Thursday, April 30, 2009

Credit Card Legislation May Screw Small Business

The Republican Party is always yammering about how they protect small business, right up there with mom, cherry pie, and the right to bear semi-automatic arms. In the debate on the credit card bill of rights, Rep. Pete Sessions, R-Texas, said the legislation could prompt lenders to restrict credit. "And small businesses that count on this credit," he said.

Well, the legislation passed the House. So let's see these protectors of small business fight for inclusion of small business in the credit card bill of rights legislation as it winds its way through the Senate. Business Week Online says the House version specifically exempts businesses with under 500 employees.

BW notes:
If the House version passed today becomes law, credit card companies will have a loophole to subject small business customers to the tactics that ordinary consumers will be protected from. Of course, small business owners could just opt to use personal cards in their own name instead of small business credit cards, since they’re essentially the same.
So let's see Republicans rally to the defense of small business, which they profess to love. They will, won't they? Or are they (and the Democrats who went along with that anti-small-business provision) too much in the pocket of the big banks?

© 2009 Gary Weiss. All rights reserved.

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Nepotism in the Geithner 'Beautiful People' Selection?


The beautiful Mr. Geithner

Joe Weisenthal has an amusing item today at Businessinsider suggesting that nepotism may be the reason for Tim Geithner (gulp) appearing on People magazine's list of 100 most beautiful people.

Geithner's brother David Geithner, is a People executive, having been at Time Warner (TWX) since 1992. This 1992 wedding announcement confirms they have the same father. And they look similar!
I'll admit that it looks suspicious. But my hunch is that it is a coincidence, given the church-state separation at Time Warner.

© 2009 Gary Weiss. All rights reserved.

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Overstock.com Stalking Victim Exposes Creepy Hedge Fund

The press has been agog recently about Paradigm Capital, a fund-of-hedge-funds run by members of Joe Biden's family, and its apparent connection with a hedge fund shut by the SEC called Ponta Negra. CJR's Audit column has the full details on this remarkable scoop by a finance blogger named John Hempton.

Among other things, Hempton was threatened by lawyers for Ponta Negra, forcing him to withdraw a post, as he detailed in a post yesterday.

So bravo, John Hempton! Right?

Wrong, according to Overstock.com's wacky CEO Patrick Byrne and his hireling, Judd Bagley.

Hempton is one of the lengthy list of "miscreants" and "crooks" and "scaramouches" and other targets of antiquarian epithets employed by Byrne.

By the way, for a long time I've been wondering where Byrne derives his strange use of insults. I searched through DSM IV until I found the source--Gomez in the Addams Family!

Hempton's nom de baloney is the "plunderer from down under," which he drew for participating in a conspiracy existing only in Bagley's mind. The man has never even written about Overstock.

The targeting of Hempton is one of the reasons I describe Overstock as a kind of petri dish for corporate crime. It's tentacles can be found well beyond the usual orbit of a third rate Internet retailer, in this case in the Byrne-sponsored blog, Bagley's Deep Capture, designed to silence the Hemptons of this world.

Ironically (but typical in Byrne's fantasies) Hempton was lumped in with other imaginary "tools of hedge funds." One reason it's ironic, aside from being false, is that Byrne himself runs a hedge fund, which controls much of Overstock's shares. But Byrne knows hedge funds are unpopular, so his critics are "tools of hedge funds."

John Hempton shrugged off Bagley's attacks, and the result can now be seen. Congratulations to him for a job well done.

Hempton is continuing his great work and, as the Audit points out, it will be interesting to see how much credit he gets in the media.

© 2009 Gary Weiss. All rights reserved.

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Wednesday, April 29, 2009

Geithner Gets it Right on Credit Cards

Since my Portfolio story on Tim Geithner was not altogether favorable, I've been scratching around for something good to say about him. At last I've found it: Geithner today endorsed legislation in the House and Senate that would curtail unfair rate increases and fees.

When I described the menace of credit cards in a Parade Magazine article last August, the possibility of reform seemed remote. But with Obama in the White House and Democrats holding a nearly filibuster-proof majority, it seems that card reforms may finally be happening. Maybe. The banking lobby is going to fight hard to water down the card legislation. Stay tuned.



© 2009 Gary Weiss. All rights reserved.

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Tuesday, April 28, 2009

The Weird Activity in Dendreon Stock

How's this for strange: Dendreon Corp. reports positive results for its prostate cancer drug Provenge, and the stock tanks, like so:


... and now, in after-hours trading, it is up 116% to 27. This has got to be the strangest trading activity I've ever seen outside of chop-stock land, and that era is long over.

Adding comic relief to the whole situation, meanwhile, are the naked shorting conspiracy types, most recently the wacko CEO of Overstock.com, Patrick Byrne. They've put Dendreon on their lengthy list of victims of naked shorting. Forensic Tracy Coenen had a memorable fisking of a recent Byrne blog post the other day.

© 2009 Gary Weiss. All rights reserved.

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Back to the Old Venue

Well, that was fast.

I must admit that the demise of Condé Nast Portfolio, while not totally unexpected, came as a complete surprise to those of us in the trenches. I had the rather interesting distinction of writing the very last cover story, The Re-Education of Tim Geithner.

Not sure I have much to add to the gobs of stuff that's been written about the end of Portfolio. Hey, news organizations die--that's the way it has been for the past half century, a vast killing field of dead newspapers, magazines and news services. The last time a news organization folded under me was a couple of recessions ago, back in September 1983, when a Washington-based news service and syndicate called Network News went out of business.

I see my Portfolio colleagues going through much the same stages of grief as we experienced twenty-six years ago: rage, denial, blah blah blah. Just about everybody wound up fine (except the owners, who, coincidentally, both succumbed to cancer in a few years).

The end of Portfolio means the end of Portfolio.com, and thus (sniff) the end of my extremely short lived blog The Weiss File. So back I come, at least for the time being.

UPDATE: I forgot to mention that my email address at Condé Nast is kaput. If you send an email to me there it won't bounce back, but I won't get it. As previously, it is garyweiss dot email at gmail dot com.

© 2009 Gary Weiss. All rights reserved.

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Wednesday, April 15, 2009

A New Venue

So, it's official: I am now blogging for Portfolio.com. Here's a link to the new blog, The Weiss File.

My first item is here.

Gawker, ordinarily no fan of my esteemed publication, had some nice words about the move and the new Portfolio markets blogger, Ryan Avent of the Economist.

This will, of course, be in addition to my writing features on all manner of subjects for Condé Nast Portfolio. I have an article in the issue that will be on the stands later this week. (My lips are sealed on the subject.)

This blog will continue, but most likely will be just a repository for past posts. I guess I'll just have to forgo all that terrific advertising revenue, which at last count was topping $20 a month!

See you at Portfolio.

© 2009 Gary Weiss. All rights reserved.

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Friday, April 03, 2009

Censorship as a Message Board Business Model

So you'd think that stock message boards would be agog with shock and outrage at word that Overstock.com has pissed away $1.25 million on a member of its board of directors, in ostensible "consulting" fees. For a company of its miserable financial condition, that's pretty outrageous, and sure enough the boards are alive with talk--everywhere but at something called Investor Village.

What you see there, instead, are posts about the bailout, about Bernie Madoff, the horrific scourge of naked short selling, Merrill Lynch bonuses--but not a word about the payout, made to a departing director named James V. Joyce. The reason is that any critical mention of Overstock is being actively suppressed, with dissenters under threat of expulsion, their posts deleted.

In a continuation of the Stalinist phenomenon I explored in a post a few days ago, this ostensibly neutral message board has kicked off one of the few critics of the company, and deleted all of his recent posts. More details can be found here. As a result, the amount of critical commentary about the company is down to zero.

A screen capture of the bottom of one of the deleted posts, thoughtfully recorded by the person who posted it, can be found below.

"Let's have a discussion of this [the $1.25 million payola] on the merits," it says. Perish the thought! Small wonder the genius who operates IV, Ralph "Kramden" Kidd, would actively rid his message board of such heresy.

This kind of stupidity turns message boards like Investor Village, and a handful of others catering to stock touts, into a closed-loop ignorance-reinforcement mechanism, practicing what is known as "incestuous amplification." At a time when investors are being ripped off right and left, it's about as great a menace to investor wealth as any small group of amateurs could devise.

Why would a message board do something quite so cowardly? Well, duhhhh.... here's a hint, contained in an email sent to members at about the time the offending words were being blotted out:

For the several hundred of you who have already purchased your Premium Memberships, we do appreciate your willingness to step up early and support us in this way—even those of you who don't wish to use the premium site and just want to support us financially—and there are many of you. [emphasis added]
That brings me to the subject of this post--IV's sugar daddies. I mean, golly, who would want to support someone else's message board financially? Who out there have such warm hearts and open wallets? (And by the way, if you believe that "hundreds" of people are paying for something they can get for nothing, there's a bridge over the East River I'd like to sell you.)

One warm-hearted type that come to mind (pardon me while I retch) is Patrick Byrne, Overstock's CEO. He and his paid hatchet man Judd Bagley both use IV to advance Byrne's agenda. Both have the most to gain from IV's censorship spree, and both have rejoiced when previous critics--such as white collar crime-fighter Sam Antar--were kicked off.

Byrne posts on Investor Village as "Hannibal," and Bagley as "De Daumier Smith," mainly for the purpose of manipulating Overstock's share price upwards by personally attacking critics of the company like myself and Antar.

I'm not sure it would be terribly legal for corporate officials to make under-the-table "contributions" to a message board. But when have legal niceties or obsolete concepts like "ethics" ever stopped Patrick Byrne?

UPDATE: Overstock's latest proxy statement was released on Friday, showing that Joyce was paid $360,000 a year for "consulting" and $75,187 in "expenses," on top of his $1.25 million golden parachute. Typically, not a word on these amazing numbers appeared--or will appear--on Ralph Kidd's stock touting forum.

© 2009 Gary Weiss. All rights reserved.

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Thursday, April 02, 2009

The Market Celebrates Pro-Bank-Fraud Measure

The stock market is up spectacularly this afternoon. That's the good news. The bad news is that it is gaining for a terrible reason: relaxation of mark-to-market accounting rules that are supposed to keep bank financial statements honest.

Reuters reported:
U.S. stocks jumped 4 percent on Thursday after world leaders agreed to pump an additional trillion dollars into the economy to fight the financial crisis and on rule changes aimed at giving banks flexibility when dealing with toxic assets.
Already, the mark-to-market pushers are gloating. Something called the Center for Investors and Entrepreneurs at the Competitive Enterprise Institute, whatever the hell that is, just emailed a gloating press release saying as follows:

The events leading to the Dow's climbing over 8000 today can be properly called the Mark-to-Market Relief Rally. More than any expected action of the bureaucrats and politicians at the G20, the decision expected today of the Financial Accounting Standards Board (FASB) to relax strict application of mark-to-market accounting mandates, urged by members of Congress of both parties, it what's giving investors something to cheer for.
That's right. Let's hear it for cooking the books. Hip hip hooray!

Isn't it just wonderful that congressmen from both sides of the aisle are still capable of doing something stupid?

© 2009 Gary Weiss. All rights reserved.

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Today's Overstock.com Chuckle: Questionable Payment to Director/Consultant

One of my favorite pastimes is reading humor websites, and one of the best is the Yahoo portal for Overstock.com press releases. Yesterday's installment was a real gem. Overstock had two bits of really bad news. One, yet another director resignation, was slathered over with platitudes. The other wasn't announced at all.

This corporate fraud poster child, which just used accounting gimmicks to eke out $1 million in paper fourth-quarter profits (an $800,000 loss without the smoke and mirrors), pissed away that imaginary "profit" by paying real bucks to the departing director--$1.25 million in fees "in connection with the termination of the consulting arrangement" with James V. Joyce. That's in addition to whatever other fees Joyce might have gotten.

Overstock.com CEO Patrick Byrne omitted mention of the odoriferous consulting payment in a happy-talk press release announcing the resignation, in which he expounded on what a great guy Joyce is without saying a word on what he did to earn all those bucks.

The dirty details were confined to a Form 8-K that many small investors, particularly its brainless core of semi-literate message board followers, would probably not even know exists. Those investors provide the core of liquidity that Byrne needs to keep share prices up, and he knows it. He also knows that the SEC won't do anything about his constant effort to bamboozle his shareholders.

White collar fraud fighter Sam Antar has more in this blog post. Sam notes:

Overstock.com's $1,250,000 contract termination payment to former Board member James Joyce is over five times the sum of $225,000 in consulting services "authorized to be paid to Mr. Joyce for services rendered to the Company during 2007." The company has not disclosed additional amounts in consulting services paid to Mr. Joyce in 2008 or 2009 to-date, aside from the termination fee.
and

A shrewd person posting on the Yahoo message board noted:

And another thing - why does a retailer that's been in business a decade need "management" consulting services (rhetorical question, I know the answer)? What aspect of "management" was Mr. Joyce consulting on? How many FTE's were consulting under Joyce's banner that would require a contractual payout of a whopping 1.25 million? How many man hours does that payout represent?

Let's see, the avg cost of a non top-tier name "management consultant" has gotta be billed at around $150/hr or so these days.

Sooooooo, that's a payoff of over 8,000 man hours.

Ok hec, let's say Joyce was worth every penny of $500/hr - that's a payout of 2,500 man hours. Under most standard per-diem consulting contracts, the contracting company only has to provide 2-weeks termination warning or forfeit 2 weeks of billings. Let's see...80 hours of billable hours at the fantastic rate of $500/hr = $40,000.

Ok longs - speak up - is THIS the kind of shareholder equity stewardship you are expecting from Patrick Byrne?

Indeed, one of the questions raised by this absurd payout, which you can bet will not be raised by the cable TV idiots who occasionally lob softball questions at Byrne, or the somnolent analysts who snooze through his quarterly conference calls, is this:Precisely what did Joyce do to warrant such a payout from a cash-starved company? And here's another: Why did Joyce quit? The real reason, not the baloney.

© 2009 Gary Weiss. All rights reserved.

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Wednesday, April 01, 2009

A Barometer for Financial Journalism

There's been a lot of debate in financial journalism as to whether the media did a good or lousy job in covering the prelude to the current financial crisis. Well, here's one current. ongoing issue that is a good litmus test of the current coverage: mark to market.

So we have the good (Floyd Norris in the New York Times, Felix Salmon in Portfolio, ), the bad (this column in TheStreet.com) and the utterly brainless (Steve Forbes and Newt Gingrich in Forbes). Forbes has also sipped from the naked shorting kool aid, as has his mark-to-market allies at the U.S. Chamber of Commerce. Makes sense, as both involve blaming parties other than the bankers for the mess they're in.

UPDATE: Ryan Chittum at CJR Daily's Audit column says that the media is rising to the occasion and exposing the mark-to-market snake oil salesmen.

© 2009 Gary Weiss. All rights reserved.

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