Sunday, September 24, 2006

Is the media overreacting on H-P?

Marek Fuchs makes that point in TheStreet.com, and he may be right. He says the media, after first downplaying all that spying stuff, is now piling on: “Hell hath no fury like a business media that was wrong — they’ll ride the story both ways, overreacting as much as they originally underreacted.”

The media frenzy on Hewlett-Packard reminds me a little of how the financial press piled on Dick Grasso during his 2003 pay controversy.

I think that the "piñata principle" applies here. That is, once the criticism of a company or executive reaches a tipping point, he is officially a "piñata" and will remain such until an effective counter-spin campaign commences.

During his pay controversy, Grasso was tranformed from "capitalist icon" into "grasping and overpaid bald man" and roughly the same thing has happened to the H-P dustup, which moved quickly from "big nothing" into a chairperson-displacing earthquake.

I did enjoy the spectre of a CEO apologizing to journalists, by the way. Now that is a man-bites-dog story.

© 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.

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Thursday, September 21, 2006

Wanted: Some Good Spin

I almost feel sorry for whomever is in charge of "crisis management" at Hewlett-Packard. Today's Washington Post story portrayed an almost comically Nixonian executive suite, with the CEO (allegedly) countenancing a "sting" operation directed at a reporter.

This kind of thing requires a higher than ordinary degree of spin.

My suggestion is that the company follow the example of Salomon Brothers after its bond trading scandal in 1991. Replace the CEO or chairman with a godlike character like Warren Buffett, and then hire an ex-SEC chairman to conduct an "internal investigation" for a couple of dozen-million bucks.

Above all, stop the leaks! The WaPo story was based on a leak, and that is simply no good. Why not hire a detective and see who's behind it?

© 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.

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A Distinguished Person Joins the Baloney Brigade?

A reader brings to my attention that a familiar name to all fraud-watchers -- "Terry Ramsden" -- appears on the list of signatories of an SEC comment letter (see page 31, lower left column) by the astroturf group the "National Coalition Against Naked Short-Selling."

Is this one of them "weird coincidences" or has the famous British fraudster, gambler and ex-bond trader joined the anti-shorting conspiracy nuts (or as I call 'em, the "baloney brigade")?

If this is the Terry Ramsden and not a coinkydink or a fake (as are most of the "1100 aroused citizens" on the list, I suspect) it would just be another indication of the pedigree of the people behind the anonymous "stock counterfeiting" websites and "organizations."

Of course, I suppose the anti-shorting forces might not view the distinguished Mr. Ramsden as a fraudster at all. The executive director of the NCANS, Mary Helburn, has said that naked shorting was the "real" problem at Enron. Overstock.com CEO Patrick Byrne recently made similar comments in a radio interview -- sentiments that, I think, pretty well sum up the agenda of these characters.

UPDATES:

  • Note the comment to this item from James Brownfield. He argues persuasively that this is the real Mr. Ramsden, based on his association with an eminent Baloney Brigadier.
    Also I should point out that a certain Texas basketball team owner and journalism-defiler has written extensively about said business associations.
  • Another reader points out that a prominent penny stock promoter, Francois Goelo, spoke up in favor of the Baloney Brigade in this 1999 SEC comment letter on naked shorting restrictions. He finished his missive by saying "Keep up the good work!" The SEC, suitably encouraged, went on to enact rules that restrict the only market mechanism that restrains overpriced stocks.

© 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.

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Wednesday, September 20, 2006

The Advantages of Paranoia

Years ago, while working on a sensitive story at Business Week, I actually hid my notes and other source materials so that they not be found by any intrusive cleaning women.

Afterwards I thought I was being a little silly, not to mention paranoid.

Not any more. The New York Times reported today that good old Hewlett-Packard (definitely not in the running for any "friend of the First Amendment" awards) was thinking of doing just that.

The company conducted feasibility studies that "are said to have included the possibility of placing investigators acting as clerical employees or cleaning crews in the San Francisco offices of CNET and The Wall Street Journal."

So I guess there is nothing wrong with a little paranoia after all.

Loathsome as Hewlett-Packard's conduct surely was, I'm having a little trouble trying to figure out if it broke any laws. I hope not. If corporate boorishness and stupidity were against the law, the penal system would break down under the strain, and we can't have that.

© 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.

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Tuesday, September 19, 2006

Annals of Baloney (continued)


Today is the end of the "comment period" for a Securities and Exchange Commission rule proposal on "fails to deliver" securities -- the central obsession of naked shorting conspiracy nuts. (The "baloney brigade," as I called 'em in my book.)

The "National Coalition Against Naked Short Selling," an "astroturf" (phony grassroots) group pushing the agenda of penny stock promoters and CEOs of foundering companies, has been busy as the deadline approached.

As I observed the other day, the NCANS sent the Securities and Exchange Commission an anonymous comment letter on the SEC rulemaking, pushing its "stock counterfeiting scandal" crusade. As you can see from perusing the NCANS letter, the "evidence" for the "scandal" consists of a jumble of statistics but without a single instance of any actual company hurt by any such thing.

If you're going to write a 23-page letter you can site one example, I would guess. Right?

So I was looking forward to seeing that evidence when the anonymous NCANS said on its various anonymous websites it has got 1,100 actual people to send in their signatures to the SEC. I said to myself, "Surely these people are going to scribble in a note about what happened to them!"

But when I saw what the NCANS was sending in, all I saw were signatures below a statement saying that "The undersigned have been negatively affected by delivery failures of equity securities in the U.S. markets, and by the crediting of security entitlements in quantities far in excess of the issued securities they claim to represent."

Just name and address. No space for "what happened" or "what stock I owned that got counterfeited or naked shorted or stuff."

So they still haven't provided a single example of a company being hurt by "stock counterfeiting" or "naked short selling."

Don't you think that if 1,100 people were "negatively affected" by something they could say exactly how they were "negatively affected"?

© 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.

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Sunday, September 17, 2006

The Folly of 'Calling the Market'

There's a cute article today in the New York Times about real estate agents and "industry executives" lamenting the negative media coverage about the housing market. They say that the coverage is splashing cold water on the market, "making a cooling market sound worse than it is."

What made it cute was this quote:
Richard A. Smith, vice chairman and president of the Realogy Corporation, the nation’s largest residential real estate broker, said there was a “constant flood of media that is so negative” that it was discouraging many potential buyers and sellers.
I wonder... would Smith be so upset if a "constant flood of media attention" was overhyping the market?

The larger question, I think, is whether the media should be attempting to "call the turn" of housing markets or, for that matter, any market.

Such articles have a reputation for being amazingly wrongheaded, such as Business Week's famous "Death of Equities" cover story in August 1979. Fortune's 2002 cover story on the real estate bubble was not half as declarative, but turned out to be premature (which pretty well rebuts the real estate industry's whining about negative media coverage).

I'm all in favor of market coverage, as I pointed out the other day, but the media should avoid "calling the turn," no matter how tempting that may be.

It's been shown repeatedly in countless academic studies that nobody can reliably forecaset either the broad market or the movement of individual stocks. So it's time journalists got out of the "market forecasting business" entirely, and wrote stories that pointed out the excesses of the market, both positive and negative. Then the reader can draw his own conclusions.

In early 2000 I co-authored with Marcia Vickers an article on Wall Street's "hype machine." That story did not attempt to "call the turn," but instead reported on how hucksterism was running rampant. The story did not attempt to "call the narket" and was not harmed by that omission in any way.

© 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.

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Saturday, September 16, 2006

The 'Times Square Sailor' Nabs a Burglar?

A loyal reader brings to my attention this article in the South Florida Sun-Sentinel, about a former New York City detective named Carl Muscarello, 81, nabbing one of two burglars who broke into in his apartment.

The reader points out that a former NYPD detective of that name has been identified as probably being the sailor in a famous Alfred Eisenstadt photo of a kissing couple on Times Square, VJ Day, 1945. See this New York Times story.

Actually there is a slight difference in age -- the Times story, from August 2005, gives his age as 78. Another account refers to the ex-detective as being from Florida, which makes it a bit less likely to be a coincidence.

Recounting his encounter with the burglar, Detective Muscarello said: "I jumped on his back and put a chokehold on him. An alligator can't get out of my chokehold." Indeed!

Whether he's the "Times square guy" or not, I'm glad that Detective Muscarello was able to nab that burglar. And I hope that the cops down in Plantation catch the one that got away. There's a police phone number at the bottom of the Sun-Sentinel article, so if anyone has any information......
UPDATE: The Miami Herald on the above. You read it here first.

© 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.

Friday, September 15, 2006

Hedge Funds Going Public?

That idea was broached in the New York Times today. Looking at it from a strictly selfish perspective, I think it is an excellent idea.

It would be nice to know the humungous sums the hedgies pay themselves, and also it would be exciting to see what happens to their share prices when their performance turns sour and they pull the cork.

Above all, it will mean that hedge funds will have lost any last claim to being "new" and innovative. They'll just be another humdrum, boring part of the securities industry.

© 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.

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Better Times for the Biz Magazines?

The SABEW blog says today that advertising sales improved mightily in August for the major business magazines. I'm particularly pleased to see that Business Week showed a particularly strong increase, even though it still lags the other major biz mags.

This is good news, because--no matter how much journalists hate to admit this--ad sales have a direct impact on editorial content. Magazines with smaller "news holes" have a tendency to drift toward the pedestrian, in addition to cutting down on both the quantity and length of articles. The number of investigative stories also suffers, as does staff morale in general. As I've noted previously, the impact of reduced ad sales has been particularly evident at Business Week.

Hopefully we'll see a pickup in investigative reporting at all these magazines, including my alma mater. Might be nice to see some substance amid all the wine columns and other fluff.

© 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.

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Thursday, September 14, 2006

Keeping His Eye on the Ball

Nobody can say that Overstock.com chief executive/conspiracy theorist/journalist-taunter/short-and-analyst-suer/"miscreant"-blamer Patrick Byrne isn't keeping his eye on the ball.

While his company limps along, Byrne has his eye keenly focused on what matters -- naked you-know-what.

He has filed a comment letter with the Securities and Exchange Commission on the evils of same, with numerous attachments. A copy can be perused here, right below "anonymous individual investor, Florida." A lot of these comments are anonymous, in keeping with the paranoia of the Baloney Brigades astroturf campaign.

© 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.

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Sunday, September 10, 2006

Annals of Astroturf


A useful phrase has emerged in the world of political discourse -- the "astroturf" organization. Astroturf is fake grass, so the term neatly depicts fake organizations that describe themselves as "grassroots" to hide a corporate agenda. (Here's one example: an alleged front group for big telcos.)

Running a phony grassroots organization is problematic, because one must hide one's backing and corporate agenda. Wall Street's version of the astroturf organization, the NCANS ("National Coalition Against Naked Shortselling") had found a solution! This self-described "grassroots organization" discloses absolutely nada about itself, other than its name.

Take this Securities and Exchange Commission rulemaking comment letter, filed the other day by the NCANS. Interesting letterhead, isn't it? No address. No phone number. Unlike a previous NCANS comment letter, it wasn't even signed by the NCANS's paranoid minister of propaganda, the pseudonymous sicko "Bob O'Brien." And if you are unwise enough to give 'em money, you've got to send it to a lawyer's escrow account.

Why the secrecy? Since the NCANS fights the good fight for CEOs of money-losing companies and penny stock cons who want to shift blame for their failures -- well, I think it's pretty obvious. But it's not so obvious to the SEC, which has diverted its scarce resources from real fraud to pander to these anonymous screwballs. Or to the more vacuous members of Congress and state regulators who have done the same.

A good example is the SEC rulemaking in which the NCANS filed its recent missive. That involved revisions to the SEC's rules on "fails to deliver," which the NCANS has been anxious to use as a red herring to preoccupy investors in failed companies. The clueless SEC has played along.

If you browse through the comment letters on the SEC site, you will find not a single instance of a real investor being hurt by naked short-selling, not from the naked shorting movement's paid shills and, of course, not from the "small investors" posting comments (some of whom are no doubt real people). What you see is a lot of meaningless statistics and some people trying to find a scapegoat for their own poor judgment.

One thing I find interesting is how the naked-shorting goofballs describe themselves as attempting to "protect the investor." They remind me of some malware that recently infected a friend's computer, disguised as a "spyware defense." It showed up on his desktop and was hard to get rid off. Persistent, annoying and dishonest -- just like the anti-shorting nuts. It's a shame that some decent people are swallowing whole their baloney.

The SEC should take a lead role in putting an end to this nonsense, and not perpetuating it. If the good people of that agency want an idea of how ludicrous the naked shorting hysteria has become, I have a suggestion: They should read those comment letters.

Don't just write them off as crackpots, folks. If just one investor makes a bad decision because of the naked shorting campaign, that's one too many.

UPDATE: For an example of how state governments are pandering to the naked shorting astroturfers, see this SEC comment from the state of Utah -- always working hard to protect its crummier public companies at the expense of people who buy their stock.

A week after this item appeared, the embarassed baloney brigadiers sent in the letter with an actual person's signature -- but still no address. The NCANS website's "whois" information, likewise, contains no address information. Makes you wonder why an "organization" would go to such lengths to avoid people knocking on its door.

© 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.

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Do We Really Need Market Coverage?

One of the perennial debates that we used to have at Business Week was whether there was any point in writing "market stories" -- articles that quote various experts and speculate on the direction of the market.

Sometime around 2001 the anti-market-story forces won out because of a change of editors. This was a popular decision -- I certainly liked it -- but I always had doubts that it was a correct one. I'm even less sure today, having picked up the latest issue of BW and noticed that not only were there no articles about the markets, but no articles about Wall Street or financial services at all. No "Finance" section.

There could be any number of reasons for that, and of course some major Manhattan Project -- requiring the labors of all -- may be in the works. I just hope it doesn't mean that BW isn't further racheting down on market coverage. Mind you, I'm not sure why I feel that way, since I don't work there any more.

Guess I'm just saddened by some of the changes I see at my old alma mater.

When I joined BW in 1986, a concerted effort was being made to bring a more investor-conscious attitude to articles. There was publicity at the time pointing out that BW was eating Forbes's lunch. I helped BW recruit people from Barron's. This change emphasis helped BW editorially, and I am sure it was a selling point for advertising.

I'm not saying that BW is necessarily wrong in the softer direction it is now taking. I'm just saying that it is not a pleasant thing to watch, at least not for me.

© 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.

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Wednesday, September 06, 2006

Employing Ex-Cons -- It's a Good Thing!


They deserve a fresh start.

Word reaches me that an ex-convict -- a man, as they used to say in the James Cagney movies, who has "paid his debt to society" -- has moved to an honored place in society.

The ex-con of whom I speak is Aleksandr Shvarts, former head of an illustrious chop house -- "boiler room" to you -- called Global Equities Group. A warm-hearted company called Edulink, Inc., situated on Coney Island Avenue in Brooklyn, has brought this man into the fold.

Isn't that sweet! And get this: They have brought on Shvarts not as a janitor or maintenace man, but as CEO! So says a recent corporate filing with the Securities and Exchange Commission.

I think it's just great Edulink is not intimidated by Shvarts's guilty plea to securities fraud or his 41-month prison sentence or the $837,436.80 in restitution that he was ordered to pay, and which he is still paying off.

I guess Shvarts owning most of the stock in the company might have something to do with this, but it doesn't matter. Not to me. What matters is that a company is doing something nice.

Edulink does some kind of media stuff, and the hard-hearted bureaucrats at the SEC just suspended trading in its stock.

© 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.

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Friday, September 01, 2006

Why Do I Write So Much About Short-Selling?

I'm asked that question from time to time. The reason is that I know of no area in finance where there is more wackiness and more inane disregard of the public interest.

Take this this New York Times story today. Seems a company has decided to pay a special dividend -- but only to shareholders whose shares are held in their own name. That will simultaneously cause trouble and expense for the many shareholders whose shares are held in "street name" -- and, simultaneously, squeeze short-sellers. Shorts must borrow shares in order to sell them, and they can only borrow shares held in "street name."

In short -- a nice way to punish people betting aginst your shares. The Times explains that "The warrant, as explained in the Pegasus news release, appeared to suggest that brokers — who can lend out stock they hold in certain client accounts — might have to recall the shares so that investors could prove they were the owners. Such action would require those who sell short to give the stock back to the brokers, pushing the price up and creating a short squeeze."

My question is this: What is Chris Cox's SEC doing while all this is going on? Oh, the Times reports the SEC is "examining the issue." How nice.



© 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.

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A Turn of the Tide?

Business Week today has a kick-rump cover story, by my ex-cellmate Mara Der Hovanesian, on a particularly nasty species of mortgage that is afflicting homeowners.

I hope this represents a reversal from the trend toward softer pieces that has plagued the magazine under its new regime.

Unfortunately, despite this fine piece, the magazine today showed no sign it is cutting back on its menu of "journalism lite" fare. Today it inaugurated a column by a psychoanalyst who "will tackle your questions about how to handle the emotional dynamics of work."

Such as, if one were working at BW, "Dear Doctor: how do I cope with a magazine that seems hell-bent on a march into jello?"


© 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.

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