Tuesday, May 31, 2005

The WSJ Continues To Follow The Big Story

Is it Deep Throat? The breakdown of the financial system, as evidenced by the growing outcry against naked short selling and the flagrant flouting of the rules by the privileged, the rich, the "above the law"? Iraq continuing to claim lives, the rule of law abandoned?


It's all about who's Bob O'Brien.

A month later, and I am still getting long email threads from the reporter there who is convinced that I am a sinister figure whose tendrils of influence make the markets dance to the tune of my choosing.

Am I making this up?

No. In today's exchange, which I agreed to keep confidential until the article breaks, among other things the WSJ admits in a very frank, obvious way to having obtained NCANS's banking records - a violation of federal law. Or if not having obtained them, of having viewed them - same difference. And that's just for starters.

Now, one might wonder aloud as to why the WSJ is up to these sorts of hijinks. I do. I wonder aloud why a prominent billionaire investor emailed me intuiting that he knew my real name a month ago, shortly after this reporter came on the scene and started digging. I wonder as to whether the WSJ's info network is so full of leaks that this guy, as well as presumably his network, can know the reporter's information virtually in real time - or whether the info is going the other way. I am filled with wonder at it all. And I ask him point blank to please clarify these points for me, as it simply confirms my fear for my safety due to people going to extraordinary, even felonious lengths, to figure out who I am.

I agreed to keep our exchanges private, which I have. I haven't committed felonies to obtain info, I haven't violated attorney client privelege, I haven't broken federal banking laws. So far I have behaved in what can only be described as an honorable fashion with a counterparty who has some explaining to do.

Now, I know, at the end of the day, that the WSJ will claim to have not known or understood that private banking records are illegally obtained if they are being forwarded to reporters. They will claim that journalistic privilege should insulate them from the repurcussions of what, to my untutored eye, appear to be egregious legal violations - that in fact journalistic privilege allows a reporter to obtain, use, and participate in violations of federal banking laws, etc.

The question is, do any of you not understand the difference? Is there some part that is unclear in this? If you received NCANS' banking records, would you have difficulty with this judgement call? How about attorney client priveleged communications? Would you have a hard time with that? Or would you figure that it's all good, to "get the story" - even if there is no story to really get?

People have been skeptical about my concerns over my personal safety. I can relate to that. It all seems a little far fetched, doesn't it? Then again, when you look at what has gone on in just the last week, which I promise you will become abundantly clear when I publish the email exchanges, perhaps my concerns will have seemed overly liberal. One thing is sure - an explanation is due.

Can't wait for the next installment.

Friday, May 20, 2005

Why Does the NSCC Want A Get Out Of Jail Free Card?

Wonder why that is? Per the latest "rule" that the NSCC passed and which the SEC rubber stamped, the NSCC is shielded from damages arising from their violating Federal Securities Laws, or at least has limited its liability. I'm not making this up. At least that is what they'd like to have you believe. The fact is that the SEC doesn't have the right to grant to the NSCC/DTCC, a private company, the right to willfully break the law and not have any consequences. Just doesn't. The only ones that could do that are Congress. And the SEC isn't Congress. It is an agency created by Congress.

A good question is why the NSCC feels the need to pass a rule essentially saying that they have limited liability for willful misconduct and violating securities laws. Why would they need to have that on the books, do you think? Is it because they know that they have been willfully violating securities laws for years, know that it will come out in court, and want to have a piece of paper to fall back on? That's the only explanation I can come up with. And frankly, it corroberates the theory that the stock borrow program violates a host of securities laws, that the NSCC knows it, and that they have been counterfeiting stock for years and just now are starting to catch on to the idea that they will get caught. It would appear that the rats are beginning to look for ways to jump ship, and are jockeying for ways to protect themselves.

It sucks.

Go see the rule at www.nscc.com/impnot/notices/notice2005/a6029.pdf - and wonder at the hubris.

Sunday, May 08, 2005

For Mother's Day, Mr. Cuban Gives The Gift of Laughter

In these turbulent times, it's all too often that we see arrogant blowhards going on and on about topics that strain the limits of their cognitive carapaces - the equivalent of Sean Penn in Team America. Not so the subject of Sunday's Barron's interview, Mr. Mark Cuban, ladies and gentleman, please, a big hand for the man, yessssss.

Mark is possessed of a marvelous sense of whimsy and fun, a mirth-filled pithiness that is a refreshing breath of cool fresh air after all the "hard number crunching" and "in-depth research" that the rest of the publication is burdened with. In his latest frolic through the pages of Barron's, he brightens all of our days by introducing a stunningly low-key parody of some of the dimmer folk that can be seen lumbering through their "analysis". Take this section of his interview from Sunday:

"Q: You have a paired trade on NovaStar Financial, another controversial name.
A: I'm hedged, leaning short. They package and resell mortgages and sub-prime mortgages. The short story is, they are keeping the stock up by paying dividends, and they are paying for the dividends by raising money, rather than from operations. At some point, that runs out."

You have to love the timing, and the cadence. It's almost musical. Obviously here he is nudging anyone that doesn't realize that NovaStar, a REIT, securitizes pools of bonds backed by the mortgages they originate or buy (all of which are sub-prime). He then lets us in on the joke by pretending to not know that all REITS are legally obligated to pay a dividend equal to 90% of their taxable income (NFI pays 100%) by the time they file their tax return, and further, that their cashflow supports the dividend they pay. You can imagine him slyly observing his interviewer, sizing him up to see if he's caught the joke or is still buying it. He then trots out the old saw about NFI having to raise cash to pay the dividend, testing to see if the questioner will point out that all REITs have to fund their growth by doing secondaries and the like, as they have no capital left at year-end given that they've payed it all out in dividends. Now, Mark's crafty sense of fun might have one believe that he didn't understand this, or that it had never been explained to him (ad nauseum), or that NFI was a special situation in the REIT world, but I happen to know that it has been explained in depth, thus this is obviously a put on. Tim Conway, Steve Martin, Mark C. Funny stuff, very inside jokey, and the delivery is a gas. But that was just the warm-up. Try this howler:

"Q: The longs are pretty vocal on this one. So is the company.
A: When a company fights so hard to fight the shorts, that's always, to me, a great sign to short a company. But it's almost impossible to borrow, and you have to repay the dividends. But there's a preferred. So I'm long the common and short the preferred. I can use the fee from lending the common to pay the dividends on the short of the preferred and still have money left over."

Again, he comes at it straight faced, but it's a rib-tickler once you get the tongue in cheek thing. First, he knows that the company has never ever "fought hard" against the shorts, and in fact has never even said a word about them. So that's clearly his richly developed sense of irony at work, as he mocks with his condescending feigned credulity the questioner's declarative misstatement that the company has been vocal, when he knows they haven't. And then he toys with anyone dull enough to not get that shorting the preferred and going long the common is actually a bullish position. He waves his hands around here a bit, for theater, but at the end of the day, it's a bullish stance, and he has some fun with his interviewer to see if he'll get it. He doesn't, but nobody said they had the best or the brightest throwing the softballs at Barron's. But the next chunk is by far the best of the exchange - you can almost see the Bill Murray-like twinkle in his eyes as he deadpans it:

"Q: So this leads me to something that you've posted about on the blog a number of times in the past couple of months: naked short selling -- selling stocks short despite an inability to borrow them as you would in a more typical short sale.
A: Because I kept on getting all these e-mails from people saying naked shorting is bad, you have to come support this.But in most of the examples, the companies were like one-cent stocks, where a guy had bought all the float for $5,000.

Q: So, did they have a point?
A: It's almost like sitting in the bar and saying who was better: Wilt Chamberlain or Bill Russell? It's not the big thing people make it out to be, but it cracks me up to watch them go at it."

Here you get to see the master at work, and it is a thing of beauty. First, he allows the interviewer to sidestep the fact that naked short selling is illegal for all but a few rare MM instances. That's to suck him in, play him, softly softly catchee monkey, and so on. Then he delivers the pile driver - he tricks the poor fool by abruptly changing the subject from naked short selling to company valuations (which clearly have as much in common as fish and bicycles), wryly allows the interviewer to ask another fumbled non-question, and then pretends to have said something coherent while tossing out some folksy aphorism involving athletes. No doubt he was ready to pee his pants by then, as it's hard to imagine an interviewer not catching on to the joke by the point this jibber jabber non-answer/retort was delivered. "Mark, is it true that naked short selling is illegal or not?" "Well, it's like when you are huffing paint fumes and arguing over whether Bruce Lee could kick Spiderman's ass, you know? I mean, they're just different, but I still think it's like really funny." "Uh huh. I see"

Anyone doubting that Mark is a man of imponderable depth of humor and shockingly keen reasoning capability need only look to this section for a rare sneak peek at the real man behind the mask. He delights in toying with the admittedly not so quick questioner, and does so with the fluidity and grace of an Olympic gymnast. It's watching a master, a virtuoso performance, a Sensei of rhetoric and a guru of reason at the top of his game.

Bravo, I say.

Wednesday, May 04, 2005

Contacted by the WSJ - "Are you Keyser Soze???"

The following is an email exchange that took place on the morning of May 4, from a reporter at the WSJ who is reportedly (no pun intended) doing a piece on "Who's Bob O'Brien" - per a source close to the Journal. In that piece, I have been told that this former TSCM reporter is attempting to connect me with the company through some byzantine twisting and turning. That's kind of hard, given that I have no contact with the management of the company, am not involved as webmaster of the website any more, am not compensated by the company, etc. etc. etc. - Oh, and did I mention that they don't know who I am? That means they are guessing, which is typically a bad way to go about doing things. Whatever. This does make for better entertainment than anything else I know, that is for sure. Here is the email exchange thusfar, and I will update it as we go:

I am a reporter for The Wall Street Journal and was hoping to interview Bob O’Brien. I have seen Bob O’Brien’s posts about me and want to assure you that The Wall Street Journal and I are interested in accurately reflecting Bob O'Brien's position.

Perhaps we could arrange to meet over a meal or drink together. If that proves impossible, then I would like to speak with Bob O'Brien by phone. Please call me back at your earliest convenience at 212-416-XXXX.

Thank you and regards,
Jesse Eisinger

Jesse Eisinger
Long & Short columnist
To Jesse:

Hello Jesse. I have a policy of only conducting interviews with the press via email, due to unfortunate instances wherein information got misconstrued or was inaccurately portrayed. Due to the large number of folks who seem preternaturally interested in my true identity, and given the very legitimate concerns over my safety, I don't discuss that. Anything else is fair game, as long as it doesn't relate to my ID. If you are interested in doing a legitimate piece, bring it on. If this is a thinly veiled attempt to do the work of the folks who have been trying to identify me for the last year or so, not interested.

You should be aware that I publish all email exchanges with reporters, in the interests of keeping everyone honest. So anything relating to nfi-info.net or ncans.net or naked short selling or the systemic problems in the market or nfi's business model or sector are fair game.

I heard from someone out your way that what you are writing is some sort of six degrees of separation piece wherein you try to get me connected, albeit tentatively, to the company. Let me start off by conveying that you are off base, if that is a correct description of your piece. I am a private investor, I have no affiliation with the company, I receive no support from them, no pay, no "secret" or proprietary information, not even encouragement, truth be told. The company is on the record saying as much, and I am saying it to you. So that dog won't hunt. I am frankly astonished that the "Who's Bob O'Brien" thing has gotten such visibility - I suspect that it is a function of a media that can't conceive of shareholders actually being articulate and pro-active enough to fight back against what they believe is illegal manipulation - a great story, incidentally, and one which your paper has been eerily silent in presenting.

The nfi-info.net is a separate, shareholder created and operated website that contains only public information, most of it not created by me. I have no affiliation with the site anymore, and there are other webmasters drawn from the Yahoo boards who now are chartered with the operations, such as they are, of the site. Same goes for NCANS.net. I started both, and have now handed both over to the folks that have the time and knowledge to support the endeavor from a technical side.

My blog is my bully pulpit, and I still operate that, as it doesn't require a lot of block and tackling to maintain.

What is the topic of your piece, and how can I help you?


To be continued, I'm sure...

Monday, May 02, 2005

As Long As They Spell Your Pseudonym Right

After reading the latest Reuters article, I can make a few observations:

1) An awful lot of energy has gone into demonizing me, by all the usual suspects - pet reporters at Barrons who are more than acquaintances with Marc and the Lapdog. Reuters. What's next? I can't believe we haven't seen lapdog or WSJ pieces yet, or AP from Carol Remond. Those are always the usual suspects, so I can make a prediction: You will likely see pieces in most or all of those - they are part of the hedge fund's network of lackey media, IMO. One does have to ask why any of this is even remotely newsworthy - Marc's publicly available address was posted on the web, along with inquiries as to the weather, and how his family is holding up. And a warning was issued that the hedge fund's gamebook is blown, and that it's time to move to a different playing field. Why all the noise? Answer: because Marc hasn't been able to find me or figure out my identity, and so he is latching onto a contrived issue, hoping to demonize me and smear my pseudonym, and maybe even enlist his local law enforcement into helping him figure out who I am. His crony at Gradient admitted that over a hundred hours have been spent, futilely trying to find me, so this is obviously his way of kicking it up a notch.

2) There was no threat, in either a legal sense, or a moral sense. This has been covered ad nauseum, but it bears repeating: Marc's name was not part of the address posting. How Marc gets from "How's the weather" and "how's the wife and kid" to kidnapping and killing is unknown, as is why he has studiously avoided the record of posts wherein the term "gamebook" have been used to describe the hedge fund world's illegal manipulative techniques involving paid message board bashers, libel, use of media to impact stock price, naked shorting, related party trading, foreign exchange manipulation via arbitrage, collusion with class action attorneys, and in essence, racketeering. Anyone as plugged in as Marc would know that when I say "do you still want to play" it involves the hedge fund's activities - it is a wildly long stretch to get anywhere else with that, so one does need to ask why all that distance is being covered with such eagerness and facility, even as he airs his son's disability (which I carefully stayed away from.) Answer: He wants to demonize me, and to do that he needs to ignore any data that detracts from his spurious position, as do his media sources. Simple. I am now too big a threat to their activities. And they want me silenced, at any cost, or smeared to the point where the message is ignored. Good luck with that.

3) It would be nice if the FBI/local police would take an interest in who posted Mary's information, and Harry of Anguslane's, all over the Web. Unlike Marc, who is a public figure and somewhat of a notorious financial system pseudo-celebrity (who wants to pretend that his address is secret, but doesn't acknowledge the reality that it is easily obtained from public search engines - the internet equivalent of the white pages, and that further he has the ability to remove it whenever he wants but has failed to take even those simple steps), these people are private citizens whose "crime" appears to have been pro-NFI and anti naked-shorting. That's it. Where are the articles condemning all that? Where are the task forces? The cries of outrage? It would further be nice to see the FBI take interest in the crews of bashers that clog the boards in what can only be called a workmanlike manner.

Here's the short version. In the past, Rocker Partners has tried to use the courts to find out the identities of message board posters. Those efforts failed miserably. This is a new variation, where a credulous, hand wringing, eye rolling claim of feeling threatened might just do the trick. My attorneys tell me this is silliness of the highest order. There is no threat. There never was one. There are pages now written describing, in excruciating detail, what each word meant, what was intended, blah blah blah. Anyone interested in understanding the exchange can, easily. And yet Marc pretends that is over his head. He just doesn't get it, and presumably is living in fear of "how's the weather." God knows what "nice day, isn't it" could mean, or how the hidden menace that is palpable in "how's your son holding up" will manifest. This really reminds me of the lapdog aberrational screed wherein he was convinced that Verizon shifting him from paper to paperless billing was evidence of a global conspiracy against him.

Maybe the Marin police don't have enough on their plates, and really need wealthy, pampered multi-millionaires complaining of imagined boogie men. Maybe the FBI needs to take their eye off the terrorist ball and hunt down the impossibly well hidden threat of Yahoo board posters. Somehow I doubt it. I can report that if any of these parties wanted to reach me, they can email me. Big surprise - they haven't. This is all noise to besmirch my nom de plume, as far as I can tell.

Because they don't want the message to get out, and apparently my efforts are causing them discomfort. So they use the media, and public opinion, and hyperbole, and rhetoric, all the while gnashing their teeth and shaking their fists, pretending to be the aggrieved parties.

Guys? This isn't China or Russia. Freedom of speech. Even if it threatens your little money making operation.

That's the latest. Now, I gotta get back onto the beach. So hopefully you will excuse my not staying glued to the screen to follow the every twist and turn of this.

I apologized for violating my ethical guidelines, and I meant it - it was sincere. But enough is enough.

BTW, traffic at the sites has quadrupled, so apparently the publicity is having the effect of drawing folks to the story. Fancy that.

Sunday, May 01, 2005

Upon Reflection, An Apology

I had some time to lay out in the sun this weekend, think about things, contemplate the meaning of life, and notions like ethics, of right and wrong, and such. I thought about the difference between what you could do, and what you should do. And I realized that I had crossed an ethical line when I posted Marc's address on the Yahoo boards.

Perhaps it was a simmering disgust with the posters who appeared in shifts, very businesslike, to post Mary's personal information - her address, her dead sister's information, the repetitive mocking of her brain damaged nephew in deeply disturbing ways. Perhaps it was anger over Harryofanguslane's information being posted by the same shifts of bashers - a man who had done nothing wrong except behave in a classy and understated way. In my gut, I was disgusted, and I wanted to show "them" that there could be a quid pro quo, that publicly available information was not sacrosanct, and that they could enjoy what these people were experiencing at the hands of people who I believe are associated with the bad guys in NFI. Mary is a warm, wonderful woman who would give you the shirt off her back, and who is taking on tremendous strain by dealing with NCANS duties, as a volunteer, out of a sense of decency. And it's not right that her address and name and such were posted.

And it's not right for me to have posted Marc's, either.

Even though I didn't include his name, avoided any mention of him, frankly, it's still is not a defense, although I honestly did believe that he was one of the ones posting the offending info, or was instrumental in directing it. Still do, truth be told, as the shifts of bashing and clogging posers seem too vocational for an accident.

Still, two wrongs do not make a right.

In today's day and age, I've noticed a tendency for people to avoid owning their mistakes, to look around for something or someone else to blame. I don't think I want to add to that clutter. I screwed up, and violated my own ethical code. This was petty, and mean-spirited in an elementary way, and beneath me. And I'm ashamed that I did it. Not because it was threatening in a legal sense, as it wasn't, and not because of any other reason than because after thinking about it, I have a hard time justifying it in my gut. And that's the final moral barometer, the only one I have. Laws tell us how far we can go and get away with it - ethics define how far it is right to go. And I went too far for my own internal comfort factor, in a low moment, and I hold myself to a higher standard than that.

So for everyone that has placed their trust in me, and who has defended my behavior, thank you, but it is unnecessary. At the end of the day you have to take responsibility for your behavior, and this is me taking responsibility for mine. I'm sorry. Sometimes smart guys do dumb things. If I ever figure out why that is, I'll be sure to let everyone know. I'm still working on it.