Novastar and Overstock in the News

Patrick Byrne touting subprime lender Novastar, July 24, 2006

Two of my favorite corporate con jobs are in the news today.

The New York Times has a fascinating book excerpt from Reckless Endangerment, a new book by Gretchen Morgensen and Joshua Rosner. It describes the unsuccessful efforts by short-seller Marc Cohodes to get the SEC interested in the fast-falling subprime lender Novastar Financial.

Cohodes failed, and the company collapsed. Had the SEC listened to the man, investors could have saved millions of dollars.

I've written about Novastar at some length, in the context of the campaign by anti-naked-shorting conspiracy theorists. A loon by the name of Philip Ross Saunders, working under the pseudonym "Bob O'Brien," viciously attacked critics of the company and had an entire website, nfi-info.net, devoted to attacking critics. The site has been defunct for years, and Saunders is believed to be tracking UFOs from a trailer park in Costa Rica.

Among the company's most fervent supporters was Overstock.com's nutty CEO Patrick Byrne, who called the company "awesome" and was a major supporter of Saunders, at one time holding up a sign with the URL of Saunders' Novastar-boosting website in a CNBC appearance. After that happened, Byrne was banned from CNBC.

At one point Byrne flew in to New York with Saunders for a meeting with Forbes staffers. The meeting was a disaster, with apologies from the organizer - member of the Forbes family who knew Byrne from college - for wasting everybody's time, I'm told by one of the participants.

Overstock is similarly under SEC investigation, and the probe has dragged on inconclusively for years.

Also out this weekend is a blog post from white collar crime watchdog Sam Antar, describing how Overstock has lost a court fight in California to keep prosecutors from interviewing former Overstock employees without Overstock officials breathing down their necks. The company is being sued by prosecutors in seven California counties for rampant consumer fraud.

Apparently Byrne's strenuous effort to buy influence in Oakland -- by buying naming rights for a local stadium -- has not paid off. Where are corrupt local officials when you need them?

As Sam points out, the rather curt court ruling rejected a strenuous effort by Overstock to obstruct the investigation:

Overstock.com did not want the Alameda County District Attorney to directly contact any ex-employees with possible knowledge of alleged wrongdoing. The company wanted the District Attorney to use it as a go-between to contact its former employees. This way, the company could know in advance, exactly who the District Attorney was going to question. It potentially gives the company an opportunity to get to specific witnesses before the District Attorney questions them and obstruct the investigation.

It was such a transparent ploy that the judge didn't spend much effort rejecting it. So the always enjoyable Overstock saga goes on.

© 2011 Gary Weiss. All rights reserved.

Message Board Positions Itself as Megaphone For Stock Touts

Ralph "Kramden" Kidd has a new business model in the works

As I've described in the past, the Investor Village message board has distinguished itself in the cause of investor poverty. It was a prime sounding board for perpetrators of the Novastar Financial subprime lending disaster, allowing investor hype to run rampant (as in this notorious post), to the point of drawing media attention. It was a forum for cyberstalking by Overstock.com's nauseating p.r. director Judd Bagley.

A couple of years ago, this ostensibly neutral investor forum banned white collar crime fighter Sam Antar from the Overstock.com message board for the crime of pestering CEO Patrick Byrne and Bagley with -- horrors! -- questions. He was first restricted to three posts a day, and then removed completely.

The move deprived investors of an opportunity for Antar to directly confront Byrne about his lies and accounting trickery. Overstock shares hit a high of $19 the month Antar was silenced. It's now trading at about $10.50, and has been much lower. Thank you, Investor Village!

But such ham-handed suppression of criticism is evidently insufficient to make Investor Village an antiseptic environment for corporate CEOs and their shills, and suitably hostile to critics.

Investor Village recently banned one of the few critical voices on the Overstock board, immediately after posting a response to Byrne on the message board. The response was deleted. No explanation was given. A message gloating about that was recommended by Bagley ("De Daumier Smith").

As a result, the board supposedly devoted to Overstock instead is dominated with nutty rants about everything but, and is silent on such material corporate events as its change in auditors. With its scant ranks of critics depleted, that subject has not been broached, and Byrne can now rant and rave without contradiction, at least from one persistent critic.

In an email to members, the site recently revealed that a new feature will allow users, including corporate managers like Byrne, to go back and delete or edit posts, forever and ever: "Unlimited Post Deletion and Editing, allowing you to correct mistakes when you need to." Since Byrne frequently changes his public announcements, as Lee Webb of Stockwatch has described, he can be expected to make good use of this new cover-your-tracks feature when he blurts out some incriminating admission, as he has in the past.

Cozy! Investor Village's operators, rather oddly it seemed at the time, anonymized its site registration a couple of year ago. Maybe it's not so odd after all.

Now, here's the funny part: Investor Village, which evidently hasn't made a go of it (don't ask me why), actually wants to start charging people.

I wish them luck. What the world needs now is another way for investors to pour their money down a black hole. But I really do think that the site operator, Ralph "Blue" Kidd, should call himself Ralph "Kramden" Kidd.

© 2009 Gary Weiss. All rights reserved.

Is Anyone Not Investigating Novastar?

Naked shorting poster child Novastar Financial is heading south, and fast. The company reported yesterday that it was under multiple investigations from the SEC, the FBI, the Federal Trade Commission, the U.S. Department of Housing and Urban Development, the U.S. Department of Justice, the New York attorney general and the U.S. Department of Labor.

It might have been shorter to list the agencies not investigating Novastar.

Lest we forget, this subprime lender was aggressively pushed by stock tout Phil Saunders, who runs the "Sanitycheck" website under the pseudonym "Bob O'Brien," and tries to palm himself off as a "market reform" advocate. Saunders set up a website, nfi-info.net, to pimp this stock and attack its critics.

Novastar was also touted by Overstock.com CEO Patrick Byrne, whose own SEC-probed company is sinking fast under a tide of red ink.

© 2008 Gary Weiss. All rights reserved.

Pink is NovaStar's Favorite Color

Troubled subprime lender and naked shorting poster child NovaStar financial began trading on the pink sheets today, having been kicked off the New York Stock Exchange.

It now has the PK appellation so beloved of stocks that have fallen into the crapper.

So how will NovaStar celebrate this blessed event? I think another reverse split would do nicely, now that the company is a penny stock.

At last look, NovaStar shares had fallen 28% to 1.35, in celebration of the glad tidings.

© 2007 Gary Weiss. All rights reserved.

The Fat Lady Gargles at NovaStar

Rehearsing the "Why Did I Listen to Phil Saunders Blues"

The proverbial fat lady gargled today, preparatory to singing at funeral services for NovaStar Financial, foundering subprime lender and naked shorting poster child.

The company, whose shares had been mercilessly pumped by naked shorting conspiracy theorists such as Phil Saunders of "thesanitycheck.com," was delisted from the New York Stock Exchange and announced dismissal of 85% of its employees. All this happened after the market close today, bless their hearts.

An 8-K filing says the company will be left with 30 employees after the layoffs. Most of them lawyers, I trust.

The stock is down 96% over the past year, and is down 45% in the aftermarket. (Another reverse split, perhaps?)

"Thesanitycheck" is the center of what crooked CEOs call the "market reform movement," but is known to the rest of the world as "the movement to give bad CEOs an excuse for their own incompetence." It clutched to its collective bosom stinky companies like NovaStar. This one managed to rip off pretty much everyone in sight, from its customers to its shareholders, and now has given a swift kick in the pants to its employees. All a source of great pride to naked shorting conspiracy theorists like Saunders because, after all, that is what their "movement" is all about -- to provide aid and comfort to companies like NovaStar.

The role of these charlatans in whipping up an investor frenzy for mediocre companies, ranging from third-rate Internet retailers like Overstock.com to penny stock scams like Universal Express, has been largely ignored by regulators.

The anti-naked-shorting nuts were particularly effective in pushing the shares of this crummy subprime lender.

Saunders established a website called "nfi-info" to push NovaStar in the context of stock market conspiracy theories, creating a mythology that has suckered naive investors to this very day. The site used to sucker investors with crap like "basher myhs," a section that rebutted the true stuff that critics of the company were saying.

The image above is from my personal files, as Saunders took the site down when Novastar plopped in the toilet a few months back. This message board post has a full list of the "myths and their debunking," which are hilarious when you consider that all the "myths" were right on the mark.

Saunders, a former used medical equipment salesman from Irvine, Calif., also posted swill of various kinds, including a shrill defense of naked shorting "victim" Overstock.com, under the pseudonym "Bob O'Brien" on internet message boards.

Saunders, posting anonymously as "Easter Bunny," "dirtydirtydeeds" and other monikers, monotonously pushed the line that NovaStar was a victim of short sellers and not its own business model. Anyone who believed him -- and he had quite a following for a time -- lost their shirts. Saunders hasn't pumped NovaStar lately, for obvious reasons, but his dirty work is pushed by others, even today.

NovaStar never supported nor repudiated Saunders' swill. That's in contrast to Overstock.com CEO Patrick Byrne, who promotes the Saunders website to this day, has openly funded astroturf websites, and has put on the payroll lowlifes who harass critics of the company. His support, however, has not been sufficient to boost thesanitycheck's readership, which has dropped off to nothing in recent months.

So for NovaStar the fat lady is not singing, but she is warming up for an appearance onstage. I think the song she will be singing is the "I Took Stock Tips from An Ex-Used Medical Equipment Salesman Named Phil Saunders Blues."

© 2007 Gary Weiss. All rights reserved.

Is This a Forward-Looking Statement?

Novastar Financial announced this afternoon, about 14 seconds after the market closed, that its CEO, CFO and general counsel were all.... er...... resigning.

All seeking more time to spend with their families, I trust? Well, it is that time of year.

But here is what I thought was interesting about the Novastar press release announcing this entirely coincidental departure of three rather senior people from the company. At the bottom it reads as follows:

Forward Looking Statements

Statements in this report regarding NovaStar Financial, Inc. and its business, which are not historical facts, are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. . . .

This is legally mandated boilerplate I know, but the very use of the phrase "forward looking" seemed a bit odd. Doesn't that only apply to companies with a future?

© 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.

Novastar Enjoys a 'Saunders Rally'

In the past I've recounted the sad story of Novastar Financial, a subprime lender that was hyped by an anonymous Internet guru called "Bob O'Brien," who runs a stock market conspiracy website called "thesanitycheck.com."

"O'Brien" was identified by the New York Post some months ago as Phil Saunders, a former used medical equipment salesman in Irvine, California. It always struck me as weird why anyone with half a brain would take the advice of a former used medical equipment salesman on any subject unrelated to used medical equipment, if that.

Confirmation of that point came in abundance today, as Novastar fell through the floor -- declining 55% -- on word that a bankruptcy filing was possible.

The stock began the year at just over $106, adjusted for a reverse split, and ended the day at $2.08.

In future years this will be known as a "Saunders rally."

In addition to mercilessly hyping this doggie stock on Internet message boards, and personally attacking critics of the company, Saunders founded a website devoted entirely to advancing the cause of Novastar. That site, and "thesanitycheck.com," pushed nutty "stock counterfeiting" conspiracy theories. Supposedly Novastar was a victim of nepharious market forces, and not its own lack of merit.

It's hard to feel much sympathy for people who buy swill pushed by stock promoters, particualrly anonymous ones, on the Internet.

© 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.

Novastar Sends Out SOS

Naked shorting poster child Novastar Financial has sent out a distress signal, Herb Greenberg reports, in the form of an 8-K.

Says Herb: "Hard to decipher through the thickest of thick leagalese, but if I read NovaStar's (nfi) latest NovaStar 8-K correctly, it's hangin' on by a thread and Wachovia, it's big lender, is pulling out all (and perhaps, it's last) stops to keep the thing afloat."

I'd say it's time to put women and children in the lifeboats, and lower away. Or have another reverse split.

I wonder if Phil Saunders a/k/a "Bob O'Brien," the ex-used medical equipment salesman who has pimped this piece of junk, has any other hot stock picks up his sleeve?


© 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.

A Death in Baloneyland

The new look at NCANS

The astroturfing website that promoted "naked short-selling" conspiracy theories -- a phony issue pushed by CEOs of crappy companies to divert regulators from real investor concerns -- is no more.

Visitors to the "National Coalition Against Naked Shortselling" site -- and there sure as hell haven't been many lately -- are now greeted with the dread Internet error message that means that a website has given up the ghost.

The site pushed the interests of corporate excuse-mongers everywhere, and was especially shrill at promoting the disastrous Novastar Financial subprime lender and the SEC-investigated monstrosity Overstock.com. The group was fronted by a coot named Mary Helburn, who once famously called Enron a victim of naked shorting.

This "organization" was so brimming with baloney that it didn't even know what its name was. It was variously known as the "National Coalition Against Naked Shortselling" on its site and the "National Coalition Against Naked Shorting" in its incoherent SEC comment letters.

A note on the "sanitycheck" stock market conspiracy website says that "NCANS is going to be incorporated into this site over the next few weeks, as this site is the de facto hub now for issues NCANS is grappling with." Translation: NCANS is kaput. The ostensible reason it was a "duplication of effort" to keep the site active.

Since that is a lame lie by even Baloney Brigade standards, I assume the site's funding source -- Patrick Byrne of Overstock.com, I would imagine -- has closed his checkbook for legal reasons.

Since the NCANS did not exist except for the little-viewed website and a similarly moribund Yahoo discussion group, this means that a minor but annoying source of investor misinformation has, thankfully, bitten the dust.

The NCANS site promoted kooky conspiracy theories, smears against media critics, and served as a sounding board for "Dr." Patrick Byrne, the wack-a-doo CEO of Overstock.com. Since it was created a couple of years ago, the anti-shorting movement has lost whatever credibiltiy that it may have had, thanks to Byrne's antics and the stench of his creepy house stalker, Judd Bagley.

Though barely alive, the "sanitycheck" website, run by a former used medical equipment salesman named Phil Saunders (a/k/a "Bob O'Brien), seems ready to give up the ghost as well. At one time it was interesting to see what clearly insane people had to say, but the shock value of that is also getting a bit old.


Though Alexa numbers are notoriously unreliable, they do give a rough gauge of readership, and indicate that Sanitycheck's following has flocked elsewhere. (To 9-11 conspiracy sites I would reckon.) As you can see from the three-year Alexa chart above, the site received a spurt of readership when promoted by Byrne, in a famously wacky CNBC appearance (below), and was sustained by links on every single Overstock page under the misleading title "Market Reform."


The page links have now dwindled from thousands to a mere one, as Byrne -- doubtless acting under legal advice and/or SEC pressure -- has taken down the links to Saunders's site. Byrne now has taken the important job of smearing his critics in-house, with screwball posts on an Overstock message board and the antisocialmedia.net corporate smear site.

Withdrawal of Overstock support has meant that "sanitycheck's" Alexa chart now has an uncanny resemblance to the price chart of Saunders favorite stock Novastar, which he shamelessly hyped on the web. It still amazes me that people would buy, or not sell, stock on the basis of the ravings of an unhinged anonymous idiot like Saunders. But it really happened.

To be sure, Byrne and other corporate blame-deflectors have not given up. Byrne's checkbook is still open, and is pouring Overstock's scarce cash into lobbying the SEC over this nonexistent problem. But any pretense of the anti-shorting movement being anything other than a corporate-financed astroturf operation is now, officially, kaput.

© 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.

A Naked Shorting Poster Child Sucks Wind

More bad news today -- and I mean really bad news -- from the naked shorting poster child Novastar Financial. Seems that it may not be long for this world.

This subprime mortgage lender is a favorite of the anti-naked-shorting loons, and was hyped up the wazoo by Phil Saunders, who runs a now-moribund stock conspiracy website called "thesanitycheck.com" under the alias "Bob O'Brien."

Unfortunately, a lot of brainless people listened to this former used medical equipment peddler-- who started a website called "nfi-info.net" to push the company -- and bought shares of this dreadful company.

It's down 17% this afternoon, on a whole passel of bad news. Stock is now trading at a bit over 7, so it is a good thing it initiated a reverse stock split! Otherwise the company would be under three bucks. The stock was trading at a split-adjusted $30 before the reverse split.

$30 and change to $7 and change. Nice stock pick, Saunders!

Seems the company has canceled a rights offering, is cutting back on its business, and--oh my, look at this:

The company said its independent auditor, Deloitte & Touche LLP, wouldn't consent to the rights offering unless NovaStar reissued its 2006 financial statements. The auditor wanted to add footnotes disclosing how problems in the subprime market adversely affected NovaStar's operations, liquidity and financial condition.

Further, NovaStar said that its auditor wanted reissued financial statements to include language related to "the uncertainty of NovaStar's ability to continue as a 'going concern.'" (emphasis added)

That "going concern" stuff means that Novastar may be about to kick the bucket. Aw shucks.

Say, I wonder if Phil Saunders has any more hot stock picks? I hear they'd be great shorts.

© 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.

More Bad News From a Naked Shorting Poster Child

Word has just crept over the financial newswires that Novastar Financial, a leading poster child of the anti-naked-shorting nutjobs, will lay off 37% of its staff -- 500 employees.

Damn those naked short-sellers! The company says it is taking this step because of tough conditions in the markets, but any reader of stock market conspiracy websites, such as Phil Saunders' Sanitycheck.com, knows that they are too blame.

By the way, isn't that what companies do before they go down for the count? I sure hope not.

Novastar was pushed unmercifully on stock message boards by Saunders a/k/a "Bob O'Brien," a former used medical equipment salesman from California. He also set up a creepy stock-pumping website called NFI-info.net. Saunders has never apologized to his victims for pumping this stock.

Saunders' paranoid rants turned out to be such an embarrassment that even Patrick Byrne, CEO of Overstock.com, stopped hyping the "sanitycheck" site on the Overstock website. Since then its readership has dropped off to practically nothing, according to Alexa.

Investors who listened to this nut got their clock cleaned. I guess that's what happens when you get your stock tips from former used medical equipment salesmen who cower behind pseudonyms. ({I think the "Easter bunny" handle would have been a tipoff to any sane person.) Hey, if you want to lose money properly, you should take stock tips from the pros! At least you know who they are, so you can sue them.

© 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.

Novastar Proves VIrtues of Reverse Split

Naked shorting poster child Novastar Financial, the struggling subprime lender, has proved the wisdom of the 4 for 1 reverse split that it inaugurated last month.

Reverse splits are, as I explained at the time, the last refuge of a corporate scoundrel. This stock-pumping artifice, which really should be illegal, artificially pumped up the price of Novastar shares instantly by 400%.

And it was well-timed at that! At the time the split was announced on July 16, Novastar was trading at $7.51, or $30.04 adjusted for the split.


This afternoon -- its stock already up 400% because of the split -- it was $6, and had been as low as $4.17. The stock declined because (surprise suprise) an analyst reiterated his underperform (translation: "this is a piece of garbage") rating. Here's Herb Greenberg's take on the day's events.

If it hadn't been for the split, in other words, Novastar would be a $1.50 stock.

Talk about great timing! But what the heck, you know why this has happened. Subprime lending woes? Not on your life. It's naked shorting, you see.

Which reminds me: I wonder what naked shorting nutcase Phil Saunders a/k/a "Bob O'Brien," Novastar booster and founder of the wacko "Sanitycheck" website, thinks about all this? He was Novastar's No. 1 fan and founded a website dedicated to advancing the cause of Novastar, "NFI-Info."

Ditto for Mary Helburn of "Enron was a naked shorting victim" fame, another Novastar booster who heads the National Coalition Against Naked Shortselling.

These two characters have some explaining to do.

UPDATE: The stock closed at $6.78. Woop-de-doo! It's down only 77% since the reverse split was announced.

© 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.

The Last Refuge of a Corporate Scoundrel

Novastar Financial, the struggling subprime lender, has been at the center of a merry-go-round of self-generated hype in recent days, as this "naked shorting victim" poster child struggles to rescue itself from its self-generated horror. But today we get the coup de grace:

Novastar is ducking into the last refuge of the corporate scoundrel--the reverse stock split. So says an announcement yesterday, which has the 4 for 1 split buried in a happy-talk press release.

Reverse splits are famed throughout microcap stockland as an artificial means of boosting share prices, in this case by 400%. Hey, you got to increase the share price some way. If you can't generate profits, why not the stroke of a pen?

Seems that Novastar won't be filing for bankruptcy soon, but is being bailed out in a dog's breakfast disguised as a "bailout." Herb Greenberg observes: "The nature of this deal, which sounds eerily like a death-spiral financing, suggests just what terrible shape the company is in." Seems that all this "bailout" does is keep the company's furniture from being auctioned off. Investors are still screwed.

As fans of corporate train wrecks may recall, this company was a center of small-investor hysteria generated largely by a former used medical equipment salesman named Phil Saunders. Saunders was revealed by the New York Post to be the crackpot who runs an anonymous stock market conspiracy website called "sanitycheck" under the pseudonym "Bob O'Brien." Amazingly enough, this moron -- who hyped Novastar as a center of lurid "naked shorting" conspiracies -- managed to suck in a sizable number of rubes to buy this faltering stock and not sell when things started looking bad.

His website was mercilessly hyped by Overstock.com CEO Patrick Byrne -- who went so far as to push his site on CNBC, and to hype the site on every Overstock.com web page. That over now, and the result is a major victory in the fight against mental illness. Readership has trailed off dramatically since the Overstock promotions ceased, according to Alexa. (Click on the three-year chart to see the magnitude of the decline since early last year.)

Working with Saunders in pumping Novastar was a Howard B. Hill, who works on the fringes of Wall Street and is known mainly for mindless hype of the stock on stock message boards. His rants were republished as "The Best of HHill" on a stock-hype website called NFI-info.net, founded by Saunders and now defunct. Fortunately, his tireless overoptimism is preserved for posterity on the Wayback Machine.

Gretchen Morgenson of the New York Times noted the other day that Hill is affiliated with one of the entities involved with the "bailout." Seems that every dog, and every shameless stock pumper, has his day. Perhaps Phil Saunders should be paid a finder's fee?

UPDATE: The company's shares tumbled over 17% on July 18, as an analyst predicted that the company's troubles will continue despite the "bailout."

Saunders was hiding under his pickup truck and unavailable for comment.

© 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.

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.
Digg this!
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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.

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.

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.

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.

Digg this!


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

The Real Investor Pain Caused by Baloney

I sometimes refer to the anti-naked-shorting zealots as the Baloney Brigade, which is flip language prompted by the bizarre, sometimes unintentionally funny paranoid ravings of Baloney propagandists such as Phil Saunders (a/k/a "Bob O'Brien"), Patrick Byrne and so on.

But there's nothing funny about the pain these nightcrawlers cause to their shareholders (in the case of Byrne) or the people naive enough to buy in to their rhetoric (in the case of Saunders, Byrne and the rest).

Probably the best example of that can be found in the Investor Village message board for the naked shorting poster child NovaStar Financial, whose share price recently collapsed. NovaStar was a supposed naked-shorting victim and was mercilessly pumped by Saunders and by Mary Helburn, executive director of the National Coalition Against Naked Shorting.

Here's a sampling of the genuinely pathetic posts from some of the people who bought in to the NovaStar crock peddled by Saunders, Helburn and others. I just took these at random by word-searching "wife" and "401K." And I do mean sampling. There are dozens of others:

"The Worst Thing IS that

"I have to tell my wife that I blew our IRA because I listened to [Phil Saunders a/k/a] the Easter Bunny."

***

"I had borrowed a portion from a 401K plan & plugged it into NFI. It will hurt for a couple of years but will not be mortal....But it did take me a few days to break the news to my wife....She took it better than I expected."

***

"After being in NFI for over four years, it was a painful task to liquidate all my 21K shares on the opening today. I followed this stock closely, moved very slowly gradually building a substantial income stream for retirement. With that income stream now gone, I must find other means. Life will go on, but my less than extravigant lifestyle will be more modest. I realize that I was far to overweight in NFI all along, but the dividends kept comin, and I spent them.
Investing in NFI was entirely my doing. However, the NSS [naked short selling] and manipulation became very alarming as did management's lack of concern and the worst possible PR/IR. Oh well, shoulda, woulda, coulda. Can't look back anymore."

***
.... and then there's this NovaStar investor who was really pushed up against the wall:

"Was forced to sell out today--Schwab raised margin requirement to 50% and wouldn't budge.

Sold last of it; 4K @ 9 and 6K @ 8.50.
Paid off the margin loan.

Paid the only credit card balance I was running.

Have $22K left to pay taxes next year (probably will owe $28K--Argh).

I've paid the 2006 taxes already, and I'll send the IRS what I have left on 4/15 and be done with it.

No debt; SSI coming in, VA for medical plus Med part-B for extras.

Now it's a task of reducing cash out-flow to where it's not more than in-flow.
Going to be an exciting time--I've never had to live on a budget before.

First to go have to be the cows, our most heart-rending task--but they are expensive pets."

****

I don't feel massive amounts of sympathy for these investors. They were adults. But the charlatans who pumped this stock and harassed skeptics, and the message board operators who allowed them to do so, need to be held accountable for their actions.

© 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.

Message Board Operator's Anti-'Basher' Website

In recent posts I've examined how managers of the "Investor Village" message board have suppressed questioning of Overstock.com execs who frequent the board. The New York Post and other media outlets have observed that IV's message board for NovaStar Financial has become infested by stock pumpers who have contributed to shareholder agony.

Remember that these are hands-on administrators who "closely monitor" their boards. So why have IV's managers, particularly its CEO and site administrator Ralph "Blue" Kidd, allowed the NovaStar board to become a stock-touting forum? Why have they allowed their Overstock.com board to become an extension of Overstock's antisocialmedia.net corporate smear site, in blatant violation of their own policies?

Why was Kidd so anxious to kick out Sam Antar -- actually siccing his lawyer on the guy -- for asking sharp questions of Overstock CEO Patrick Byrne and resident stalker Judd Bagley? (Why did he at one point delete all of the posts by Internet sleuth ScipioAfricanus challenging Bagley's and antisocialmedia.net's smears?

Why do Overstock critics avoid Investor Village? Why was it described by Byrne as a forum that "keeps corruption at bay" -- Byrnespeak for discouraging criticism of Patrick Byrne while allowing Byrne and others to smear and libel critics?

Why would IV openly align itself the smear-happy CEO of a foundering company, thereby opening itself up to lawsuits?

Well, bad me. The answers to at least some of the above questions were available all the time and I just noticed it.

Kidd, it appears, shares Byrne's disdain for stock "bashers" -- people who voice negative opinions about, or address pointed questions toward, execs of public companies.

He thinks "bashers" are so awful that last March he started an infantile website called basherjokes.com, devoted to ridiculing stock "bashers." Kidd is listed as the owner of the site.


Note that there is no "pumperjokes.com" Kidd owns that site name too, but has just "parked" the site name, while starting up the infantile "basher" site.

"Basher," of course, is stock-pumper-speak for what the rest of the world calls "skeptics." That is, people who -- often rightly -- feel that stocks are heading into the toilet. Had the thousands of elderly investors who follow NovaStar listened to these "bashers" that Kidd despises, they'd have saved millions of bucks.

Kidd thinks "bashers" are to be "ignored" and derided. ("Ignoring them is half the fun," says he.) Here's a sample of Kidd's anti-"bashing" website:

BASHERS GATHER FOR ARTSY PHOTO-SHOOT

CRACKASS, Venezuela - More than 15,000 Venezuelan stock bashers and naked short sellers scurried from their basement boiler rooms clad in nothing more than their typical work attire, comprised primarily of brown and yellow stained underwear and the occasional leather face mask with matching restraints (a few even paraded around in nothing but their birthday suits).

Funny!

Observe the reference to "naked short sellers." Another thing I hadn't noticed was that Kidd has promoted a wacky "stock counterfeiting" website, "thefaulkingtruth.com," in a post on the Investor Village website. Kidd urged his readers to "stay informed"by reading the wacko junk on the website.

Explains a lot, I think. Not everything.

UPDATE: This web post has some interesting observations about Kidd's involvement with a penny stock called Eagle Broadband.

© 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.

NovaStar's Agony Continues

Naked-shorting poster child NovaStar Financial continued to collapse today, declining another 9%. It is now down 51% for the week, after announcing financial results that could be summed up as, "We may be able to realize aftertax profits sometime before the next ice age."

Phil Saunders a/k/a the "Bob O'Brien," the anti-shorting loon who was second to none in pumping this dreck, appears to be back to pushing the notion that unseen market forces were responsible for NovaStar's demise (and not all that stuff I just mentioned about profits and the ice age).

Responding to a post poking fun at the naked shorting conspiracy nuts, Saunders posted as follows on the Investor Village message board:

Always nice to see the whole gang out. Congrats. You did well on this one. Never play against the house when they control all the cards, right? 4.7 years of being wrong, but guess what? If the guys running the boat decide to run it onto the rocks for reasons unknown, you win.

Wonder why they ran it onto the rocks? What's your guess?

Saunders reminds me of the fellow I wrote about in Born to Steal, superbroker Lou Pasciuto, who never let the facts get in the way of a good sales pitch. That has been the sustaining principle of the Baloney Brigade.

© 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.