Saturday, March 31, 2007

Lloyd Blankfein is Turning Me Into a Commie


Someone sent me a link to this article in Radar Online, about how Goldman Sachs CEO Lloyd Blankfein is spending his $53.4 million 2006 pay check:

Now he's aimed his checkbook at the fabled "Old Trees" estate in Southampton and fired away, buying the place for a staggering $41 million. Not only is the 1911 estate located on swanky First Neck Lane, it's a spacehog, swallowing up 10.6 acres on Lake Agawam.

There's a clay tennis court and an ocean-view swimming pool with a heated walkway from the main house—exactly the sort of adult playground gear you'd expect to find in tony Southampton. But even the "cottage" on this estate has 13 bedrooms and a dining room that seats 60. Another guest house, the modestly named "Tulip Cottage," has three bedrooms and a heated pool of its own. The "barn," built in the 1800s, has three bedrooms, too, and massive entertainment space.

A nice beach house. Of course, he could divide it up into apartments and make it a nice dacha for the proletariat.

Sorry, I just had to say it. Excessive Wall Street consumption brings out the Commie in me. I know: it's not fair to say that, he earned every penny, he'll probably throw some rubles at United Way, blah blah blah.

© 2007 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, gary-weiss.com.

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Silence on Solengo

I'm surprised, and disappointed, that the media has not picked up on the outrageous effort by Solengo Capital to bludgeon blogs to not post its marketing brochure. This includes a real or threatened (it's not clear which) lawsuit against Dealbreaker, which won't cave in.

Apart from Reuters and the New York Times Dealbook, both yesterday, there has been no pickup in the media.

What makes Solengo interesting, apart from its ham-handed and dumb saber-rattling, is that Solengo is quite fascinating in its own right, and for all the wrong reasons. It is run by former traders of the collapsed Amaranth Advisors hedge fund.

Dealbook noted:

Wall Street has been buzzing over the news that Brian Hunter, who was in charge of the ill-fated energy trades that brought down Amaranth last year, was already raising funds for a new hedge-fund firm called Solengo. The fund’s marketing materials, which were marked as confidential but leaked to blogs, describe it as “structured to become a multibillion-dollar commodity investment vehicle” that is “designed to minimize the risk associated with leverage, liquidity, credit and operations.”
Thus Solengo is a good example of the unbridled hubris that still infects the hedge fund industry -- and, to the extent it can raise money, the stupidity of people and institutions that invest in hedge funds. Apart from a small article in the Wall Street Journal a week ago, this swift rebirth of a proven failure has received little notice.

P.S. Here is the infamous brochure.

© 2007 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, gary-weiss.com.

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Friday, March 30, 2007

Annals of Legal Genius


I'd like to know the name of the genius who dreamed up what must surely be the dumbest lawsuit I've heard about in recent weeks... (no better make that recent days... no, recent minutes...)

Seems that the Dealbreaker blog is being slapped with a court order by the Solengo Capital hedge fund, to stop the blog from posting a marketing brochure.

Really a smart move for a "secretive" hedge fund group seeking to not draw attention to its marketing brochure. Naturally, the first thing I did when I heard about this was attempt to get the marketing brochure. It had been withdrawn. Drat. As soon as it is back up, I will of course link to it.

Meanwhile, here's a link to every story Dealbreaker has ever written about Solengo Capital.


There's an old movie line (from Detective Story, if you must know) in which the villain was told by Kirk Douglas he had a lawyer instead of a conscience. Solengo Capital has a lawyer instead of brains.

UPDATE: More on Solengo and a download link. To make the whole thing even more grotesque, Solengo hunted down Greg Newton's Naked Shorts blog and blackjacked him into removing a link to the brochure. Here's a Reuters story. Unbelievable -- as in unbelievably dumb.

P.S. Here is the infamous brochure.


© 2007 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, gary-weiss.com.

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'Sharing Concern' About Business Journalism


Winokur (second from left) and other Enron board members in 2002

I was intrigued to see the following in the memo announcing a new editor for CJR Daily's "Audit" business journalism watchdog site, which appeared on the Romenesko media blog:

The Audit is made possible by Herbert Winokur, Jr., a business executive turned investment manager, and by other individuals who share a concern about the quality of business reporting.
Can't understand why CJR is being so modest, and didn't provide more details about the backers of this project. Winokur is a pretty well-known guy, at least to those of us who followed Enron. He was a longtime member of Enron's board of directors during all the stuff that made Enron a household word, and was chairman of its finance committee.

I can understand Winokur's concern about the "quality" (i.e., favorableness or lack thereof) of business reporting, considering how much of a shellacking he and the other Enron board members received.

Many articles covering the scandal, such as this one from early 2002 in the New York Times, pointed to the role of Winokur's finance committee in reviewing transactions by Enron's off balance sheet partnerships.

He and other members of the Enron board were hauled before the House Commerce Committee, and Winokur did not exactly cover itself in glory, according to Frank Rich of the Times. Pointing to an internal report on the Enron disaster, Rich said:

One author is Herbert Winokur Jr., an Enron outside director who was in the fortunate position of having a big say in a report passing judgment on his own questionable corporate citizenship. Appearing before the House Commerce Committee with condescension in his voice and a flag pin in his lapel, he contradicted himself so much under questioning that one member, Bart Stupak of Michigan, told me he had ''impeached his own testimony.''
Gee, I'd be concerned about the "quality" of business reporting after reading stuff like this.

Or reading about how the board itself was slammed for its role in Enron's collapse. Or reading another Times article after Winokur resigned from the Harvard board in April 2002:

"Many shareholder advocates and others have been calling for Enron directors to be removed from the boards of other insitutions." The Times pointed out that "a special committee of the board concluded that [the Enron board] failed to provide adequate oversight."

Wouldn't that make you up in arms about the "quality" of business reporting? Makes me wonder about the identity of the other "individuals" who share Winokur's "concern" about business reporting.

Oh, that new "Audit" editor is Dean Starkman, formerly of the Wall Street Journal. I wish him well. He does not have big shoes to fill, as I and other critics of "Audit" have pointed out.

The former editor raised eyebrows for, among other things, his peculiar affection for websites that push wacko conspiracy theories and personally attack journalists to advance the interests of latter-day Enrons.

I always thought that was a bit odd -- until I read that memo on the Romenesko site.

UPDATE: Loren Steffy comments: "Actually, I think Winokur may be on to something. I can think of a few other blogs he might want to finance. How about one called 'Minding the Store'?"

© 2007 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, gary-weiss.com

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Thursday, March 29, 2007

A Road Map for Train Wreck Fans

Journalists and others examining the ongoing Overstock.com train wreck are urged to hasten to this comprehensive post today in the O-Smear blog. It details the pretexting and cyberstalking of Overstock.com's resident stalker and paid basher, Judd Bagley.

Compelling reading. How often does one get a chance to watch a public company melt down? Enron-watchers never had it so lucky.

© 2007 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, gary-weiss.com

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Hedge Funds Now Bigger Than China



New data shows that hedge fund assets increased 30% to $2 trillion, making the hedge fund industry bigger than China, the former Soviet republics and Japan combined.

Hedge funds worldwide returned an average of 13 percent last year, according to Chicago-based Hedge Fund Research, which estimates global assets in the industry at $1.4 trillion. That return lagged behind returns including dividends of 16 percent for the Standard & Poor's 500 Index and 21 percent for the MSCI World Index.

It's the same over the long term. Imagine how well they would have done if they actually beat the market. Then they would be larger than the entire solar system south of Neptune.

The Bloomberg article on this goes on to say "The survey said `an increasing proportion' of hedge fund assets comes from institutional investors, and half of the industry's assets are invested through funds of hedge funds with portfolios that include a mix of other hedge funds."

I never trust articles that begin "survey said," as it reminds of the old Richard Dawson line from Family Feud. But I do believe that survey and I do believe that institutional investors, who are paid handsomely to underperform the market, will continue to drive hedge funds ever larger, until they conquer the universe.

© 2007 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, gary-weiss.com.

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Catfight at Alma Mater


This is inside baseball, I know, but I'm watching with some interest the ongoing catfight at my alma mater, Business Week, that has been reported in Gawker and now picked up by Talking Biz News.

The first comment in Talking Biz News is priceless. Sounds like a high-masthead person to me, but that's just a guess.

© 2007 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, gary-weiss.com.

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Tuesday, March 27, 2007

A 'Paid Basher' Exposed by Overstock.com Stalker


Overstock.com's stalker-in-residence, "director of social media" Judd Bagley, is hot on the trail of what he and his boss Patrick Byrne call "paid bashers" -- the term they employ to deride critics of Overstock.com.

Stalking, intimidating and demonizing critics of his boss is Bagley's job, in addition to running Overstock.com's antisocialmedia.net smear site. Indeed, one of the enduring hypocrisies of the ongoing Overstock train wreck is that Bagley is an open, proud and lusty "paid basher," and the evidence that anyone is "paid" to criticize his company's unethical and possibly illegal conduct is nonexistent.

Posting yesterday on a stock message board, Bagley went on a lengthy riff "outing" a particular Overstock critic, and concludes as follows:

"If [this screen name] isn't a paid bashing scammer, then there must be no such thing."

Fair enough.

Apparently Bagley was not aware that this individual's identity is well known, and is in fact disclosed (under a similar screen name) on the Internet. I'm sure it will take Bagley more than "10,000 moments" to find that out, as he did in falsely saying that Bloomberg's Susan Antilla is wed to a hedge fund magnate.

Bagley's "paid basing scammer" is anything but, and indeed is a well known and respected Internet investigator who is close to officials of the Securities and Exchange Commission and has received a lot of publicity. This would have been obvious to any ten-year-old child with Internet access, but it eludes Bagley. I'll keep mum on the identity of this person, just to see how long it takes for Bagley to recruit a ten-year-old child.

This would be funny, if it weren't for the fact that a public company is behaving this way, flaunting the most basic corporate ethics. You really have to wonder whether Overstock's directors are deaf and dumb. It is indisputable that they are blind.

UPDATE: Bagley had not found that ten year old child by the following morning. I'll keep you posted as developments warrant. Meanwhile, Seth Jayson observed at the Motley Fool (subscription required):

I wonder if [Bagley is] smart enough to know that the entire "paid basher" myth was hatched by the dirtbags who were pumping BIFS [Technologies Corp.] back in the day.

Of course, there were no paid bashers, just a bunch of greedy scammers pumped and dumped.

But let's not let facts get in the way of a great paranoid fantasy.

OSTK shareholders: You pay this man to think about this stuff.

© 2007 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, gary-weiss.com.

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Monday, March 26, 2007

Bring Out the Brickbats, Folks

My latest Forbes.com column is on Wal-Mart in India, the one subject that in the past has yielded uniformly negative feedback.

Really. Not one favorable comment.

Go ahead... fire away!

© 2007 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, gary-weiss.com.

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Sunday, March 25, 2007

Eichenwald Thrashed -- Again

Kurt Eichenwald, who has been a pinata lately for his infamous $2000 check to Justin Berry, has been given yet another public thrashing -- this time by New York Times public editor Byron Calame, a highly respected former Wall Street Journal editor.

His column is here.

It's a devastating column. His "private citizen" explanation for the check is called "baloney." Calame says that Eichenwald "misled" his editors and concludes by saying that "even if editors ask a reporter the right questions, they must be able to trust the answers they get." That's pretty close to calling Eichenwald a liar.

I can't quarrel with the findings of the column though I'm sure Eichenwald will, and I will post his response when I see it. One question occurred to me as I read it: Would Calame have been quite this harsh if Eichenwald was still working at the Times?

© 2007 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, gary-weiss.com.

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The Overstock Meltdown Continues

A reader (citing a discovery by the great Sam Antar) brings to my attention this fascinating item yesterday from the blog of a person describing herself as a recently fired Overstock.com employee.

The post says that along with this employee, who is unnamed, the vice president of of Internal Marketing, Director of Site Design, was also canned on Friday. Interesting to see mid-level employees shown to the door while its inept CEO, Patrick Byrne, remains untouched by a lapdog board of directors.

I guess that's the difference between being born with a silver spoon in your mouth and having to work for a living.

I'm sure these and other fired employees are delighted that they have lost their jobs at the same time that Byrne keeps on the payroll a full-time stalker and operator of a smear website.

That sort of thing does wonders for employee morale, as you can see from the comments below, which were directed at Byrne:

[A former Overstock employee] was knowledgeable, experienced, fair, and kind; which are a collection of traits very foreign to the upper echelons of the Overstock bureaucracy. You, on the other hand, are undeserving of the fulfillment of my promise because you have displayed yourself to be anything but a gentleman. Brash, disingenuous cad more aptly comes to my mind and one who’s been so deluded and brainwashed by the Iagos he surrounds himself with that he has quickly driven his own company to the ground while blaming it on naked-shorting.

As you seem to be such a raconteur, I will suggest a great story for you. It’s that of King Lear. Read it and perhaps you will learn something. As disconnected from this company as you are, the rest of us are in quite the opposite situation (perhaps something akin to rubbernecking a trainwreck).
This is, of course, a (purportedly) disgruntled former employee, and her comments (the gender becomes obvious from an intriguing previous post) have to be evaluated with that in mind.

Still, disgruntled former employees are excellent sources of information for journalists and other investigators, and their views frequently reflect employee sentiment. (The first step, of course, is to prove that this really is a disgruntled former employee, and not a red herring planted by the company.)

One can only guess at the state of morale at this company. I am sure some terrific, honest people work at Overstock. One can only speculate how it feels to work for a CEO like this one.

As I said, I am not convinced this post is genuine. But whether it is the real McCoy or an Overstock plant, this much is certain: This company, and this CEO, are melting down faster than a candle in a fireplace.

UPDATE: The employee blog was swiftly turned "private" by its authors, and is no longer available for public perusal. That argues in favor of the "real McCoy" hypothesis.

© 2007 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, March 23, 2007

The Media Fumbles on Amex

I wasn't expecting page-one coverage of the SEC's soba-noodle slap yesterday at the American Stock Exchange, which it essentially found was an utter failure at supervising its floor brokers. But I thought it was pretty startling how little attention that it received.

The New York Times totally ignored the story. Not even a news brief. (The Post's Roddy Boyd had a pretty good wrapup, by contrast.) The Wall Street Journal ran a story on page C5 (subscription only, so I won't bother to link) describing how the ex-CEO, Salvatore Sodano, was being pursued for not doing a great job at the Amex. But the central issue, that the Amex is an absolute joke, received short shrift.

Now, I must say, it is interesting that Sodano is dean of the Frank G. Zarb School of Business at Hofstra University. I didn't even know there was a Frank G. Zarb School of Business. But.... what about the Amex? Isn't it doing a lousy job? Shouldn't it be... well, maybe shut down?

Just asking. What I do know is that it's not every day that an entire stock exchange is found to be a complete failure. Isn't that news?

© 2007 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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Some Rare Positive Words on Magazines

Joe Mansueto, founder of the Morningstar analytical colossus, has some rare positive words to say about the magazine business in Folio. The article is here.

Despite online competition, he says, magazines still make good investments. This brief article describes how he pulled off a turnaround at Inc. and Fast Company.

Mansueto is a true visionary, who initiated a mutual fund data system in the early eighties just in time to latch on to the bull market. I used to deal with him occasionally years ago, in connection with Business Week's mutual fund issues. Thanks to Jeff Laderman, BW went with Morningstar instead of Lipper Analytics. Good choice, obviously.

© 2007 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, March 22, 2007

SEC to Amex: Don't Drop Dead

The Securities and Exchange Commission today settled some mighty serious charges today with the American Stock Exchange, which it says has done exactly zilch to police its trading floor -- the subject of an article that I had in Business Week eight years ago.

The SEC statement announcing the settlement is here. Ex-CEO Salvatore Sodano is fighting charges against him, apparently.

Here's what's striking about this case: the SEC found essentially the same nonfeasance as it did in 2000, when it settled almost identical charges with the Amex.

So why just a censure? Why not just admit the Amex can't or won't supervise the Amex trading floor and shut the damn thing down? Hell, the Amex still won't admit it did a thing wrong: "Without admitting or denying the Commission's findings, the Amex consented to the issuance of the Commission's order."

Enough already. Shut it down.

© 2007 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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'The Audit' Gets it Right on Chiquita

In the past I've been critical of CJR Daily's 'Audit' section for some strangely reasoned articles, made all the more unpalatable by the sometimes bizarre statements of its then-editor Mark Mitchell.

Mitchell has gone, and the Audit seems to have finally caught up with reality, judging by a well-aimed barb at CNNMoney today. Seems a commentator called a "raw deal" the prosecution of Chiquita for paying off a terrorist organization in Colombia.

Another critic of the Audit, Brad DeLong, once observed that the Audit has limited credibility and is "lacking quality control." The former is still true, but today's item is a step in the right direction.

The Audit would also give its credibility a boost if it cut out links to Judd Bagley's BusinessJive and "FaulkingTruth" websites, both of which sling mud at journalists while pushing the naked-shorting conspiracy theories that fascinated Mitchell.

It was always more than a little strange that a journalism review would link to sites that personally attack journalists on behalf of Bagley's boss Patrick Byrne, CEO of Overstock.com. But then again, the Audit was a strange website. Maybe that's changing.

© 2007 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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An Investor 'Village' Goes Into Hiding


In past posts I've noted oddities at the Investor Village stock message board -- censoring critics of Overstock.com while allowing cyberstalking to flourish (see here, here and here) , allowing stock hype to run rampant in its Novastar message board, ridiculing stock skeptics as "bashers" -- and generally allowing its boards to be turned into stock-pumping mechanisms where critical questioning can result in being kicked off.

The dreary picture has gotten even murkier. An alert reader points out that IV has suddenly gone into hiding, transferring the registration of its website to an anonymous domain registrant.

This seems like a strange tactic to employ for a supposedly neutral purveyor of investment information. It's usually something you find among phony blogs and worse, like Overstock.com's antisocialmedia.net smear site and the nutty "thesanitycheck.com" conspiracy site.

Antisocialmedia used an anonymous domain registration, of course, to hide its Overstock connection, now moot since it was outed. Thesanitycheck cowers behind an anonymous registration to conceal that it is run by a nonentity -- some bozo named Phil Saunders who used to peddle used medical equipment. If investors knew that some guy with no financial background was running the site, they might not have rushed to buy his fave stock pick--the disastrous Novastar subprime lender.

In other words, you don't cringe behind an anonymous domain registration unless you have a reason to cringe. Investor Village is run openly by a couple of guys with a murky background who don't like "bashers." I'll admit, they have a lot to be ashamed of, but is it that bad? Why are they hiding the ownership of their website?

Copyright © 2007 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, March 21, 2007

My Market Forecast


My official market forecast is that the Dow will close at 12447.52 on March 21.

I believe this may have to do with the first day of Spring, or maybe the Fed, or perhaps traders reacting to traders reacting to traders reacting to the Fed.

That's all one really knows, except that it is awfully nice! Anyone who says otherwise is full of beans.

© 2007 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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Monday, March 19, 2007

I Love This Market!


Here's a bit of sophisticated market commentary:

I love this market!

That's the difference between writing a blog and covering the markets for a publication like Business Week.

If I was still at BW, I'd have to enlarge that comment to 1,000 words and add a bunch of statistics.

I repeat: I love this market!

Carry on.

© 2007 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.

Ordinary Perople Versus Corporate Bullies


The Overstock.com slo-mo train wreck continued last night, with its resident stalker, the so-called "director of social media" Judd Bagley, reiterating a threat he had made a week ago to contact the employers of people criticizing this disgusting company.

It's interesting how Bagley and his boss Patrick Byrne have focused their venom on ordinary Internet users, as well as gutsy reporters who have taken them on (such as Susan Antilla of Bloomberg and Joe Nocera of the New York Times). This is a new and disturbing element of Overstock's "campaign of menace," as it was so accurately described by Nocera.

While it is unclear whether Bagley can actually do any damage by his tactics -- replaying his smear campaign against a Florida reporter when he was a flack in the Jeb Bush administration -- there's no doubt that this slimeball would love to destroy his boss's critics.

After all, that is what Bagley is paid to do. His cover story, a joke called "Omuse, was revealed last week to have been outsourced, and another fairy tale, that Bagley was put in charge of a "cars" project, disintegrated today with a routine announcement referring to a "vice president for cars." It ain't Bagley.

It's clear that he and Byrne are hell-bent on diverting attention from Overstock's miserable financial condition, as in Byrne's moronic "hold up the sign" stunt on CNBC last March (right). Overstock's finances have become so awful that it has begun liquidating assets. See Jeff Matthews's analysis of Byrne's sale of a once-hyped travel subsidiary, and a Seth Jayson article in Motley Fool describing the O-Meltdown.

The number one target on Overstock's enemies list is a software engineer who runs the excellent O-Smear blog, who was instrumental in revealing that the antisocialmedia.net smear site was run by Overstock.

O-Smear recently deconstructed Bagley's smear campaign against Antilla, commenced after she wrote a column excoriating Bagley and Byrne. Bagley, typically, centered an entire item around a fiction -- Antilla's "marriage to a hedge fund magnate," constructing a brand new conspiracy theory. A few minutes of checking records on the Internet-- or, God forbid, a phone call to Antilla -- could have ascertained that they are divorced.

Bagley and Byrne are also terrified of Sam E. Antar, former CFO of Crazy Eddie's, who devotes his life to exposing the Overstocks of this world. They worked hard to get him kicked off the Investor Village Overstock message board, where he was removed for "clogging" the board with smart questions.

Sam's analysis of Overstock's accounting, through sharp questions such as this, provides a road map for regulators in the months ahead.

David Carr talked about "citizen journalists" in the New York Times today. But these aren't journalists. They are just citizens.

What I don't understand is why regulators and law enforcement (who are fully aware of Overstock's actions, believe me), haven't stepped in by now, particularly since Overstock's strange share price behavior is sucking in still more "dumb money."

All regulators need to do is follow the trail of bread crumbs -- left for them by citizen sleuths who have already done much of the spadework.

Meanwhile I wonder what's next on Bagley's agenda. Drowning puppies?

UPDATE: Nope, looks like the next item on his agenda was covering his tracks. All of Bagley's posts on the Yahoo Overstock message board, where he is "antsaresocialinsects," abruptly vanished on March 20. The puppies will come later.

© 2007 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, March 17, 2007

Immense Surprise in Moscow

I was shocked, shocked to read that there has been a delay in the retrial of the accused killers of Paul Klebnikov. Seems that one of the two defendants, who had been freed by the court, did not show up for trial.

Here's a story from Novosti.

The farce called "Russian justice" continues. If the need for a U.S. investigation was not obvious before, it certainly is now.

© 2007 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, March 14, 2007

It is Officially a Thin Lizzy Market


I just notice that according to the wire services, what we have now is a Thin Lizzy Market. I.e., it is "fighting its way back."

"I'm tough, rough, ready and able
To pick myself up from under this table
Don't stick no sign on me, I got no label
I'm a little sick, unsure, unsound and unstable

But I'm fighting my way back..."


I'd prefer to be in a Sideways market.

© 2007 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, March 13, 2007

Judd Bagley to Star in 'What's My Real Line?'


Some of us of a certain age may remember a classic game show called "What's My Line?", in which celebrity panelists tried to guess the occupation of mysterious people.

Something tells me that Judd Bagley, Overstock.com's resident stalker, will be playing a game of "What's My Real Line?" pretty soon -- and he won't be up for any prizes.

The reason is that his ridiculous cover story, that he is operating a Wikipedia wanna-be called "Omuse," has just collapsed. The Utah firm that actually spent a month (!) toiling over this lame little wiki has just surfaced and bragged about all the great work that it did.

I'm actually surprised it was farmed out, and not just slapped together by a low-level techie when not fixing computers. I mean, look at it. Omuse has all the originality and finesse of a high school computer project. It's a joke.

You'd think they'd have taken more care in dreaming up a cover story for this guy. It could hardly be more obvious that Bagley was hired to create and run Overstock's antisocialmedia.net corporate smear site, and to engage in ancillary duties like vandalizing Wikipedia under multiple sockpuppets and intimidating critics of the company.

I don't think that engaging in dirty tricks against the real Wikipedia, and pursuing the vendettas of Patrick Byrne, count as a proper use of shareholder funds by any fair standard. Some people may object to that, such as non-cultist investors, regulators and class action lawyers.

That's where "What My Real Line?" comes in. It would be entertaining to be a fly on the wall when the lawyers play that game with Bagley.

Almost as much fun as watching this object lesson in corporate sleaze self-destruct.

© 2007 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, March 10, 2007

The Times Chronicles the Patrick Byrne Meltdown


The meltdown begins, March 2006

The New York Times today has a fascinating column by Joe Nocera on the meltdown of Overstock.com's Patrick Byrne, his anti-analyst-and-media jihad and "naked shorting" demagoguery.

It is a seminal piece that will be cited by market scholars for years to come, long after Overstock and Byrne are just vile memories.

Just by coincidence, Nocera's column comes almost exactly one year after Byrne's meltdown officially began, in a famously bizarre appearance on CNBC. Byrne's downhill slide into the muck had already commenced, but as he held up that sign it was obvious to pretty much everybody that he was losing it.

The latter stages of his deterioration are just as grotesquely entertaining to watch. Nocera provides stunning, new details of Byrne's infamous meeting with Utah legislators over his pet "fails to deliver" legislation:
As it became clear that Mr. Byrne had no support, and the law was going to be repealed, he first offered to finance the state’s defense himself. No, he was told, the state had to bear the cost for its own litigation. Then, he became increasingly agitated, accusing [Utah state senate majority leader Curtis] Bramble of betraying him. As his tone became more belligerent, and he began cursing, most of the others in the room, their jaws agape, simply listened to him rant. Several of them later told me they had never heard anything like it.
Apparently (and I have to admit, I find this hard to believe) even his wads of cash in political donations won't buy his way out of this mess:
Though no one will say so publicly, the word is that Utah officials now feel they were snookered by the Overstock C.E.O. And that his behavior at that meeting further damaged his credibility. And that, even though he is one of the state’s largest political donors, he is going to have a hard time ever getting the Legislature to take him seriously again.
Nocera quotes Bramble as saying "he now believed that Overstock’s motives were 'highly suspect.'" This, mind you, from the sponsor of the original bill. "He added: 'There are those who believe Overstock has been using the Legislature as a distraction against its own problems. It raises serious questions.'"

No s--t, Sherlock.

Now that Byrne has insulted and embarrassed two branches of the Utah state government, you have to wonder whether the state's lapdog Capitol Hill delegation will continue to offer unblinking support for Byrne's fantasies.

Nocera says that Byrne "is becoming harder and harder to take seriously. . . Which is not to say that I don’t still think he’s dangerous."

That he is, and that is why I and many others have been watching him very carefully.

Byrne is clearly terrified by this scrutiny, and he hauled out his shopworn intimindation tactics when Nocera came calling. His surrogate Phil Saunders a/k/a "Bob O'Brien" posted Nocera's emailed questions on his nutty "sanitycheck.com" website, and Byrne pledged to do likewise.

But the brass-knuckle tactics, used effectively against Business Week a year ago, didn't work -- just as they didn't when Susan Antilla of Bloomberg took a star ship to Planet Byrne.

One final note: Nocera wrote another seminal column on the early stages of Byrne's slide into the abyss, "Overstock's Campaign of Menace," in February 2006.

Nocera is a finalist for the Pulitzer Prize in Commentary, and I understand that the oft-quoted "menace" column was one of the prize submissions.

Byrne may be an unmitigated disaster for Overstock shareholders, but for journalists and regulators he is the gift that keeps on giving.

UPDATE: Overstock's resident stalker, "director of social media" Judd Bagley, responded in a message board post accusing Nocera of being corrupt:

Joe Nocera's skewed take on this issue can no longer be attributed to mere differences in human perceptions. He has sold his soul. And I guarantee you he hates himself for it. Certainly, whatever he's getting in return helps to numb the pain, but that stuff never lasts.
Similar sentiments ("Bought, stupid? I'll go with bought.") came from Mary Helburn, director of the National Coalition Against Naked Shortselling. I always wondered why some people in the media would quote this ditz as an "authority" on anything after she said that Enron was a victim of "stock counterfeiting." I'm even more amazed now.

Bagley later went into a meltdown of his own, with a message board post threatening to contact the employers of small-fry investors who criticize Overstock.

As Nocera pointed out in his column, these kinds of ravings are losing much of their "oh my goodness" factor. But the fact that a public company would employ goons like Bagley and tactics like this underscores the need for continued close scrutiny of Overstock.com.

© 2007 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, March 09, 2007

A Wake-Up Call for India

I've long lamented the media's tendency to gloss over India's infrastructure problems, which I touched upon in a Forbes.com column. So I was delighted by the cover story in the current issue of Business Week, "The Trouble With India."

It's a thorough, detailed examination of the problems facing overseas businessmen in India. The article concludes, "Unless the nation shakes off its legacy of bureaucracy, politics, and corruption, its ability to build adequate infrastructure will remain in doubt. So will its economic destiny."

This article is going to be unpopular among some India boosters, but I'm sure most informed observers of this country will be nodding in agreement.

© 2007 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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Another Sideways Market

Another sideways day in the market, thereby giving me an excuse to trot out another variation on the use of the word "sideways" in popular culture.

This one was in the New York Times today, in an article on the late Jerry Orbach:

“As Jerry would say, onwards and sideways.”

(By the way, I really wish they'd name that street corner after the man.)

© 2007 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, March 08, 2007

Department of 'No Good Deed Goes Unpunished'

I'm a great admirer of the work of Kurt Eichenwald, so I'm devastated by the way his name is being dragged through the mud over his $2000 payment to a kid he wrote about.

Eichenwald acknowledges he'd "gone off the deep end" in writing out the check, and that's true. It was an incredibly dumb thing to do. (And I do mean dumb, if his check funded the kid's porn site as is been suggested.)

I originally ended this item by saying "I hope the media coverage of this goof doesn't reach Bartiromo-like proportions." I still do, but that last link raises a serious question that needs to be resolved, if there is any truth to it.

UPDATE: Kurt Eichenwald makes very clear there is no truth to much of what has been written about him, and he's justifiably teed off. See this letter on the Romenesko website.

© 2007 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, March 07, 2007

Looking Forward to a Sucky Year

I'm curious to see how the media is going to cover the comment today by Donald J. Tomnitz, CEO of the homebuilder D.R. Horton, that "'07 is going to suck, all 12 months of the calendar year."

He said this at an investor conference in New York, according to the Associated Press.

Perhaps Tomnitz is refreshingly frank like this all the time, or perhaps he... well, maybe he....



© 2007 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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Stocks and Sideways

The Associated Press just reported that "stocks move sideways in midday trading." I won't provide a link because it will be dead soon. (The link, that is, not the market.)

I wonder if the AP writer was thinking, perhaps subconsciously, of a line from the movie Sideways. The market today is "quaffable, but far from transcendent."

That reminds me of another way to celebrate the rally/cure the market blues:



UPDATE FOR DEALBREAKER READERS: Sorry folks, that's all I said in this item. Click here for more blog items. Click here if you want to buy my book. Click here if you want to buy some great chocoloate.

© 2007 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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More NovaStar Fallout

This post by Peter Cohan in bloggingstocks.com gives several reasons why NovaStar Financial may wind up as a penny stock. Pay particular attention to this one:

  • Weak disclosure. While I am not an expert on mortgage accounting or disclosure requirements, one analyst who is said that NFI's financial disclosure was the "most difficult . . . that we have examined." For example, its 10K reveals that the value of NFI's mortgage loan portfolio is based on management's assumptions about current economic conditions, the makeup of the portfolio based on credit grade, loan-to-value, delinquency status, historical credit losses, whether NFI purchased mortgage insurance, etc. -- which are not made explicit to investors. Thus there is no way of knowing whether management used assumptions that artificially inflate its financial condition. One thing's for sure -- while NFI's top line -- interest income -- rose 54% to $495 million, its cash balance fell 43% in 2006. This is the sort of red flag that attracted James Chanos to Enron, who made a fortune shorting its stock.

NFI's weak disclosure leaves important questions unanswered. . .


... which he goes on to list. But to me, what he is describing is an excellent example why Sarbanes-Oxley is not the panacea for accounting mischief as it was billed in 2002. It did nothing to address the central problem, which is the tendency of some corporate managers to obfuscate, conceal and lie.

Another issue raised in Cohan's piece is the value of short-sellers to counteract management overenthusiasm.

NovaStar was the "beneficiary" (quote unquote) of a campaign by the anti-naked-shorting crowd, which set up an "independent" stock-pump website, created by naked-shorting fruitcake Phil Saunders, that vilified critics of this company.

The endless pumping on the site and in message boards turned NovaStar into a "cult stock" that sucked in untold numbers of small investors. Some were persuaded to put a substantial portion of their retirement savings in NovaStar, such as this investor cited by Cohan.

Every year sees new and better ways of ripping off investors, and the newest are what we saw at NovaStar -- pumper websites ostensibly unaffiliated with the stock issuer. NovaStar demonstrated that these can be just as damaging as traditional boiler-room pumping. Time for regulators to hone in on this problem and punish the people responsible.

© 2007 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, March 06, 2007

My Sure-Fire Ways to Celebrate the Market Rally (if it doesn't fade)


One possible method of celebrating

I have several suggestions for people interested in celebrating today's rally (if it doesn't fade):

1. Dive into a box of See's chocolates. Approximately three pieces left of the two-pound box I mentioned last week. (See conflict of interest disclaimer.)


2. Have a good laugh. Read Patrick Byrne's latest lie. (New link!) Or read Overstock.com resident stalker Judd Bagley's latest excuse for his "Omuse" make-work project.

3. Say to yourself, "Happy me. I almost sold my New Century Financial shares yesterday."

4. If you're a NovaStar Financial shareholder, say to yourself, "Happy me!" Say it again. "Happy me!" Say it again.

5. The NovaStar shareholder quoted in #4 is on heroin.


Yet another

Earlier post: My Sure-Fire Cures For the Market Blues.

© 2007 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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My (Almost) Mob Jury Experience

I just read in Newsday about the mixed jury verdict last week in the trial of Christopher Colombo and other reputed mobsters.

I have a personal interest in that case, as I was in the federal court jury pool when the Colombo jury was empaneled.

Didn't even get to be questioned. I mentioned "Born to Steal" in the jury questionnaire (even though there was no question "Have you ever written a book about the Mob?") and I was excused.

Drat. Would have been an interesting, if time-consuming, experience.

© 2007 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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Monday, March 05, 2007

My Sure-Fire Cures For the Market Blues


One possible remedy

I have several suggestions for people interested in curing the market blues:

1. Dive into a box of See's chocolates. Approximately a half-pound left of the two-pound box I mentioned last week. (See conflict of interest disclaimer.)


2. Have a good laugh. Read Patrick Byrne's latest lie. (Here's a response from a soon-to-be-former member of the Investor Village stock-pump website.)

Or read Overstock.com resident stalker Judd Bagley's paranoid ravings on Wikipedia yesterday afternoon, before getting himself kicked off.

3. Think to yourself, "It could be worse. I could be a New Century Financial shareholder."

4. If you're a New Century Financial shareholder, think to yourself, "It could be worse. I could be a NovaStar shareholder."

5. If you're a NovaStar shareholder, try heroin.


Yet another

© 2007 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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When Magazines Forecast the Market

One of the things that I absolutely hated -- hated! -- about my job at BusinessWeek was the rare occasions when I was called upon to make a forecast on the stock market. Even though I had two excellent editors, both doctors of economics, to guide my prose, I simply felt that I was not qualified to make such a judgment. I felt that forecasting the market was as much luck as data analysis.

Another thing that weighed upon me is what has come to be known as the "cover story indicator," which is that a cover story in a large magazine, including Business Week, is a contrary indicator. The famous "Death of Equities" cover of the late 1970s is frequently an example, as was the gloomy "How Bad" cover story right after the 1987 crash (which turned out to be the best time in recent history to buy stocks).

On the other hand, the "cover story indicator" ignores the fact that BW's generally bullish coverage throughout the 1990s proved to be right on the money.

So I had mixed feelings over the fact that both Business Week and Barron's had essentially bullish cover stories on the market, with Barron's more bullish than BW.

BW, which went to press before the March 2 selloff, said that despite some negative indicators, a"stronger case can be made that Feb. 27 will turn out to be more of a tremor than an earthquake."

Barron's, which was published late Friday night, said "the global economy still looks healthy, equity-market valuations are reasonable in most major markets and the demand for stocks from corporations and private-equity firms remains robust."*

It's easier to criticize such coverage on various grounds, but market coverage remains a crapshoot. No matter what data is used to support a market story, there is always a 50% chance that it will prove to be right and a 50% chance that it will be wrong.

The only solution I can come up with for this problem is that someone other than myself write these stories.

*The Barron's story suggested purchase of Berkshire Hathaway. I cannot comment on that recommendation because of the conflicts of interest I outlined here.

© 2007 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, March 02, 2007

Closing the NovaStar Barn Door


NFI-info.net in happier days

There's an old expression, "closing the barn door after the cows have left." That same principle was applied today to the "nfi-info.net" website, which was created by naked-shorting fruitcake Phil Saunders (a/k/a "Bob O'Brien) to pump the doggie subprime lender NovaStar Financial.

NovaStar's shares have collapsed over the past couple of weeks, leaving egg over Saunders's face as the No. 1 pumper of NovaStar shares. NFI-Info.net hacked away at the crackpot theory that NovaStar was a victim of "stock counterfeiting" or "naked short-selling," and not its own doggy fundamentals. It was festooned with such nonsense, as was the NovaStar Investor Village message board.

Saunders was pumping away with drivel like this right up to the moment NovaStar fell off a cliff. The one I just linked, posted a few days before the disaster, was typical: "Is there any reason in the fundamentals to doubt the company paying $5.60 this year? Nope. Next year? Nope. Has there been any reason to doubt their ability for the last 4 years? Nope. History has shown that all the big drops were NOT based in any fundamental problem. Not once. It has always been based upon FUD distributed via media campaigns, class action suits, analysts, and message boards. Always. As in every single time to date."

So now, applying the "belated closing of barn door" principle, Saunders's NFI-Info.net has been shut after the naive investors have been fleeced. Today if you clicked on the NFI-info.net link, you got a black screen with "nfi-info.net" in small type.

As usual when caught with his pants down, Saunders has resorted to covering his tracks and blaming the media.

Before it was shut I saved NFI-Info.net's pumping for posterity, and I am sure that regulators and class-action lawyers have as well.

People interested in the same MAD Magazine approach to the stock market (albeit meant to be taken seriously) should log on to Saunders's other website, ironically called "thesanitycheck.com." It's been a bit lame recently, and its audience has dribbled off. I wonder when that one goes black?

© 2007 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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My Warren Buffett Conflicts of Interest

Berkshire Hathaway has just released its annual report, so the journalism community is examining, as it does on on such occasions, the role of Carol Loomis of Fortune in editing said annual report and then writing about it.

Before I chime in on this subject, I need to first disclose my Warren Buffet conflicts of interest:

1. I am a customer of GEICO, and have been for twenty-five years. I have placed two or three small claims, all of which have been paid.


2. I am a consumer of See's Candy, and have been for four days, since I received a box of See's chocolates from a friend on the west coast. It is a two-pound box. A pound remains.

It is very good chocolate.

3. I met Warren Buffett once.

4. He once said something nice about an article I wrote.

5. I really like those chocolates.

Having disclosed my Warren Buffett conflicts of interest, I hereby chime in:

Yes, it is a conflict of interest for Carol Loomis to write about someone for whom she edits an annual report, even though disclosed. However, there are far more serious issues facing financial journalism than disclosed conflicts of issues.

P.S. It is very good chocolate.

© 2007 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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