Tuesday, August 23, 2005

Today’s NY Post – Much ado about The Easter Bunny

Today's New York Post article was interesting to me, in the sense that it spent a lot of time focusing on the pressing question of Who's Bob O'Brien, and zero on whether it is even possible, just possible, that Dr. Byrne is correct in his allegations about a conspiracy of hedge funds, the media, class action suits, billionaire financiers, and shadowy master minds.

Tut tut. There will be none of that.

Who cares about a wide reaching scheme that threatens the entire US financial system?

Nope. Of what interest is that sort of nonsense? Who wants to know how it is possible that Byrne/friends/loyal institutions could own virtually all of the legitimately issued shares of his company, leaving the huge short interest with no shares with which to cover, and yet the company can trade millions of shares per day? Who cares that Byrne has affidavits placing the defendants in an illegal scheme (if the allegations are to be believed)? Who cares that OSTK hs been on the Reg SHO list for over 6 months, with only a break of a few weeks in the middle, and yet nobody from any regulator will explain how that is possible without the law being egregiously violated every day?

Instead, we have the speculation that a guy by the name of Phillip Saunders is Bob O'Brien.

For the Record: My attorneys advised me several years ago not to reveal my name. Concerns about my safety have escalated since then with the naked shorting topic and several ominous posts and events, and that advice has not changed. So as always, I will neither confirm nor deny my identity. Everyone will just have to keep speculating.

Unless of course the current object of the press’ attention turns out to be a 300-pound Samoan lad. Or I do. Or Bob does. Then, those that have met me/him/us/them will chime in to say it isn't me/us/them and we’ll all be back at square one. See, this is already getting confusing...

Let's examine the trip down the rabbit hole the Post takes in getting to the identity they speculate might be "O'Brien - AKA the Easter Bunny".

About four months ago, a document went up onto the NCANS site with the name psaunders on the document somewhere – that got the whole psaunders thing going - they assumed that the name on the document loaded up on the NCANS website was my/Bob's name - odd, that, given that so many other names have been on docs and associated items at the sites - but still, why not? Seems reasonable as anything else we'll see. And they concoted a timeline that convinced them that it had to be psaunders due to the speed with which the document was edited - things like the telephone and instant messengering are apparently unknown in the hedge fund world. They then assumed that my nom de plume's residence was accurately described as Vegas. Why? Well, uh...because I’d said so. I also said that the site was headquartered at Cheetah's. And many thought that was true in an earlier article, as well. Apparently I’m a liar about much, but honest about my address. Baffled yet?

So then they set out to profile all the people in Vegas (I presume) with that last name (wonder if they considered middle initials used as first names or skipped that fairly common item) and came up with our lucky lad as one of the list of possibles.

So one has to ask what evidence there is that psaunders isn’t a mistaken lead, or a guy who helps with the web stuff, or merely a contributor? They could have asked NCANS and we would have told them that there was at least one psaunders in San Diego who is a card carrying member. Or that there have been other psaunders' who have been involved in the site. Apparently they wanted this to be the correct one, the perfidious Bob O’Brien himself, and poof, made it so. Really, I get the impression that anyone would have done the trick - the machine requires its food.

Could this have anything to do with the Rocker Partners lawsuit, and wanting to have a thread to pull, a guy to name, someplace to start? Nah. That would be way too obvious, given the timing, and the, what, 4 or 5 articles in 8 days the reporter has written on a topic he's never chimed in on before in his life.

One nit to pick, in the article Boyd refers to speaking to O'Brien, and then articulates that "The Post" believes that Saunders is he, and then uses Saunders and O'Brien interchangeably when discussing comments and attributions. That is confusing - it appears that he never actually spoke with Saunders, only has a belief, and yet attributes statements to Saunders as though by using the declarative, he can force theory to become fact. From a journalistic standpoint it seems unprofessional - did he speak with Saunders or not? Are my statements being attributed to Saunders, and if so, absent anything but a theory, why? If he never spoke with Saunders, why does he refer to me as one and the same, absent proof? It just seems rhetorically slothful. You can read a poster's similar view here .

Now, one could wonder aloud why the WSJ has published at least 3 “Who’s Bob O’Brien” articles, not counting the latest Barron’s article, and yet decided not to publish this exact same story, but rather let the Post scoop them. One could also inquire why my identity is so interesting, and yet the message of systematic stock manipulation and naked short selling isn’t. I guess the SEC and DTCC keeping the level of fails secret to protect hedge funds and the US economy from unknown damage isn’t sexy enough, but speculations as to my real name are? Some businessman's possible association with NCANS is gripping, but a coordinated scheme to manipulate a public company isn't news. Got it. Seems like a lot of effort to out a pseudonym, but what do I know?

So what does it all mean? I chose the name Bob O’Brien in honor of the CNBC commentator, but hell, I’m flexible. Half the bashers are convinced I’m James Dale Davidson, so maybe some permutation of all three names now? Phillip Dale O’Brien? Bob Phillip Davidson?

For the record, there are a number of inaccuracies in the article - the first is that I never indicated that I lived or had properties in California (he could have spoken with Saunders, who could have indicated that he did, but I didn't). I indicated that I was in the Oregon/Nevada/California region, but wouldn't narrow it down further. That could have been an honest miscommunication, so we'll just say it was an open issue. I have certainly made my share of oopses, so I can't throw the first stone.

I am curious as to how they got emails alleged to have come from me. That is curious. Very curious. I can't think of any legal way to get them.

I looked at the site for the Lycaon Group, and there is no phone number, just an email, so I'm not sure where all that came from - maybe Brett is one of the webmasters or contributors for NCANS, or the guy that the Lycaon Group site was farmed out to (FWIW, I did NOT create nor contract for the Lycaon Group's website, thus that connection is erroneous), and the phone number is on the registration form - odd that NFI-info would be based in the BVI and masked by a a german registrar, but presumably the same people did Lycaon and went to none of that effort. Could it be that Lycaon was farmed out to one of the content contributors for NCANS, who didn't particularly care if his identity as a contributor was know? Not in the Byzantine world of the ever-more-convoluted conspiracy theorists. It all has to be much more complicated than that. Why is unknown, at present.

But at the end of the day one has to again wonder why any of these speculations are news of any sort.

Let's say none of it is true. Or all of it. Or some of it. How is anything changed? It isn't.

One thing of note is that the Post acknowledges that I have safety concerns, and everyone that reads this blog knows that I have been the lucky recipient of ominous messages, and yet there was no hesitation in publishing an article speculating as to my identity. I wonder what the reaction will be if the businessman's car blows up, or if he's hit crossing the street? Apparently that is a non-issue compared to the importance of breaking this stop-the-presses story.

So we got a column that covered a possible O'Brien sighting, and yet nothing to cover the implications if Dr. Byrne is correct in his allegations. That to me is odd in the extreme. We have the CEO of a major corporation going public with his contention that there is a coordinated manipulation in his stock that encompasses key players in the financial press, that he cannot get a straight answer as to how many shares of stock are circulating for his company, that there is a Master Mind directing a web of colluding hedge funds to systematically violate the law and destroy companies for profit, and yet what is the story?

A full page speculating as to whose shirts I wear. If it weren't so funny I would be crying.

So there you have it. This week’s tabloid-installment of the “Who’s Bob O’Brien” non-story. Stay tuned for the next episode of this soap opera – maybe I’ll get treated to a two-page centerfold with my shirt off in the WSJ next year, with a story about some woman claiming to have fathered Bob O’Brien’s alien child (whose spilt milk bottle left a clear outline of the Madonna, if you kind of squint…).

Friday, August 19, 2005

Who's Bob O'Brien/The Easter Bunny Redux

[UPDATE] The reporter, Roddy Boyd, was kind enough to email me and give me a head's up that the article will run Tuesday. I pointed out that I hoped he had contacted all the players in the drama, as that would be basic diligence. I also pointed out that I found the timing wildly coincidental as it sure appeared that this was being done for no other reason than to provide Rocker's attorneys with a pretense to build their case around, given that the WSJ and NY Times have walked away from the story - The Post is not exactly first string of NY papers, thus it was "if you can't get anyone else to run with it" territory. It is not lost on me that one of the defendants in Byrne's suit is on record admitting to having invested over 100 hours trying to identify me - how fortuitous for him that this reporter is willing to do the heavy lifting developing the identical story as Eisinger and Carol, and publish it when they wouldn't. I further pointed out that nobody had covered the threatening posts directed at me, and I found it odd that nobody seemed interested in factoring that into the wisdom of running an expose on speculations as to "my" identity. Apparently none of that matters, as this reporter is pursuing this as though I was deep throat, and the threats to my legal and literal existence are outweighed by the public's pressing need to know. I actually am somewhat amused by it all, as it is so patently transparent - this was a non-story over 100 days ago, and yet suddenly a reporter who has NEVER commented on NFI, NCANS, OSTK, or any of the issues involved, has issued forth 3 articles in one week on OSTK and naked shorting - two of which are "Byrne's crazy" pieces, and one of which is on its face a balanced story on naked shorting by a market maker - which leaves out that the market maker got a wrist slap fine, and the victim company got pummeled and now trades at 17 cents. So anyone expecting a balanced article is delusional, IMO, but I'm always willing to be surprised. Folks that want to share their support of Mr. Boyd's agenda should email him and his editors at the Post and share with them your admiration for their ethic and their integrity. RBoyd@NYpost.com - the business editor is dcolarusso@nypost.com and the most respected columnist there is Christopher Byron - cbyron@nypost.com [END OF AMMENDMENT]

For those of you who live for the every twist and turn of my life experience, this will seem like deja vu.

I spoke with a reporter for the NY Post at great length over the course of several days about naked short selling, the uber-conspiracy theory involving the Master Mind, why nobody is talking about the FTD situation, the honesty of reporters and hedge funds, etc.

Imagine my surprise today when he asked me to call, and the topic turned out to be....what else?

Who's Bob O'Brien.

Now, I can appreciate that the whole world is waiting with baited breath for information about whose shirts I wear, whether I favor red or white wine, what my views are on rising gas prices and lowered hemlines (not in favor of either). But it did strike me as curious that this same gentleman of letters has written two not-particularly-flattering pieces about Dr. Byrne in just the last week, and is now revisiting the time-worn path trodden by Jesse Eisinger, and after Jesse, Carol. The curiosity came from the fact that the only folks that seem to care are those three, and David Rocker's attorneys (per his press release indicating that he was going to counter-sue [odd, as I'm not suing him] me, on some as-yet-to-be disclosed theory).

Call me overly cynical for a furry creature whose mission is to deliver chocolaty treats to the young ones once a year. But I wonder about someone resurrecting a story whose appeal by now has all the news value of last month's TV Guide.

Could it be that this is a transparent attempt to create an article for the attorneys to cite and wave over their heads, proclaiming that they intend to sue this person because as august a publication as the New York Post declares that it must be true?

Why, that would not only be transparent given the timing, but pretty despicable, in my opinion.

For those that haven't followed the whole saga, one can go back to June and read "The WSJ/Jesse Eisinger Email Exchange" for the identical story.

It really is the same story. Exactly. Same names, same boat, same friend of a friend of a guy who works with NFI on some peripheral tax issues. And here it is again, given fresh wings by the Post.

Now, I can appreciate how annoying it must be to have an anonymous board poster and commentator poking fun, and messing up your game. That has to just righteously piss people off. Especially given how vocal I've been about the Naked Short Selling issue since February - in the off chance that you happen to be using that as an illegal manipulative technique, I'd bet that you'd try virtually anything to keep me quiet. I get it. The Easter Bunny (TEB) is making it difficult to do business as usual on Wall Street, giving stock manipulation a bad name. Check.

But doesn't it seem just a wee bit odd as to the timing?

A little convenient, if you will?

One of the elements of the discussion that stopped me in my tracks, though, was a curious bit of circular logic that I'll share with everyone - it was so odd as to be surrealistic, and the reporter knew it as much as I did.

He indicated that he had determined based upon comparing "my" voice and another supposed TEB appearance, that I was his "suspect".

Huh.

I pointed out that on the Q1 2005 conference call, there was a guy by the same name who called in and asked a question, who sounded like he was late 40's, chain smoked, and was from the Midwest. So if I was that guy (under this theory) how did he account for that? Tut tut, the experts at the NY Post had determined that on that call I had used powerful digital technology to modify my voice, presumably in real time. Really, I wondered? Powerful digital voice modifying technology that would work real time, and make me sound completely different, give me a Midwestern accent, different word choice and syntax, etc.? Either that, or I'd had someone else call in, pretending to be me, for reasons that remain a mystery, as no reason was cited (I asked how he knew that wasn't the real guy, and I was a "fake", but there was no response). I also wondered how they had compared my voice, given that at no time was I told that I was being recorded, and that to do so against my knowledge was illegal* (I was travelling this week in an all party consent state, which is where the calls were from, thus requiring my permission), but passed on raising the issue - who wants to be rude?

And I had something else stumping me. Being fair-minded, I paused, and thought, "that must be some technology". So I asked two obvious questions:

1) How did he know that I wasn't using that powerful digital voice altering technology now, and on all my calls?

2) What was that powerful digital voice altering technology?

He didn't really have a response to that, either. In fact, at that point it seemed like he might have dropped hot coffee in his lap, because he couldn't get off the phone fast enough. I did appreciate his last statement, something along the lines of "Jeff Matthews doesn't know anything about naked shorting and you don't know anything about powerful digital voice modification technology" - an apparent tip of the hat to Jeff's landmark CNBC statement, and its having become synonymous to Wall Street insiders as "telling a tall tale" or "spinning a yarn" or "bald-faced lying through your teeth in a patently transparent manner". That alone made the call for me, as unfair that I believe it is that poor Jeff's clearly sincere words were so badly misinterpreted by so many - it was a little funny when he said it.

My point is that I actually don't have the equivalent voice modification expertise as Jeff claims to have with the ways of Wall Street - I haven't spent the last 25 years engaged in digital voice modification technology development, so I don't know the latest and greatest.

I thought it was cool that Stephen Hawking could hit a screen with his nose and create speech (I think that's how he does it, remembering a somewhat fumbled romantic attempt during "A brief history of time" on PBS - what does that say about my love life?), and I once had a cab driver from the Ukraine who was not only angry about something unintelligible, but also had a device that he held up to his larynx that croaked out words in an oddly monotone and robotic fashion, albeit with a heavy Slavic accent, which was also more than a little disconcerting - but I digress.

Being as I'm a curious guy, does anyone know of any powerful digital voice altering technology that can alter the tone, pitch, timbre, syntax, word choice, pacing and accent, on a phone call? I mean we've all seen the hokey movie where the guy in the dark room pretends to be someone else, and selects sentences (pre-recorded) to trick the gullible rube/protagonist/villain. But this is powerful digital voice altering technology that we are talking, available for use on phones (all phones? Some phones? Special phones?), that works on the fly, and is available to me, TEB. I don't travel with a trailer full of super-computers, so I presume that it must operate on some sort of a PC base, or as part of a handset - dunno.

I know it must exist, as the reporter assured me that he was an honest man, and presumably had a skilled team of technologically-savvy wire heads pointing skyward and proclaiming "Eureka, he's using the Z-57 hyper voice module, running through an oscillating confabulation engine, and ported in through a giga-nano drive on an SGI workstation), or some such.

So anyone know what that is?

The other thing that I told him about, that had occurred since the Eisinger interview/trespassing citation, and subsequent to the Remond hand-off, was that I had been the object of threatening posts by a presumed ex-felon with terrorist connections (read about it in June's "Bad Moon Rising"), along with other threatening posts that weren't particularly noteworthy - it's hard to top the ex-con/terrorist money-launderer/stinger missile procurer angle (I'll see your terrorist, and raise you with a serial killer/rapist...?).

We'd previously discussed the fact that many of the relevant pieces of the Byrne story had been curiously omitted from every negative article that had emanated from the supposedly un-biased press, and he assured me that his piece had contained them, but been cut for space reasons (another amazing coincidence). I bet him a dollar that any piece about me wouldn't contain any mention of those threats ("you are under surveillance") - call it a hunch. I plan to collect my dollar and put it towards my defense fund, also called the "Texas lawyers think it's their birthday, New Years and Mardi Gras due to all the discovery that it will enable them to perform in order to mount an affirmative defense" fund. I find it refreshing that these hedges (because my theory is that all the names on Byrne's list could be part of the proof) are willing to stand up and be counted, and welcome the fresh antiseptic of sunshine into their affairs, their banking records, their trades, their phone records, their emails, their offshore funds, their relationships, their contractors, their tax matters, etc. to allow them to clear their good names from the shadow of the lawsuit's allegations. We live in a marvelous world, and I, the Easter Bunny, am proud to be a part of it.

Now, I don't want to hear any of the cracks about the NY Post being for folks that move their lips when they read People Magazine. In my mind it is a credible publication, and I am absolutely positive that the reason the same story hasn't run in the WSJ by Jesse or the NY Times is because of their restrictive belief that the identity of an anonymous shareholder advocate isn't any sort of interesting news to anyone. I applaud the NY Post for tackling not only the hard hitting issues about Dr. Byrne (does he really think that certain analysts should be "whipped, f--ed and driven from the land"? Does he really think that some female reporters might enjoy a Lewinsky-esque rapport with their superiors?) but now has further defined the cutting edge of responsible, relevant journalism by tackling the "Who's Bob O'Brien" story. It's kind of what the Post is known for, isn't it?

So one more time round the track. Bob/TEB/Psaunders is a bad bad man, he is a friend of a friend of a guy who does something for NFI as a contractor, he has a boat, he lives in Vegas (or doesn't), he thinks there is something bad going on in the markets, and he thinks that Dr. Byrne's theory has a lot of merit. Apparently he also has started or been involved in (that was unclear) a bunch of companies with a penchant for the use of initials in their names, has never been involved in any sort of market-related business or activity, and had to sue someone to collect some money he'd lent. That is the Eisinger story, that is the Carol story, and that is the Post's story.

As to whether any of it is true, or relevant to me and my identity, I will say what I said when Jesse repeated it verbatim - I don't comment on identity-related issues, and will neither confirm nor deny any of it as germane nor accurate about me. The Easter Bunny apparently wields enormous power, and can make billionaires dance to his bidding, pulls the strings on politicians, and is single-handedly responsible for (insert whatever you think I'm responsible for here).

So this isn't about the thinnest of pretenses to create a media slam against me and NFI, using innuendo and guesses, and to provide the alleged perpetrators with a foil to use to convince a hopefully (for them) dim judge to allow what is plainly a SLAPP suit. Far from it. No, friends, this is a quest for truth of the most noble sort, and is to be commended on its face for its integrity and its sincerity.

Anyone else want to bet me on the threats not making it into the final cut? I could sort of use the money for the fund.....

* Calls that cross state lines become complicated legal issues especially when one state is a one party consent state and the other state is an all party consent state. What has happened is that you didn't violate the law in the one party consent state and violated the law in the all party consent state. Moreover, since the call went across a state line, the federal laws would certainly apply. - source = http://www.pimall.com/nais/n.recordlaw.html

Thursday, August 18, 2005

El Conejito De Pascua - The Easter Bunny

A news release today indicated that David Rocker is going to counter-sue Overstock.com, and Dr. Patrick Byrne, and Mary Helburn, and everyone and anyone connected to the suit or the company.

Standard Operating Procedure.

Now here is where it gets interesting. The press release also indicates that he intends to sue Bob O'Brien, and presumably others that have taken the position that something stinks in all this, and that the stink is coming from NJ. Now, we could debate the merits of suing an anonymous message board poster all day, especially since his last foray into this area resulted in his suit being thrown out of court, but why spoil all the fun? If he wants to sue everyone that expresses the opinion that short sellers aren't warm, cuddly gnomes that tend the chocolate grass in Candyland, hey, it's a free country. Anyone can sue anyone over anything, and if he thinks that is productive, super duper. Some might view it as a transparent attempt to silence a vocal critic of illegal manipulative practices, whose NCANS.net organization has created a tremendous spike in popular awareness of a predatory practice that devastates innocent companies and investors, and is a well documented tactic of hedge funds (Refco and Hilary Shane have been charged in just the last 4 months for naked short selling, on behalf of hedge funds).

Why Mr. Rocker would try to silence a critic of this illegal manipulative practice is unknown.

I can only conclude that he believes that when I express opinions against the blood sucking parasites that routinely break the law and use this technique, I am somehow defaming him. Now, how does that make sense?

Presumably he has been defamed by my expressing support for Dr. Byrne's position. Harmed exactly how is not clear. Or why I can't, as part of my right to free speech, express support or criticism for whatever I want also is unclear. Dunno.

Bizarre. Really and truly bizarre. I guess it's OK for Jeff Matthews to say that Byrne is a kook 3 times a day, but I can't express an opinion about Rocker. OK. I respectfully disagree, and further would advance the notion that if public figures disagree with taking criticism from commentators, they should reconsider their status as public figures.

In deference to the import of all this, I have officially shunned all other posting IDs on Yahoo, and have selected a new ID that suitably conveys my appreciation of the gravitas that this matter warrants. I considered Santa Claus or Saint Nick, and the Tooth Fairy was on the table for a while, but after conducting exhaustive focus groups from a wide ranging demographic that mirrors the likely jury pool in California or New Jersey, I settled on something we can all live with.

The Easter Bunny.

Now lest anyone think that this is intended as a slight against our furry friends, or Easter, let me just say, tut tut. Not true.

The Easter Bunny's longstanding record of determination in the face of tremendous adversity (a rabbit who must distribute eggs throughout every Christian country at light speed within a period of hours) could well be a thinly veiled metaphor for my inner fortitude and resilience and commitment to taking on a seemingly insurmountable task.

Or it could just mean that this is the stupidest thing I've ever heard of in my life. Some might take my instinct to mock what I view as colossal stupidity as being insulting or defaming. I would posit that is because you are an idiot. If you fall in that camp, we can certainly agree to disagree as to how stupid - to what degree, or how the stupidity manifests, or whether it is a blathering, slack jawed village idiot sort of stupidity, or a more advanced sort of cretinism. But I do think it is pretty silly, and pretty bizarre. That's my opinion, and I'm sticking to it with rabbit-like tenacity.

Be that as it may, whether your opinion is pro or con, bunny or anti-bunny, let me make one thing perfectly clear:

Rocker is now spending his time and money trying to sue The Easter Bunny.

"Your honor....we are here today to...well.......oh, never mind...."

You can practically hear it now.

I rest my case.

Wednesday, August 17, 2005

Jeff Matthews - "I've been in the business for 25 years..."

.
"...and I don't know how to naked short."

That's rich.

Really.

Maybe Jeff should change his tagline to read "I don't know anything about any of that."

--------------------------

On CNBC today, Jeff Matthews, who calls VP's strippers when they aren't and gets much wrong (or makes things up), said that he's been in the business for 25 years, and that he doesn't know how to naked short.

Huh.

Apparently everyone else does. Hundreds of millions of shares per day fail. It isn't our imagination - there's a little nicety called the Reg SHO list that documents that fact. OSTK has been on that list for 6 months, when the rules say they should be off in 13 days.

But Jeff doesn't know how it happens.

That little performance was classic. Lot's of mockery, snide, smug, self congratulatory smirking, but no meat. And of course, the always popular wide-eyed denial - "I don't know nothin'" of every perp that ever had the cuffs put on. Apparently, MBAs that can recite entire 10K's from memory don't know how to call their buddy the market maker and tell them to sell a hundred thousand, and I'll make it up to you on the back end. Classic. And lest it merely be a stammer-fest of oddly slowed response times and mugging that would have made Robin Williams blush, we were treated to a repertoire of misstatement - he's long puts, which is a derivative short position (as Mark Cuban calls it point blank in his blog), but says with tremoring sincerity that he isn't short, he has no answer for how OSTK can be on the Reg SHO list for 6 months (with only a few trading days off in the middle), he finds simple sentences incomprehensible (was he on downers? Valium? Beta blockers? Heroin suppositories?), and in a master stroke that had my jaw on the ground advanced the hackneyed, facile pablum that equates to, "how can anyone drive faster than 55 MPH - there's rules against that!" idiocy that presumes the viewer is a simpleton. Yes Jeff, people routinely do in fact drive over 55, even though there's rules against it. But you wouldn't know anything about that.

It's rich. Just as with the mutual fund front-running scandal "I don't know how to front-run a mutual fund" statements by the perps in that case, or the specialist scandal "what do you mean they front-run, there's laws against that" in that case, or the analyst scandal "how dare you accuse us of pumping stocks that are junk," Jeff has put on the tap dancing shoes and with the innocence of a newborn babe declared that he "doesn't know anything about all that."

He also doesn't know anything about stock manipulation schemes. Dr. Byrne mentioned Joe Kennedy, Jesse Livermore, Michael Milken at Drexel - the list goes on and on and on, throughout the history of Wall Street, of guys that ran schemes.

But apparently that doesn't happen anymore. Just doesn't. Because Jeff doesn't know anything about all that.

I particularly loved how he mentioned Michael Milken as a potential Master Mind. Ooops. Trying to suck Byrne in. Didn't work. But now that name is out there for discussion. Does Jeff think the former guy who ran the stock manipulation scheme at Drexel using a network of associates, much like what is alleged here, is the Master Mind? Bears further examination. But Byrne didn't take the bait. Byrne 1, Matthews 0.

Jeff. Sweety. Loosen up the tie. In the last 4 months, the NASD filed charges against the perpetrator in Compudyne that was naked short selling out the wazoo, and against Ryco who was naked short selling out the wazoo, ON BEHALF OF HEDGE FUNDS. Elgindy admits to running a scheme, masterminding it, in the parlance of Dr. Byrne. Operation Bermuda Shorts had Mark Valentine and his gang using 1200 accounts to naked short for his hedge funds. And the list goes on. But Jeff apparently doesn't know about any of that. Jeff, Babe. There was a holocaust. The earth is round. Bad guys do bad things with regularity on Wall Street - they always have.

You must have missed that memo.

Nope, in Jeff's world it is deny everything, roll your eyes when you don't have a response, declare clear, concise statements as incoherent, and stammer your way through your agenda: "Byrne is incoherent, and I don't know nothin'." I actually thought that I saw Rocker's hand up his back moving his sweaty jaw and shifting the ferret-like eyes back and forth, but it could have been a hallucination, as by that point I was howling with laughter to the point my eyes teared.

By far the greatest confirmation of the low quality of the man's character was when he shrugged his shoulders at the end of the show when Dr. Byrne called him on posting false and misleading information about his VP, Ms. Simon, as though he had no idea what Byrne was referring to - apparently there's a lot of that going 'round the hedge fund community, where you lie, cheat and steal and if caught, you fall back on...."I don't know anything about all that."

Bravo. Wonderful amateur theater. How surprising. And how credible.

Perhaps next time Dr. Byrne can mud wrestle Carol Remond and a pig. That would be entertaining.

He can go 10 minutes with the filthy swine, and then tackle the pig.

But please, no betting. That would be wrong, and illegal. And we all know that nobody would do that. Just ask Jeff. He wouldn't know anything about all that...

Monday, August 15, 2005

Jeff Matthews - Dolt, Or Making Things Up...? (AMENDED)

NEW SECTION - This morning, Mr. Matthews amended his blog and struck his false and misleading accusation that Ms. Simon was an "exotic dancer", after running it for 3 days and being cited as a credible commentator by national media (all of course those highly critical of Overstock). No apology was issued for the protracted libel campaign, nor any explanation as to why it took me exposing his "error" for him to retract his contention. His claim is that he just received the book I discuss and simultaneously discovered his error. What astoundingly fortuitous timing. Now, if I sound annoyed, it is because this guy is held out by those sympathetic to the short attack on OSTK as a legitimate source of information, when in fact he is clearly highly biased, and is either dishonest in the extreme, or so inept at basic diligence that his opinion shouldn't be solicited for anything more important than "would you like fries with that?" Yet he is treated with reverence by the hedge fund media hacks, and will be on Kudlow this evening, presumably to share his wisdoms with the world. My opinion is that if you are shown to be dishonest or stupid, then your credibility should correctly be flushed down the toilet. Apparently there is a movement on to make Jeff a credible pundit, so that his venomous attacks will have more impact. I find it despicable that he is afforded any face time, given what we now understand as to his tactics. END NEW SECTION

Normally, I'd say that a guy who spends a third of his blog commentary on smarmy innuendo needs to get himself some sort of stimulation other than his computer. In Jeff's case, however, I would almost be more tempted to say that he's either a liar or an imbecile. I'll give you, my humble readership, the facts, and you can decide which is the more charitable interpretation of his fine work.

On August 13, Mr. Matthews published a screed at his blog, titled, "The CEO, the “Exotic Dancer” and the Lawsuit", which apparently purported to be an accurate description of the history of Stormy Simon, Senior Vice President of Overstock.com, and her checkered past as an exotic dancer.

Now, there's a few things one needs to know about Jeff Matthews before we continue. First, he used to work for David Rocker, who's being sued by Overstock, and is accused of engaging in damaging business practices to harm the company and its shareholders. Matthews is also an acquaintance of Marc Cohodes (also being sued), and Herb Greenberg, another Rocker/Cohodes familiar and alleged "financial journalist". Matthews runs a hedge fund (Ram Partners) and is short Overstock (via put options), and bashes the company at least once a week. He also censors my posts on his blog, ostensibly because his delicate sensibilities are offended by my ethics - this, from a hedge fund hack who scribbles hatchet jobs about his short positions while silencing dissenting views from your's truly.

Jeff holds himself out to be a smart guy, savvy, ostensibly smarter than most and more thorough in his research, as he is managing other peoples' money - and that carries a certain responsibility. He is so taken with his own views and ability to accurately dig down and get at the truth, that he shares those views via his blog, which implies that they are in brisk demand. He's had some help with touting his site, as it's trumpeted by many of the bashers on the Yahoo message boards, and by Herb Greenberg, and by Carol Remond, and by the NY Post, and the Motley Fool - all of which have been attacking and criticizing Dr. Byrne for being delusional, and Overstock for being a terrible company.

So here we have his awesome research and cognitive powers displayed for all to admire, namely by "discovering" that Stormy Simon was an exotic dancer - a stripper, in the vernacular. This revelation caused quite a few titters on the message boards, and had the critics of the company howling, and Mr. Matthews' supporters giving one another high fives.

The only problem is that it's dead wrong.

Couldn't be more false.

How is that possible, you ask? How can this lofty being, ostensibly renowned for his superiority to we mere mortals, have gotten it 100% wrong?

Simple.

He went the cheap route. And he failed to do necessary, basic diligence to confirm his find.

Apparently slandering a VP in a misogynistic, sexist manner is OK in Jeff's book, as it certainly doesn't warrant any heavy lifting to ensure that it's accurate.

Sloppy and lazy, in my lexicon.

The court papers he cites are from findlaw.com, which is commonly understood to be the Weekly World News of legal search engines by anyone that does serious research. It's handy for quick skims, but is no more appropriate for doing any meaningful digging than reading a two page pamphlet is for learning to perform surgery. The reason it's considered as such is because the data is not updated nor current, and thus is periodically wrong.

Like here.

I smelled a rat when I read his piece, and so, in about 10 minutes, located the actual court document: http://www.utcourts.gov/opinions/supopin/mead.htm

Imagine my surprise when it didn't contain the language that Jeff said it did. I read it twice. It doesn't. Read it yourself.

Huh.

And people trust this guy with their cash? One can only imagine the level of acumen he wields in more demanding research and analysis, if this is an example of his work.

Which it is.

And which he is so proud of, it deserves a position of prominence in his rhetorical kingdom.

Are you starting to understand why he doesn't want adults posting at his little propaganda party, which is a string of "Jeff, oooh, you're so smart, thank you for enlightening us" cooing from the same 5 or 6 quislings and suck-ups? Apparently he's correctly concerned that he will be debunked, and exposed as either an arrogant buffoon, or a liar so consumed with advancing his agenda that the truth can be discarded in favor of, well, making things up. That's my opinion.

I can appreciate why he wouldn't want that to get out - it's hard to be a media pundit when you're dead wrong on your flagship piece.

Anyone interested in knowing more about the case, which was apparently a sensation in Utah at the time, and fostered a book about it, can go see and order the book at: http://www.overstock.com/cgi-bin/d2.cgi?page=proframe&prod_id=1408382.

Jeff did a sloppy job, and IMO libeled a woman, and didn't bother to check his work to verify that what he posted was right. Or, someone sent him that ready to be printed, and they might have known it wasn't the latest, but just didn't tell him. Or, he knew it wasn't right, and printed it anyway, wanting the headline value. Either way, IMO he has libeled the Senior VP of a publicly traded company using provably false and misleading information, with a profit motive at heart for doing it. That is despicable and should be condemned. I hope Kudlow asks him about it tomorrow, but I doubt it. These guys want Jeff touted as the next Herb for their purposes, IMO. Why let a little libel and false and misleading information get in the way of your agenda?

I'll leave you with Jeff's own condescending and hubris-laden words from his aforementioned screed, and point out that his endorsement of Mr. Rocker and Mr. Cohodes can be taken with the same assurance of thorough understanding and accuracy that his take on Ms. Simon contains. Which is to say none at all.

"So in this latest round of high-stakes poker by Doctor Patrick Byrne, you can put your money on the CEO who apparently entrusted his company’s marketing campaign to a woman described as having been “an exotic dancer.” Or you can put it on two of the hardest-working, smartest and least-likely-to-be-intimidated-by-a-hokey-lawsuit individuals I know, David Rocker and Marc Cohodes. Mine’s on David and Marc. "

Thank God that Jeff doesn't get to gamble with my cash - I wonder if his investors understand his decision-making and research skills when they entrust him with their's? Because "his money" is on David and Marc - or maybe I should say his investors' money is.

Best of luck with that.

Friday, August 12, 2005

Overstock, The Den Of Thieves, and the Master Mind

The names articulated in the schematic Dr. Byrne presented are incredible, a veritable who’s who of the hedge fund world and Wall Street:

David Rocker. Leon Black. Tom Barton. Marc Cohodes. David Einhorn. Jim Cramer. Kroll. Barron's. The WSJ.

And at the bottom of it all, a Master Mind. Some on the Yahoo boards have a speculation, which seems credible to me. Check out this post. If true, this is the guy who was a poster boy for corporate raiding and stock manipulation, who's spent much energy and money to present a benign and innocent façade since he was released from Federal prison.

The name wasn’t mentioned, but the initials seem like a good clue. Master Mind. Famous 80’s securities criminal, back in business, unbeknownst to the SEC. MM.

It all starts to make sense. In today’s Overstock.com conference call, Dr. Patrick Byrne laid out a master plan of manipulation that is staggering in the comprehensive way that it covers all the bases – media, regulatory, hedge fund, financial – and which is the single most complete coordinated conspiracy I have ever heard of. It actually makes a lot of sense once you think through the connections, and read some history about the likely MM, rather than the puff piece propaganda generated that frames him as a victim of the bad old anti-Wall Street government. The guy I’m thinking of was involved in a stock manipulation scheme the likes of which had never been seen before, and he got put away for it. While he was in jail, he was allegedly teaching an MBA level course to other inmates on how to game the system (this from an insider and former regulator who was involved in shutting it down). Once out, he spent considerable time and money sculpting a front as a philanthropic hero, misunderstood, brilliant and persecuted. I’m guessing that this is who Byrne was thinking of.

Many don't remember, but Giulliani took him down. The same Giulliani that is a partner at one of Dr. Byrne's attorney firms. When you look at what Giulliani put him away for, it was being a master stock manipulator. A guy who stole money from shareholders by systematically breaking the law. Not too glamorous or noble. If it is him, the SEC and the DOJ needs to get on this now, contact Byrne and the legal team and see what evidence they have.

Here we have again, laid out in living color, a master-planned stock manipulation scheme that involves the theft of billions and billions from American shareholders, according to Dr. Byrne. Old habits die hard, and when you are used to being the smartest guy in the room, the guy for whom none of the rules apply, it has to be tough. It also shows that if it is him, he learned nothing from his stay in Club Fed, other than how to cover his tracks better.

The Call Blow by Blow

What can be said that Dr. Byrne didn’t say in his conference call? Let’s recap.

First and foremost, about 100% of the total outstanding shares of OSTK are held by insiders, and strong institutions that aren’t trading. Which inevitably points to massive counterfeiting of the company’s shares, as it trades between 500K to 1.5 million shares on any given day – and none of the actual owners are trading. So that begs the question how are an estimated 10 million or so shares (counting FTDs) going to cover when only 100K or so shares are actually in the float? And who allowed this wholesale counterfeiting to get this far? This is not some OTCBB stock selling shares out the back door – it is a billion dollar market cap company on the NASDAQ, that regulators and the exchange are supposed to be protecting – in other words, this isn’t supposed to happen. So how did it?

Dr. Byrne introduces the cognitive disconnect with one of his first slides, wherein he shows the huge disparity between the number of transactions the exchanges report, and what the brokers report - often more than a 100% disconnect, for long stretches. He postulates that this is the infamous "ex-clearing" gimmick at work, wherein larger brokers keep a separate set of books to document trades with no delivery, and swap those IOU's back and forth between brokerages, removing them from the prying eyes of the regulators, and enabling easy churning between related accounts. That seems plausible given the fact that for 99.99999% of all companies, the two metrics are in lockstep. OSTK is different. Lucky them. Coincidence? Not likely.

But that is just the preamble. The meat is an expose of a stock manipulation scheme involving some of the biggest names on Wall Street. According to Dr. Byrne, the assault on a number of companies by the same network of hedge funds, using the same techniques, is part of a coordinated engine of corporate destruction being perpetrated using all of the tactics I described in the Q4 OSTK CC, and then some. Its tentacles intrude into the media via an intricate network of interpenetrated relationships, into politics, into corporate espionage, into the DOJ and the SEC by powerful and rich men accustomed to swaying the rules in their favor. The driving force is a network of hedge funds structured and beneficially owned by a “Billionaire financier” who was unnamed (but Byrne said he could name him, or rather declared “I Can”), and directed by a Master Mind who was a famous uber-market criminal from the 80’s.

It all fits. If the message board poster's guess is correct, who else would have the intelligence and contacts to create this sort of web of deceit and illegal activity, than the guy that invented the modern variant of the game?

So now the question is what is going to be done about it? The information is out there. Their bankers are no doubt now freaking out and trying to figure out how to contain this, how to run disinformation, and distance themselves. The inevitable huge class action lawsuits will come, as the pockets rarely get this deep. Discovery will no doubt implicate more of a who’s who of the nation’s wealthy, where self-made is synonymous with immune from prosecution – until now.

I had made a number of predictions in the previous Sanity Checks. One very specific one relates to "financial journalists" who have been co-opted by the bad guys, and who appear to me to be nothing more than mouthpieces and apologists for the perpetrators. And right on schedule, bam, first Carol Remond publishes a slam with a false and deliberately misleading and alarmist headline (it read "OVERSTOCK subject of SEC Probe", referring to the rumored informal investigation initiated by these hedge funds, that Dr. Byrne said he'd heard about from February, that fizzled into nothing) and then the Lapdog trotted out a typically lame commentary, that ignored all of the facts laid out by Byrne, and focused on being an apologist for the hedges. We were also treated to CNBC referring to the perpetrators as "respected hedge funds" (there's an oxymoron) by talking heads that barely could conjugate or read their lines.

The inter-connectedness of the players, most of whom are within a 1 mile strip of Manhattan, is pretty damaging, and the scenario is plausible to my ear. This also explains why the financial press seems so disinterested in reporting on the obvious manipulation that has been noted by blogs all over the web. It explains why so many of the supposedly unbiased reporters invariably have an agenda. It explains why so many shareholders have been completely and totally screwed by a system that has apparently been robbing them blind, in a fraud as blatant and complete as Enron, Worldcom and Tyco combined. And it explains why Spitzer is so disinterested in exploring this. After all, he’s friends with one of the participants, and undoubtedly needs campaign money to run for governor – and these are billionaires we are talking.

So now we have all the puzzle pieces, and the SEC and the Department of Justice can’t just pretend that conference call didn’t happen, and the brokers on the hook for the 10 million bogus shares of Overstock can’t just keep selling counterfeits and pretending they are real. Or maybe they can, judging by today's trading.

Anyone holding OSTK shares should get paper certificates, now. That will be the only protection from the coming meltdown, as millions of shares that don’t exist have to be covered out of around 100K real shares.

Folks, email and fax your federal and state regulators demanding subpoenas be issued immediately against the parties named in this call. Call your brokers and demand your shares be issued in paper form, today, no excuses.

And if you are holding any of the other companies these guys have been robbing, NFI, NAVR, PPD, KKD, NFLX, ALD, TASR, HANSEN, etc. do the same.

Just to end on a fun, upbeat note, here's a multi-part bonus question for the gang: What founder of what private investigation/security firm lives next door to what secretive hedge fund mogul, whose wife worked for what financial periodical?

It really is a small world.

Hopefully law enforcement will now get involved and put a stop to this, and bring the perpetrators to justice. If not, it will all come out in discovery.

Thursday, August 11, 2005

Overstock Sues Rocker and Gradient

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Better Than American Idol, More Action Than Fear Factor…

This afternoon, shareholders of Overstock.com, along with the company, filed a groundbreaking suit against Rocker Partners, David Rocker, Marc Cohodes, Gradient Analytics (AKA Camelback), Donn Vickrey, and several other defendants in California State Court, alleging unfair business practices, and conspiring to denigrate Overstock.com's business so as to reap personal profits for themselves and for their companies.

The attorneys representing the plaintiffs are the O’Quinn Group, headed by Texas legend John O’Quinn, of big tobacco, Phen-Phen and DTCC suit fame. This is an extraordinarily well-funded consortium that can see this through to its inevitable conclusion, which will likely go on to name more entities and individuals going forward, as the facts of the case become known, and discovery is obtained.

Let me start off by saying that I’m not an attorney. I don’t claim any particular legal acumen, nor should my claims and comments be construed as any sort of statement of absolute fact – this is my opinion only, and should be taken as such.

Having said that, it appears to me that the inevitable has occurred. The bad guys have been caught with their hand in the cookie jar, and they are now going to benefit from a free and open disclosure of their misdeeds in an open court, and their techniques made part of the public record. If the claims in this suit are true, then the investors in the funds named are likely going to have significant cases against the managers of the funds, as the complaint alleges that they have participated in what to me could only be described as a systematic, organized campaign designed to depress the share value of OSTK, in order to create financial windfalls for the hedge funds and their associate conspirators. This takes on an ominous RICO characteristic, as if true we are talking a regular pattern of illegal behavior by disparate entities, colluding and acting in concert to achieve a criminal end result.

I applaud the plaintiffs for stepping forward and sending the message that this wholesale abuse of the system will not be tolerated, and I celebrate the attorneys who have stepped up to the plate to bring the perpetrators to justice.

For years, the shareholders of companies like NFI, PPD, KKD, TASR, TTWO, OVTI, NAVR, ACAS, ALD, and OSTK have been convinced that the precipitous drops in the value of those companies’ shares, and the seemingly coordinated assaults (including media attacks, class action suits, questionable regulatory probes, radio and television eviscerations, message board onslaughts by vocationally driven teams), were part of a Byzantine scheme driven by some dark force, some group that had so co-opted the regulators and the media that there was no hope of justice or fair treatment.

Now we have a face to put to the force, or at least the tip of the iceberg. Everyone should read the complaint and familiarize themselves with the charges. It would not surprise me a bit if this was followed by criminal charges being brought – if true, the alleged behavior is certainly criminal (in my untutored opinion) and deserves the prompt attention of regulators and the Department of Justice.

It’s interesting to me that the market greeted the news of the suit with an increase in the share price this afternoon. Other companies that have released news of lawsuits have experienced price drops – like NFI, when they sued PMI, and Herb jumped all over it, and the price declined precipitously. It is difficult to predict how the market will take news like this – but apparently the market liked the story. The bashing posters would have us all believe that this is folly, a nuisance suit, evidence of Byrne being unbalanced - but the market apparently sees things differently. I do hope that the trading from today becomes part of the case - it would be fitting if the trades turned out to be the same accused perpetrators selling more non-existent shares in a further effort to damage the company's share price. How much clearer would it have to be?

It is ironic that Dr. Byrne offered fair warning of discrepancies and concerns over the company’s trading in the last conference call. I’ve been wondering for some time how a company like OSTK, whose shares are essentially 100% owned by the Byrne family, their friends, and institutions who are intimately connected with them, could have huge a such a huge short interest, really un-coverable without driving the price into the stratosphere. Well, here’s an explanation. The bad guys allegedly intended to drive the company into the dirt while breaking the law – a handy way of investing, if true, as you don’t have to be correct about the company, just adequately funded and motivated to do whatever it takes.

I cannot believe that there isn’t a huge element of truth to the charges – they certainly resonate with me, and what I have been saying for some time. Now I suppose we will get to find out whether these poor hedge funds and their associates are being unjustly accused, or if they are actually as dirty and vile as we have long suspected. My hunch is that the stink wafting from this is going to turn out to be overpowering, and will involve big and influential Wall Street names before it is over, and will finally force the “see no evil” regulators to confront the decay and morbidity in the system, as well as within.

This is a huge blow to the hedge funds’ bankers as well, as if they have been complicit in aiding this organized predatory scheme, they will get sucked into it, as will the investors in the funds, their satellite of media cronies, complicit money men, and their dirty tricks operatives. As this unfolds, I am confidant that the truth will prevail, and if the allegations are true the ugly web of lies, deceit, larceny, misappropriation, collusion, etc. will unwind and strangle the perpetrators.

It can only be a matter of time before the other companies that have been preyed upon follow this lead and we see other legal challenges to a practice that the system seems content to ignore. This marks an important day for investors, and for the companies that have been targeted by this network.

It is a day that many have been waiting for, and a few have been dreading.

I shall follow the proceeding with interest.

Pundits have long been expecting a cartel of hedge funds to implode, creating a cascading domino effect in all the companies that they are short, their leverage now their worst enemy - speculating as to what the trigger would be.

Folks, I think we have ourselves the trigger.

Now, I’m sure that the industry will circle the wagons, and decry this as foolishness, and pretend that it isn’t happening, just as they have with Dr. Byrne’s now famous Q2 conference call, wherein he compared the short position in OSTK to a bus hurtling towards a cliff, while he tried to warn that the bridge was out. I’m certain that the network of enormously influential friends and co-conspirators will actively try to spin this as a non-issue, even as they eye one another for signs of flop sweat or cooperation with the authorities…as they try to figure out who will be the most likely to roll. Once it registers on them that this isn’t going to go away, and that the whole ugly truth will be known, that there isn’t any way to cover this up (as they have apparently been doing for years), you can expect distancing from the bomb blast zone. Nobody is going to want a piece of this when it becomes clear that it is going to reveal all.

I would think that the brokers that facilitate this sort of game are at risk now, as it can only be a matter of time until their role is uncovered. I would believe that they have to be trying to figure out what happens next. I’m quite confident that there are calls going out to reassure everyone that it is all going to be fine, we are good for it, have no fear, we’ve weathered worse than this. The problem is that they haven’t – the only time they’ve even come close is when L&H filed against many of the same bad guys, and they didn’t have the financial staying power to fight to the conclusion – that, and the company was up to no good. That wasn’t a challenge – that was a softball. This is the A team coming over the hill with guns blazing. A legal team with virtually limitless financial resources and access to the very best talent, well prepared for the inevitable barrage of counter-measures and stalling tactics, ready to dismantle the ugly machine and show the world its component parts.

I have a feeling the names in this are a who’s who of Wall Street, and wouldn’t be at all surprised if you see a full court press to discredit everyone and everything associated with this effort – the plaintiffs, the attorneys, the company (even thought they aren’t a party to the suit), Dr. Byrne, probably even me (I’m not a plaintiff, but they just don’t much like me, so I expect that they will target me for a slamming). I can hardly wait to see the first salvo from the hedge fund quislings, the Carols, the Jesses, the Alperts, the lapdogs, the Jeff (making things up, as usual) all professing that this is stupid, or unfair, or typifies companies that are in trouble, etc.

The spin machine will likely now go full speed, as the bashing crews are currently doing on the message boards – no conspiracy there, folks, no siree.

All of which won’t change the story that the trading records and emails and phone logs will tell. And that is, at the end of the day, their problem. The trading tickets will tell the story, just as they did in Operation Bermuda Shorts, where a far less sophisticated group was caught with over 1200 accounts to do related party trading and evade the US rules, preying on OTCBB companies. There are no new ideas.

This suit is the first step in the process of the market getting a glimpse of the seedy underbelly of the industry, and the predatory practices that are its stock in trade. It should be quite a show.

And we have ringside seats.

Popcorn, anyone?

Friday, August 05, 2005

Ugly Is As Ugly Does

Sometimes I feel like Karnak the Magnificent, holding an envelope up to my head and guessing the contents.

On the January Ovestock.com conference call I made a series of predictions associated with a coordinated manipulation of their share price. I also outlined the anatomy of a manipulation, and broke it down into its components. As a refresher, here are the central elements:

Part One

1) Short position established in target company, price run up for best short prices, some money made on Call options, which are sold, and Put options are bought.

2) Once established, media blitz of ugly articles unleashed from usual suspects.

3) Pet analysts issue negative reports.

4) Message boards are blitzed with panic-inducing posts.

5) Related party trading from ECN’s dominates down days, creating huge volatility, scaring off most retail investors.

6) Rinse and repeat.

Part Two

1) Company is listed on Foreign exchanges to facilitate offshore naked shorting via arbitrage and foreign market-maker loopholes.

2) Naked short selling commences in earnest, as legitimate borrow either too thin or too expensive.

3) Company appears on Reg SHO list as a result of 1 and 2.

4) Bogus regulatory investigation starts, driven by short seller complaints.

5) Alarming slam article in Barrons or WSJ-level paper.

6) Class actions suit commenced.

7) Massive down days with 50% or more of all outstanding shares traded to trigger stop losses and panic selling.

8) CNBC, TSCM, Lapdog, Cramer all take jabs, playing pile on.

So where are we with OSTK? Well, we are in Part Two, between step 3 and step 4. So here are my predictions for what the short fund network has in store. Follow along.

1) There will be a regulatory probe initiated, alleging accounting impropriety, or trading impropriety, or failure to make adequate disclosures – whatever, the actual investigation is meaningless. It is the headline value that is important, as that can be used to trumpet that the company is clearly bad, or up to no good. Doesn’t matter if any of it is true, as by the time the investigation is completed, the damage will have been done and the shorts will be long gone.

2) A major publication, like the Wall Street Journal C section or Barron’s, will publish an innuendo-laden piece, usually written by one of a roster of known hedge fund-friendly “journalists”. It will allege many things, skirting a line of libel, and make it appear that the company is engaged in everything from white slavery, to making furniture out of baby skin. Management will be accused through leading questions of being larcenous, inept, compromised, etc. The company’s future will be painted as one filled with doom, and any positives will be spun as lies, delusions, or meaningless. The message will be to sell immediately, before you find yourself holding the next Enron.

3) A class action suit will be brought, usually citing the article as its basis, or simply the massive selling that accompanies the article. This will further depress the stock price.

All of the above are part of a calculated manipulation to destroy shareholder value by depressing the stock price, creating forced selling via margin calls, and causing panic selling. Once it is suitably depressed, it will be churned at the bottom via related party trading, and the short position will be unwound, the Put option profits taken, the short sale profits taken, and the gang will move on to the next target.

In rare instances this will not work as planned. OSTK will likely be one of those cases, as there is no way the Byrnes will sell as they will know it is all BS. So that means that the goal will be to convince the institutions to sell, and the retail longs to follow suit. But there is a problem here as well – the institutions are mostly composed of folks who understand this game, and are unlikely to play along.

This is known as an impasse.

Dr. Byrne let the shorts know that this was a stalemate in the CC, when he spelled out that there were essentially no legitimate shares left with which to cover any shorts.

Be that as it may, I would expect the bad guys to try anyway – they have to, as there is no alternative.

If you are concerned, email this column to the SEC and to the Senate Banking Committee, who oversees the SEC, as well as to the State Securities Regulator in your state. That way, they can’t claim that they weren’t warned, or that this all comes as a complete surprise. In a perfect world the Senate Banking Committee would get an accounting of the Fail To Delivers for OSTK, and be able to act as an interested spectator watching the SEC do its job. Forewarned is forearmed.

For the record, I accurately predicted the identical events with NFI, six months before they occurred, and was roundly chastised as an alarmist and a kook. And then it unfolded precisely as foretold. This is the standard operating gamebook of a network of short sellers that serial kills small and mid-sized companies for a living. It usually is unvaried, as it works every time, or at least 90+% of the time. That it happens to be racketeering is besides the point, as nobody is enforcing the laws that would deter the bad guys, so they continue to operate with impunity. This is a unique opportunity to put the regulators and the banking committee on notice as to how this works, and what is likely to occur on a going forward basis. If they don’t follow their gamebook it will be because of a catastrophic event for them, which is unlikely given their history – but we can always hope.

Thursday, August 04, 2005

Paper? You Don' Need No Steenkeeng Paper...

Just a short postscript to yesterday's OSTK CC, which has been met with absolutely deafening silence by virtually every media source and market commentator on the planet.

During the call, Dr. Byrne spent a good 20 minutes spelling out in exquisite detail how the numbers work out so that there are likely no more than 300K or so shares that aren't owned by a Byrne, the wife of a Byrne, or someone a Byrne has taken a bath with (a whimsical tribute to the habit of having all the tykes bathe together as toddlers), or an institution that has known him for many years.

I have been vocal that anyone owning OSTK in any weight should immediately move their shares to a cash account, and request paper certificates.

Doing this, I anticipate several things going forward. First, I anticipate that anyone demanding their paper certificates is going to encounter a brick wall of resistance from their broker. The reason is simple - the broker doesn't want to have to call back the shares he is making big money by lending. Simple. Your request will cost him windfall profits, and he won't want to lose all that free money renting your asset out without your knowledge or consent (other than the brokerage agreement you signed, which gives him that right). So you are now his adversary - he views your wanting your property back as an infringement on his ability to use it to make 20% or more interest.

When you make your request, do it in writing. Registered or certified mail is good. Email will also work. Ask for a written response. Expect them to try to talk you out of it, to assure you that a cash account is adequate protection, etc. It is a lie, designed to keep the share in electronic format, where it can go make them some cash. Don't be fooled. They will tell you that you will have problems selling your shares. Another lie - the Cusip number will easily allow you to sell now, and deliver the cert. If they tell you that is wrong, get another broker - there are plenty that will do so.

Follow up even if they say yes, on a weekly or so basis. There have been numerous exchanges on penny stocks where the brokers commit to delivering the certificates, and then ultimately stonewall the shareholders, refusing to fulfill their obligation. There is no excuse for anything like this happening with OSTK - this isn't a penny stock - it is a billion dollar NASDAQ company, and there is no legitimate reason for you to not get your property when you request it.

If you can't get your certificates, and start sensing the runaround, it's time to escalate matters. First, call OSTK's transfer agent and get them involved. The transfer agent's name is Theresa Collins, and her telephone number is (781) 575-2193. Her company is ComputerShare. She should be able to go to bat for you.

If she can't get the job done, then email me, and I'll get the state regulators involved. Every state has a state securities bureau or person responsible for those affairs, and I have contacts with many of them, and can find yours for you pretty quickly. Most brokers won't enjoy having the state come down on them and give them a proctology exam for withholding your property. Unlike the SEC, most states will move, quickly and effectively, to nip this in the bud, and the brokers dread that knock on the door. Most will miraculously find the certificates if they are told what the next step will be.

I would expect that this will become harder as time goes on, and fewer and fewer of the genuine shares are left in the market. You do not want to be one of the folks who can't get their shares in the later stage. Act now, and understand your broker is not going to be your advocate here - you will be costing him a lot of money, much as though your kid was renting out your car to his friends at night while you slept. He won't be overjoyed to see the gravy train end, and will try everything to avoid doing it, including promising to do it and then having an endless series of excuses after the fact for non-performance, avoiding your calls, etc.

Understand how this will likely play, and be prepared for it, and be prepared to act when it happens.

Anyone with over 500 shares would be advised to do this, sooner rather than later.

Wednesday, August 03, 2005

The OSTK 300K Share Conundrum

Dr. Byrne had a good conference call today. Especially towards the end, when he started doing the math on the number of shares that were owned by his family, friends, and institutions. The way the math works out is that all but about 300K shares issued are owned by these folks.

That is insane.

300K shares legitimately issued by the company, insiders and family who aren't trading or selling, and institutions that aren't trading, judging from their filings.

So here's a question: Today 2.5 million or so shares traded hands, on blockbuster earnings (the company was projected to show a .22 cent loss, and beat that by almost 50%, with a .13 cent loss), and yet it was methodically sold off, from the ECN's - BRUT, CINN, and ARCX responsible for 90% of the trades from the sell side. Where did all those shares come from, if nobody on the Byrne side of the fence is selling?

Answer: They are phantom shares created by the system, and traded as though they are real. FTDs. Or at least a good portion of them likely are. Some are no doubt shares lent by a few of the institutions to legitimate short sellers. But most are likely FTDs.

Question two: What happens when the institutions finish up their trading today, and run the math, listen to the call, and figure out that there are only 300K legitimate shares from which to cover around 10 million shares, give or take?

Bonus question: What happens when the institutions simply call back their loaned shares - and there are no actual shares with which to cover? What happens to the millions and millions of shares that must be bought, immediately, no excuses, and there are only 300K shares? Does anyone believe that the institutions won't comprehend the ramifications, and be thinking in terms of 5 or 10 times the money?

Why not?

Did anyone notice that you can now buy September call options up to $100? Wonder why that is?

I commend Dr. Byrne for alerting the legitimate shorts as to the danger of their situation, and further would advise one and all that criminal behavior like illegally naked shorting to manipulate the price of a stock can sometimes end badly. This looks like one of those times, where a tightly held company owned largely by folks that know each other on a first name, if not familial basis, decide that they don't want to play the game any longer.

If I was one of the three prime brokers that supports the hedge funds involved in this, I would be asking some very hard questions, and stopping any short selling that isn't accompanied by a legitimately issued share of stock immediately. This contingent liability for these houses could be astronomical pretty quickly, as the other stocks these hedge funds are short also must get bought in to cover the damage. And there will likely be heavy hitters watching to ensure that no funny business goes on, so the usual tricks won't fly. So the bankers now are on notice that they have an issue.

Because at the end of the day, it's not just the hedge funds that have a problem now. What's that old saying? If you owe the bank a dollar, you have a problem...but if you owe the bank a billion dollars, the bank has a problem....

Dr. Byrne, IMO, just alerted the banks that they have a problem, and it could be triggered whenever the institutions want to call the shares, or if Dr. Byrne decides to take the company private, or any number of other scenarios. And this isn't some penny stock where it will all go away - everyone will be looking at the trades from this point forward, expecting some sort of shenanigans.

So longs, get your paper certificates now. Legitimate shorts, understand that you have just been warned that you could be put through a thresher, without warning, at will, where your fortunes will be lost in a matter of days. And manipulators, your days are now officially numbered.

That's what I took away from the conference call.

For the record, I have no affiliation with OSTK, nor am I endorsing the buying or selling of their shares, for any purpose whatsoever. Do your own diligence, and invest wisely.