Another Dealbreaker icon moves on

It's true, it's damn true. Dealbreaker's Joe Wiesenthal is leavings the Opening Bell in order to get more sleep persue other ventures.

Dealbreaker: Opening Bell

Editor's Note: After some 2.5 years, this will be my last Opening Bell. One can only take so much sleep deprivation, after all. On the other hand, getting reminded and abused about typos never really gets old. Unfortunately I don't really have any advice or words of wisdom to leave you with, since I'm pretty tired.

As I said in the comments, Opening Bell has been an important part of my morning crawl for news for as long as hes been doing it, and I've always enjyed it, typos and all. Some mornings the typos were so egregious that I thought it was just part ofhis schtick.

Fans of business blogs should note that Mr. Weisenthal's excellent blog The Stalwart continues it's tradition of thoughtful bloggotage. Check it out.

*in his honor, and in tribute to 2.5 years of DB's Opening Bell, I left all the typos in this post uncorrected.

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Plus ca change, plus c'est la meme chose, redux

Equity Private, the pseudonymous new editor of Dealbreaker (and one-time James Bond movie villainess) has posted a cautionary tale of high finance that reminds us that some schemes really are the oldest trick in the book.

Dealbreaker: Word To The Wise

Were not the fact stated by scores of credible witnesses, it would be impossible to believe that any person could have been duped by such a project. The man of genius who essayed this bold and successful inroad upon public credulity, merely stated in his prospectus that the required capital was half a million, in five thousand shares of 100 pounds each, deposit 2 pounds per share. Each subscriber, paying his deposit, would be entitled to 100 pounds per annum per share. How this immense profit was to be obtained, he did not condescend to inform them at that time, but promised, that in a month full particulars should be duly announced, and a call made for the remaining 98 pounds of the subscription.

This is a trick that has been played over and over, in both high society and low.

In in my dissolute youth I lived for a brief period at a ski resort. The skiing was fantastic, but eventually I tired of living on Kraft Dinner, and grew up. But one incident that I recall involved a Quebecois labourer named Guy who quit and left the hill mid-season. Over the following week, a lot of ski bums started enquiring about his wherabouts. Suddenly, it seemed that everyone was looking for Guy. When people finally started talking to each other, they learned that he had told over a hundred resort staff* the same story: that he was going to drive to Banff that weekend and score a big bag of weed, and if that person gave him $20, $50 or $100 he'd split his score with them.

Contrary to what his erstwhile partners believed to be the plan, he moved back to Quebec.

There's a lesson there.



*and no, I wasn't one of them. I'm more of a beer guy.

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Dealbreaker.com bids adieu to John Carney

It's true, it's damn true. Editor-in-chief John Carney of Dealbreaker.com, arguably one of the most eminent finance bloggers you can find, has left his post.

Dealbreaker: So long to all that

Today is my last day at DealBreaker. I leave you in the capable hands of Bess Levin, my writing companion for the past 130 weeks or so, while I move on to other forums. Equity Private and a special surprise writer will be around to help out. You've been the best readers a writer could hope for. Thank you for your tips, your comments and for reading. Thanks, really, for going along with me all this way.

In case you care, he's heading over to Clusterstock, a media property owned by notorious ex-analyst Henry Blodgett.

Mr. Carney has been an inspiration to all of us who straddle the line between bloggotage, gossip columnist, and semi-quasi-legitimate journalism. We at the Global Headquarters of Lee Distad's Professional Opinion wish him all the best in his future endeavors.

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Quote Of The Day

"This is one of those regulatory questions that is actually quite straightforward: How can you short if you don't own the shares?"

-- The Deal.com's Robert Teitelman

From The Deal.com, hat tip to Dealbreaker.com

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Random Market Musings

Normally, the comments section of finance blog Dealbreaker is full of jaded, often profane commentary that is nonetheless financially astute. Wisdom from the trenches of Wall St, so to speak.

Lately however, and perhaps as a reflection of the growing tensions surrounding the ills suffered by major Wall St. players like Bear Stearns and Lehman, there's been a growing rise in bitter, almost Marxist sentiments from anonymous angry commenters. Is the rise in left-wing, anti-finance commentary sign of a market bottom?

On a related note, when is a grass-roots movement going to start, seeking to garner support to make Oppenheimer financial sector analyst Meredith Whitney the next Chairperson of the US Federal Reserve?

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Quote Of The Day

"Unfortunately a lot of economic data is backward looking.''

- Yogi Berra Thomas J. Lee, chief U.S. equity strategist at JPMorgan.

from Bloomberg, hat tip to Dealbreaker.com

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Kinder, Gentler Collections Agencies?

Every so often, like spores from a mushroom the mainstream media puffs out soft little articles calculated to appeal to the counter-intuitive or even contrarian mentality of some readers. This has been especially so since the runaway success of Freakonomics. Once contrarianism goes mainstream, can you still conisder yourself contrarian?

Regardless, there's a puff piece in the NYT about collection agencies trying to be more sensitive:

NYT: Debt Collectors Try to Put on a Friendlier Face

Just in time for a recession, the debt collection industry is working to shed its reputation for remorselessly hounding people.
Oh, the collectors still want the money. But now they would like to be seen as helpful and sympathetic, even a force for good.
They have started calling the indebted “our customers.” They are pushing consumer tips on the ideal way to respond when a collector comes calling (basically: pay up). They note that debt collecting is an old American tradition. (Abraham Lincoln was a debt collector, some histories say.) They point out how, in a time of rising unemployment, they are hiring.

Since a family member spent several years working in collections while going to school, I've had a pretty close-up view of the goings-on in the offices of collection agencies. The phrase "Boiler Room" comes to mind. At one, the pep cheer at the end of every morning meeting was "MONEY MONEY MONEY! CALL CALL CALL! GO METRO!" Thus, I find it hard to swallow the PR story the writer for the NYT laps up. One or two collection agencies might have adopted a model centered on unicorns and candy canes, but I suspect that the dominant paradigm remains focused on getting blood out of a stone.

Hat tip to Dealbreaker's Opening Bell.

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Breaking News: Home Depot Still Sucking

Dealbreaker: Home Depot Is Hurt By Weak Housing Market

A rough quarter for Home Depot, as net income fell by 27 percent in the face of a weak housing market. Sort of takes the wind out of the bull argument, that when people aren't spending their money on buying new homes, they're spending their money on renovation, so Home Depot wins either way.

I've got a question: How does Home Depot determine a quarter where they were hurt by a weak housing market versus a quarter where they were hurt by every other excuse factor that they like to blame for their perennial non-performance?

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Rogue Trader Story Just Keeps Getting Better

The lastest twist in the Jarome Karviel story, according to Dealbreaker.com is that the French trader remains employed by Soc Gen.

Dealbreaker.com: Shocker: Kerviel Still Has His Job!

Unlike Wall Street, where employees can typically be fired at a moment’s notice, French law requires that the bank must explain it’s decision to fire him at a sit-down meeting arranged in advance. Kerviel is permitted to bring along a union representative, a lawyer or even his mom. The judge in the case, however, has forbidden Kerviel from having any contact with the bank. So it seems that until this order is lifted, Kerviel will keep his job and Soc Gen will remain the bank that continues to employ the guy who lost them billions. (Now that we think about this it does kind of remind us of Wall Street—or at least Bear Stearns.)

Aside from the fact that the high water mark for reporting on this scandal remains the "FRENCH TRADER WAS FORCED TO WORK 30 HOURS A WEEK" from Britain's The Daily Mash, two things have become apparent. First, almost everything I've read so far on this story in the mainstream press has reeked of bullshit, and makes me lean towards the coverup hypothesis. And second, providing that young Jerome was in fact taking positions that were deep in the money until December 30th, and providing that he doesn't end up barred from working in the securities trade, I expect that he will have plenty of opportunities open up for him at firms that would reward such behavior better than Soc Gen.

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Fox Business News is like CNBC, only weirder

In case any of you thought that Fox might actually bring something worthwhile to the broadcast business news table, your fears are laid to rest:





What the hell was that? Are the writers for MadTV are scabbing for Fox Business Network under assumed names?


It might have been forgiveable if it had been clever or funny, or both.



Hat tip: Dealbreaker.com

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Another staggering insight: Warren Buffet knows what he's doing!

Dealbreaker.com: Study Produces Useful Information For People Who Are Idiots

A new study by Gerald Martin of American University and John Puthenpurackal of (wait for it) the University of Nevada, called “Imitation is the Sincerest Form of Flattery," has found that if you buy the same stocks as Warren Buffett, you will make a lot of money.
...
The study found that investors mimicking the Oracle’s stock picks, even up to four months later, would earn an annual return of 24.6
percent, easily beating the S&P 500, which rose 12.8 percent during the same period. Based on these numbers, Martin and Puthenpurackal came to almost the preposterous conclusion that “"Warren Buffett appears to possess investment skill.” (No joke, they actually came to and wrote that conclusion.)

Wow. Just, wow.

I imagine that this study required ample academic resources, not to mention some serious grant money to be able to deliver such an insightful conclusion.

As I commented over on Dealbreaker, it must be International Pointing Out the Obvious Day.

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The Obligatory Blog Post About Microsoft's Facebook Deal

NYT: Microsoft Deal Values Facebook at $15B

SAN FRANCISCO (AP) -- It's hard to determine what's more surprising about Microsoft Corp.'s investment in Facebook Inc. -- the appraisal that valued a 3 1/2-year-old Internet hangout at $15 billion or the rare snub of online search leader Google Inc.
The $240 million price Microsoft paid for a 1.6 percent stake in Facebook demonstrates just how badly the world's largest software maker wanted to deepen its relationship with a startup that doesn't even have $200 million in annual revenue.

By now everybody else in the Blogosphere has had their say.

Dealbreaker's Opening Bell:

So yeah, as you knows, Mr. Softy paid $240 million for a mere sliver of Facebook, giving the company a $15 billion valuation. This is the valuation that everyone has been talking about... but it still sort of hits you in the gut when it's actually announced.

Marketnews:Microsoft Buys $240M Stake in Facebook.com

Large corporations find social networking Websites, and other online entities like YouTube.com, appealing mainly due to their powerful consumer reach: even though members can join for free, these Websites attract millions upon millions of visitors daily. These visitors, in turn, ultimately create the content that make the sites so popular, resulting in overhead costs that are much lower than a typical online business would endure. And this translates to very lucrative business opportunities from the likes of advertisers such as Microsoft.

And so on.

I don't really have anything constructive or meaningful to add to the discussion. Is Facebook worth $15 billion? Pfft, I have no idea. But my basic cynicism and rationality makes me sad that someone else already coined the phrase Dot-Bomb 2.0.

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Concerns about $100 oil, again

From Dealbreaker.com's Opening Bell:

Crude Oil Breaches $90 a Barrel on Dollar Drop Against Euro (Bloomberg)

So we're officialy on $100 watch. We've been talking about this for a couple days, but now that we've crossed, er, breached the $90 mark, it's really time to start talking about the triple digits. Time to play a game. Enter the date in the comments that you think oil will cross $100. Can't guarantee that there's a prize, but if there were, closest answer would win it.

Never mind that the commentariat talks about $100 oil every time the barrel price crosses a round-number threshold: whether $60, $70, $80, or now $90, can $100 a barrel be far off?

On the one hand, I'm primarily in favor of high oil. The more oil costs, the greater the impetus for investment in both exploration and alternative energy sources. Also, unlike smoking (which is a real addiction) high oil correlates with reduced consumption, as we saw last year.

On the other, is $100 oil really that big a bogeyman when the move in the barrel price is based mostly on a declining US$? As a metric, it's not particularly objective, no?

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RIAA drops the hammer on poor single mother

I know that's a real tear-jerker headline, but what else are you going to make of a case like this?

Yahoo!: 24 illegal song downloads cost US woman 220,000 dollars

"This does send a message, I hope, that downloading and distributing our recordings is not OK," Richard Gabriel, the lead attorney for the music companies, told the Minneapolis Star Tribune.

Don't forget that this happened in the USA, where the appeals process means that this is still not over, not to mention the other 26,000 cases that the RIAA still has on the docket.

And for what? I think the best sound byte today was the ever quotable Joe Wiesenthal from Dealbreaker who said

Labels Win Suit Against Song Sharer (NYT)

FInally, the scourge of illegal file sharing will be stamped out for good, now that someone has finally had the book thrown at them. This is all it took... now watch the profits roll in at the big labels.

I couldn't have said it better myself.

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Quote of the Day

Dealbreaker's Joe Wiesenthal knocks it out of the park with this one:

Microsoft Updates Its iPod Competitor (NYT)

Ah, that explains the mile-long lines we saw outside of the Microsoft store the other day.

Sometimes sarcasm is a stilleto. Sometimes it's an axe.

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Newsflash: Many iPhone owners are whiners

Apple Users Talking Class-Action Lawsuit Over iPhone Locking (InformationWeek) reported on Dealbreaker's Opening Bell

No offense, but what's the deal with iPhone owners? Seriously. First, Apple warns them not to surf the internet when they're overseas, because they'll ring up a huge bill. What happens? Nobody listens, and then they complain when they get a $3,000 roaming bill. A bit steep? Sure, but they were warned, so hard to have too much sympathy. Then Apple warns them not to unlock their iPhones and that if they do, they might be in for some nasty surprises. Again, warning delivered and then followed up upon. But people act like it's some big shock. Here's the thing about the iPhone set. It doesn't really seem to be the early adopter crowd that everyone assumed it was. Remember those pictures of frat boys walking out of the Apple store, screaming at the top of their lungs? Exactly. That's the iPhone customer, which actually explains a lot.

While we're dogpiling on iPhone owners, don't forget the way that they screamed and mewled when the iPhone got a price cut.

To be a real early adopter you've got to be willing to hang out there on the edge, and pay top dollar to stay there: Forty thousand for a plasma tv ten years ago, eleven hundred for a Blu-ray player last year, and so on. Not to mention taking your lumps when hardware goes sideways on you, or if you end up on the losing side of a format war.

It's the cost of being first in line. Early iPhone owners are misguiding fanboys, not proper early adopters.

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Quote of the Day

Owning one home is being a homeowner. Owning 2 homes is
being an investor. Owning $1 billion of CDOs is being a doofus.

Posted by: Fake Don Lapre* August 21, 2007 12:48 PM

*one of Dealbreaker.com's coterie of anonymous internet troublemakers comments section trolls. Call them the Trollocracy.

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You know that it's Götterdämmerung in the capital markets when...

Dealbreaker's John Carney starts quoting Martin Heidegger.

Dealbreaker: Philosophy and Markets

Heidegger, in my estimation, vacillated between being completely full of crap, and dining out on pointing out the obvious, but couching it in lots of obtuse compound words.

I have been told by more than one person that philosophy students in Deutschland read Heidegger in the english translations, because he makes more sense in english than in his native german.

See also my entry in Dealbreaker's comments section, re: Jean Paul Sartre.

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Newsflash: People who badger you with statistics are usually trying to sell you something

Lovely little spot of rudeness on Dealbreaker yesterday in response to a dire pronouncement.

Dealbreaker: Jeremy Grantham: RUN FOR YOUR LIVES

Are you presently working for a hedge fund or major bank? May Jeremey Grantham, chairman of Grantham, Mayo, Van Otterloo & Co. (via us) suggest that you get the hell out of there, because most of you are going to die anyway? That’s right, Dealbreakettes, according to Grantham, credit-market declines are going to force “as many as half”-- half, 50%, 1 of every 2-- of all hedge funds to close in the next five years. Last year 717 hedge funds closed, leaving 9,800 in business. Ergo, FOUR THOUSAND NINE HUNDRED of you are soon to be history (we did the math). Oh, and at least one global bank (gut instinct: Goldman Sachs) and “one or two” of the largest private equity firms, because those assholes have it coming. Grantham can make such apocalyptic forecasts for 2012 because he is 68, and may very well be dead by then. Grantham, Mayo, Van Otterloo & Co will survive, presumably.

Not to swing too hard from Nassim Taleb's nuts or anything, but I get a kick out of these wildly doom n gloom pronouncements from pundits who are, in fact, totally full of crap.

As it happens, I've conducted extensive research, analysis and modelling that indicates that 88% of pundits, 94% of tv talking heads, and 173% of bloggers pretty much just make up wild-ass statistics to get attention for themselves.

My favorite dumbass stat was from the researchers who (just in time for the 2004 Olympics) plotted the improvements in the 100M sprint among male and female sprinters and deduced that at the current rate, women would be running the 100M faster than men by 2036, or some such. Oddly enough, they didn't trumpet how if you followed their models all the way down the line, both men and women would be running a 100M sprint in 0.0000 seconds by 2287 AD, at the latest.

Idiots.

On the bright side, there's a lot of sensible talk in the comments section.

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Whole Foods CEO busted for trolling the internet

I was going to leave this story alone. I really was. I said to myself "Self," I said "You're better than this. You don't need to go there."

Of course, I rebutted myself with "Really? Then what about all that crap about Paris Hilton a couple of weeks ago?"

I had to admit, I had a point.

Anyway, this story has already been flogged all over the blogosphere, so I'll keep it short:

WSJ: Whole Foods Is Hot, Wild Oats a Dud -- So Said 'Rahodeb'
Rahodeb was an online pseudonym of John Mackey, co-founder and chief executive of Whole Foods Market Inc. Earlier this year, his company agreed to buy Wild Oats for $565 million, or $18.50 a share.
For about eight years until last August, the company confirms, Mr. Mackey posted numerous messages on Yahoo Finance stock forums as Rahodeb. It's an anagram of Deborah, Mr. Mackey's wife's name. Rahodeb cheered Whole Foods' financial results, trumpeted his gains on the stock and bashed Wild Oats.

Even if Mr Mackey did not issue material non-public information, or make statements that impacted Whole Foods' stock price, his behavior, while not necessarily illegal, is definetely unethical, and probably incredibly thoughtless. You might even call it stupid.

For starters: Yahoo! Finance? Good God, that's the lowest of the low. I used to think that bulletin boards devoted to bodybuilding, powerlifting and other iron sports were full of bizarre, damaged personalities, until I took my first forray into browsing the world of internet stock boards. "Bedlam" doesn't even begin to cover it. I've ranted about this before, so I'll leave it there.

Secondly, as the officer of a publically traded company, Mr Mackey has a duty to shareholders to disseminate information through appropriate channels. If nothing else, hiding behind a pseudonym and cheerleading your own company to investors is sleazy as hell. No amount of circumlocution or fuzzy logic on his part can rationalize his way out of this.

Needless to say, the usual suspects in the blogosphere have all drawn the same parallel, comparing Mackey's behavior to that of Overstock.com's perennially surreal CEO, Patrick Byrne.

Long or Short Capital: The Patrick Byrne Award for Operational Focus and Excellence: Whole Foods CEO Rahodeb
I’m undecided if it’s a better or worse call than being a bat-crazy Quixote in public like Byrne. This is less ethical but more competent as as opposed to more ethical and less competent. But this is decidedley worse than not wearing a condom in Haiti, which is our standard threshold for management competence.

Dealbreaker: Only You Can Stop CEO Internet Addiction!
It's happened before. As Gary Weiss has shown, some chief executives simply cannot be trusted with the internet. If you are working in the IT department at a public company now, you might want to look into disconnecting your boss's internet connection. It's for his own good.

Gary Weiss: John Mackey, Patrick Byrne, and a Snoozing SEC
Mackey, it seems, posted anonymously on message boards to bash a competitor and boost the company's share price -- amazing behavior that came to light not because of an SEC enforcement action, on any number of possible grounds ranging from securities fraud to Regulation FD, but in a lawsuit by the Federal Trade Commission.

Gary Weiss seems especially indignant that the SEC seems to be uninterested in the unethical behavior of either Mackey or Weiss' favorite poster boy for bad governance, Patrick Byrne.

I will however go out on a limb and say that the Whole Foods story will diverge from the Overstock.com train wreck sooner rather than later. I forsee that John Mackey will be sent packing by his own board, under pressure from regulators and the media.

Why?

Because Whole Foods makes money. Because they're successful. Because there will be a lot of concerned parties on Wall Street with a vested interest in making sure that Whole Foods continues to succeed. Now that Mackey has shown what kind of thoughtless, half-cocked decision making he's capable of, he's a liability. Those concerned will want to have him ejected before he does something that scuttles the ship.

Compare that to OSTK, whose vested interests are limited solely to buy-and-hold investors who still believe in Santa Claus, and are still praying that one quarter, any quarter, their baby will show a profit. If your company was as beneath most people's radar as Overstock.com, you might resort to public temper tantrums to get attention too.

Anyway, Mackey will be crucified in the media, and will probably get the sack before the month is out. There, I said it.

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