as creating "the world's most liquid and truly global financial marketplace." A New York Times editorial noted approvingly:

Most important to investors in the exchange companies themselves is the $375 million in potential savings that NYSE Group predicts for a combined entity.
If a combined company can pass the fruits of those savings on to the average investor — not to mention added ease in buying shares of foreign companies — we're all for it.

OK. If the company passes on the savings to the "average investor," who trades maybe three or four times a month, if he's very busy, that would mean savings of ..... goodness. My calculator can't quite count that low. He might be able to buy one more ham sandwich a week, maybe?

And as for the "ease of buying shares of foreign companies," let's just assume for a moment that that's true. Is that really a good thing?

Investors do a remarkably poor job of picking individual stocks, and are usually better off buying index funds, as has been demonstrated repeatedly and as was just pointed out in a fine new book. Overseas stocks are also major subjects of stock fraud. Heck, just look at the spams I get in my inbox every day, mainly from sure-thing Chinese companies.

No, there are plenty of closed end funds that are much better bets for investors than individual foreign stocks -- if bought at below-par premiums to NAV or, preferably, discounts.

Besides, it's anything but clear that the merger would do that. Business Week Online put it best: "In theory, at least, someday investors from any country could readily trade any security listed on any exchange." So in theory, maybe, someday investors will be able to invest poorly everywhere, and not just in the United States.

And then, of course, there is the issue of the trading floor. It may be abolished. Or maybe it won't be abolished. Who cares? As that book (which shall go nameless) described, such "market structure" issues have long been overemphasized by the media.

In summary I am theoretically, maybe, someday, underwhelmed by the whole thing. I sure wish that the media would show a bit less enthusiasm for a merger that is, from an investor standpoint, a total nonevent.

© 2006 Gary Weiss

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

Some Thoughts on Enron

Salon.com has some thoughts on Enron -- and how we have forgotten its lessons -- by an author familiar to us all.

(Re one of the comments: after the ad appears for a few seconds, click on the "Enter Salon" link at the bottom.)

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

New to the Neighborhood

I've read the Village Voice since I was a kid. At its best (and I I'm going waaaaaaaay back into the mists of time), the Voice was absolutely essential reading. It had its claws dug into the underbelly of New York, and reported stories that the New York Times and the other dailies wouldn't touch.

Its advantage was that it was, at all times, a neighborhood institution, located in grungy dwellings in the west Village. I live about a hundred feet from the Voice's very first location, which was an unremarkable comercial building on Greenwich Avenue.

So I'm less than thrilled to read in the Times that the Voice has hired as its new editor a person with absolutely no experience with the city, either as a resident or journalist. His name is Erik Wemple and he is editor of the Washington City Paper.

I'd bet that this seeming handicap is either a tremendous advantage in disguise, or that his unfamiliarity with the area means that Erik will miss the nuances of the city and fall flat on his face.

He should begin by traveling around the city and getting acquainted. It is more than just Manhattan -- something the old Voice never forgot, but which has sometimes been neglected in the weekly of late. He also should haul out some old-- and I mean old -- issues of the Voice.

The Voice has always had good coverage in certain areas--organized crime, to cite one example--but it used to kick butt on a host of subjects back in the Sixties and Seventies. It would tackle stories that were way off the radar, like Albanian-Hispanic tensions in the Bronx. That was the kind of story that the Times, back then, never touched.

So my unsolicited advice to Erik Wemple: take the Voice back to its roots.

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