This is the speech that lead to the book, “Fooling some of the People”
Part 1:
Part 2:
Part 3:
Here is the book:
Disclosure (“none” means no position):
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Tag: einhorn
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SEC to Quell Rumors………..Right!!
Does anyone really think the SEC will be able to stop rumors? Do they really?
The U.S. Securities and Exchange Commission said Sunday that it and other regulators are firing up new examinations to prevent stock-price maniplation by short sellers and others.The agencies’ goal is the “prevention of the intentional spread of false information intended to manipulate securities prices.”
Now, who is to say what is “false” vs what is “wrong”. We are now delving into the realm of a persons intent and when you do that, it is a losers game. On another note, why are we only looking at short sellers?
How about CEO’s and CFO’s of financials who said “things were ok” only to write down billions months later? Are they not just as guilty?
The SEC is up against it in this one because up until now, the shorts have been right and the firms that have come under attack are poorly managed, over leveraged and have questionable business models for down times. Reads Bear Sterns (BSC), Lehman (LEH).
If I “think Lehman has questionable loans and think management is not forthcoming enough so things must be worse”, then am I spreading false rumors or just speculating? Is this going to be a rear view mirror test? We are going to prosecute people after the fact when what they have said proves wrong? Will journalists get into trouble by reporting these rumors?
Will we investigate Congress-people in an election year like this one who throw bombs about the economy and stocks in an attempt to curry votes? In effect they are hurting equities and stock prices by making the current situation seemingly worse than it is. Surely we can prove half of what is said there is “less than truthful”. Is a SEC investigation into Sen. Schumer coming? clearly his letter lead to a run on the bank. any bad news is bad for Republican’s in the election. Was Schumer pushing Indymac over the edge for votes?
If we are going to investigate Bill Ackman and David Einhorn, let’s look at Schumer’s motives also.
Rumors have and will be around forever. If you have a strong business, they may affect the share price temporarily but not impair it. If your business is weak, they may hurt it….
How about the SEC investigate all those newsletters I get in the mail pumping stocks that never go anywhere?
Disclosure (“none” means no position):None
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Fooling Some of The People…..A Review
So, finished David Einhorn’s book over vacation. Pissed me off…
Let’s just put aside the whole “short seller” argument. Like I have said before, I do not care how folks make money, short, long, whatever. Short sellers, when wrong, get creamed and can make longs tons of cash in a very sort time when the shorts cover en mass.
Now, Einhorn was right about Allied. What pissed me of was the “regulators”. Far from being asleep at the wheel, it is their abject ambivalence at the Allied situation that ought to infuriate people. They just did not care. Both the SEC, SBA and Congress (surprise!!) are to blame here. Einhorn painstakingly details his efforts to bring the Allied fraud to regulators who just did not care…..
Now we are talking about further regulating capital markets? Why bother? We do not even enforce the regulations we have now!! Why add more regulations that can be ignored by the very folks who are supposed to enforce them? Why?
Do not feel bad for David though, the publicity he has gotten has vaulted him to “famed” status and now his picks and thoughts are sought after. Shorting a stock successfully just became far easier for him now that millions believe in him. Now, this is warranted given his 20% plus annual returns at Greenlight, it is just that a whole lot more folks are listening to him now.
Too bad Lehman’s (LEH) Erin Callahan was not one of them…
Read Einhorn’s book. It is an eye opening and sobering experience.
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Another Vacation
So headed out again this time for 10 days Saturday.
The family is heading to upstate New York to Lake Tuscarora for 10 days of fishing, campfires and nana time for the kids…
Last year we had no internet (or cell) access so I am not sure if we will this year on the lake. At any rate, even if we do, posting will be extremely limited if not non-existent, this is kiddie time. If anyone wants to be able to post in my absence, let me know and we can set something up. I have a handful of folks in mind….
My goal is to get through the following books.
I have started Einhorn’s and so far it is great……..
and
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David Einhorn yesterday filed a 13-G in lender Fifth Street Finance (FSC).
According to the filing:
As of the date of this filing, each of the Reporting Persons may be deemed to be the beneficial owner of the following number of shares of Common Stock:
i)Greenlight LLC may be deemed the beneficial owner of 990,640 (4.4%) shares of Common Stock held for the account of Greenlight Fund and Greenlight Qualified.
ii)Greenlight Inc may be deemed the beneficial owner of 655,848 (2.9%)shares of Common Stock held for the account of Greenlight Offshore.
iii)Advisors may be deemed the beneficial owner of 494,248 (2.2%) shares of Common Stock held for the account of the managed account for which Advisors acts as investment manager.
iv)DME GP may be deemed the beneficial owner of 494,248 (2.2%)shares of Common Stock held for the account of the managed account for which Advisors acts as investment manager.
v)Mr. Einhorn may be deemed the beneficial owner of 2,140,736 (9.5%) shares of Common Stock. This number consists of: (A) 990,640 shares of Common Stock held for the account of Greenlight Fund and Greenlight Qualified, (B) 655,848 shares of Common Stock held for the account of Greenlight Offshore, and (C) 494,248 shares of Common Stock held for the account of the managed account for which Advisors acts as investment manager.
The information set forth in Rows 5 through 11 of the cover page for each Reporting Person is hereby incorporated by reference into this Item 4(b) for each such Reporting Person. The denominator for determining the percentage of shares of Common Stock held by each of the Reporting Persons was 22,614,289, which is the number of shares of Common Stock outstanding as of June 11, 2008, as reported in the Prospectus filed by the Issuer on June 12, 2008 with the Securities and Exchange Commission.
About 5th St:
Fifth Street Finance Corp. (Fifth Street) is a specialty finance company that lends to and invests in small and mid-sized companies (with annual revenues between $25 million and $250 million) in connection with investments by private equity sponsors. It provides financing to support the acquisitions or recapitalizations of companies by private equity sponsors. The Company is externally managed and advised by FSC Management LLC. As of September 30, 2007, its portfolio was comprised of debt and equity investments in 10 portfolio companies and the weighted average annualized yield of its debt investments. As of September 30, 2007, all of the Company’s debt investments were secured by first or second priority liens on the assets of its portfolio companies. Fifth Street Mezzanine Partners III, L.P., the Company’s predecessor fund, commenced operations as a private partnership on February 15, 2007. Fifth Street Mezzanine Partners III, L.P. has merged with and into Fifth Street.
Disclosure (“none” means no position):None
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Tuesday’s Links
Tilson, $250, Einhorn, Dykstra
– Whitney does a great job here taking the NY Times to task. The only thing more transparently biased than their political coverage in their business coverage.
– Want to see people in the NE freeze?
– Do they really think he views it as gambling?
– He wasn’t even really that good of a baseball player
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Tuesday's Links
Tilson, $250, Einhorn, Dykstra
– Whitney does a great job here taking the NY Times to task. The only thing more transparently biased than their political coverage in their business coverage.
– Want to see people in the NE freeze?
– Do they really think he views it as gambling?
– He wasn’t even really that good of a baseball player
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Lehman’s Callan Out: What About Fuld?
What about the guy at the top? Callan did not get Lehman (LEH) into this trouble.
Erin Callan was demoted at Lehman after only 7 months on the job trying to deal with problem that took year to create. Callan must now know how Christ felt….
The logic here is indefensible. If Fuld did not know the depths of the problems, he should go. If he did, he should go for sending Callan to slaughter.
Admittedly she has been lying to the press and whining about short sellers in a desperate attempt to save Lehman. But, she is doing Fuld’s dirt work for him.
If the firm is going down, the CEO ought to be the public face, not the “pretty woman”. Was he hoping folks would take it easier on her because she is female? I mean really, step up buddy…
Now, we all knew this was coming but even I expected Fuld to step up a little and at least offer some public support for the troops….guess not
The list will continue to grow
You got no one to blame now Dick
Disclosure (“none” means no position):None
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Lehman's Callan Out: What About Fuld?
What about the guy at the top? Callan did not get Lehman (LEH) into this trouble.
Erin Callan was demoted at Lehman after only 7 months on the job trying to deal with problem that took year to create. Callan must now know how Christ felt….
The logic here is indefensible. If Fuld did not know the depths of the problems, he should go. If he did, he should go for sending Callan to slaughter.
Admittedly she has been lying to the press and whining about short sellers in a desperate attempt to save Lehman. But, she is doing Fuld’s dirt work for him.
If the firm is going down, the CEO ought to be the public face, not the “pretty woman”. Was he hoping folks would take it easier on her because she is female? I mean really, step up buddy…
Now, we all knew this was coming but even I expected Fuld to step up a little and at least offer some public support for the troops….guess not
The list will continue to grow
You got no one to blame now Dick
Disclosure (“none” means no position):None
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I have not found a reason to doubt Einhorn yet and actually, if one is following it, one must believe him more as each day passes….
Listen to what Einhorn has to say first about Lehman (LEH):
Now listen to what Faber says CFO Erin Callahan says:
Here is how it priced:
Not for nothing but where is CEO Dick Fuld? Why aren’t the media demanding he be the face of the company rather than the CFO? The company is imploding and he is sending Callahan out there for crucifixion. Why?
There comes a point in time when the guy or gal in charge need to be out in front. I mean if they will get rid of Jimmy Cayne for playing bridge, is it now ok for Fuld to hide in his office? What is the difference really?
Here is what it comes down to. Lehman now is at a point where they are either not telling the truth, or, do not have a handle on what they hold. Either is very bad for shareholders.
This is the singular reason comments from Einhorn have so much weight. He right now seems to be the only one who is both being totally honest AND has a handle on what is going on there.
Disclosure (“none” means no position):None
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Lehman To Raise $5 Billion
Will Lehman’s (LEH) Erin Callahan try to blame Greenlight’s David Einhorn for this one?
Despite saying the last round of capital raising they did “wasn’t really necessary”, The WSJ reports that Lehman is about to hit up investor for another $5 billion.
Lehman “is close to raising more than $5 billion of fresh capital from an array of investors including the New Jersey Division of Investment, according to a person familiar with the matter.
The move comes as the firm is set to report a second-quarter loss of more than $2 billion, this person said. Until recently, most analysts who follow Lehman have been predicting a loss of about $300 million.
On Sunday afternoon, the firm was still pulling together final details of the capital raising, which could be announced Monday or Tuesday” according to the Journal.
The additional capital will be raised through the issue of common shares. With a market cap of $17 billion, Lehman is about to dilute shareholders by around 25% -30%, ouch.
Someone will pay for this and tops on the list are the face of the company, Erin Callahan. We are in a time now that if you say “A” and “E” happens, back up your desk. For Callahan, this will not only be the first but the second time she has told investors things are ok only to go out and raise billions soon after.
Doesn’t matter how well dressed you are, time to “look for other opportunities”. At least if she plays bridge she’ll have partners in Jimmy Cayne (Bear Stearns (BSC)), Chuck Prince (Citi (CC)), Ken Thompson (Wachovia (WB)), and Stan O’Neil (Morgan Stanley (MS)).
Soon or later these folks will learn, tell the truth, even if it isn’t pretty…
Disclosure (“none” means no position):None
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Whitney Tilson Talks About Shorts
Tilson talks about Ambac (ABK), MBIA (MBI), Lehman (LEH), Citigroup (C), Washington Mutual (WM) and Wachovia (WB). He always makes great points. Is it just me or do the short sellers like Ackman, Tilson and Einhorn (when they are short) make the best points?
Disclosure (“none” means no position):Long C, WB, none
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Will Lehman Answer Einhorn Now?
Despite attacks by the NY Times, Einhorn keeps raising issues that, until Lehman (LEH) can answer honestly, will continue to crush the stock.
Like I said yesterday, Einhorn is raising very specific issues. There have not been specific answers from anyone. Here is what Einhorn has ACTUALLY said regarding Lehman. Read the entire piece because what has been printed and said about it is well, less that accurate
Disclosure (“none” means no position):None
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Lehman vs Einhorn: Lehman Will Lose
Why can David Einhorn affect Lehman’s (LEH) stock price? The answer is simple really.
It comes down to believe-ability. Einhorn has it, bankers do not.
Investors sitting and watching for the last few years have witnessed the savaging Bill Ackman took from bond insurers MBIA (MBI) and Ambac (ABK) as well as threats from NYC Insurance Commissioner Eric Dinallo. For years they asserted he was “off base” and accused him of spreading rumors, innuendos and outright lies. What happened? Everything Ackman said came to fruition yet he was still blamed for the world’s reaction to the prices of both company’s stocks. As though the actual crippling losses at both company’s has nothing to do with it.
Now it is Einhorn’s turn. Having been short Lehman since last summer, Einhorn is now being blamed for the current rush to sell the stock.
Here is the thing. Einhorn has been saying the same thing for a year now but the stock only cratered since February. Why? The things Einhorn has been saying are now coming true. Lehman has massive CDO exposure, has not written it down properly, has needed more money and has more loses in the works.
Lehman, for its own part is fanning the flames by denying they need money and then going out and raising more of it. Lehman’s advantageous disclosure on page 56 of an SEC filing that seemed to contradict public statements also lead investors to doubt management and gave Einhorn yet more ammunition.
Lehman’s management has spoken about Mr. Einhorn, but they have declined to comment publicly beyond a statement that says Mr. Einhorn “cherry picks” and misconstrues information. Isn’t good enough. Einhorn is being very specific in his critic of the company, unless your refutation of him is the same, you lose. Basically Lehman is saying, “trust us, he is wrong, by the way, got $4 billion you can spare?”
Crying about short sellers is a losers game. Why? If your results and disclosures do not give them anything to stump, they go away or get crushed. When you get into a “tit for tat” with them, they win unless you are 100% accurate and disclose everything not just in a filing, but in public statements. Unless you do both all the time, and Lehman has not, you lose.
PS. The NY Times described Einhorn as a “rabble-rousing hedge fund manager“. Having heard him speak, nothing can be further from the truth. Icahn? Yes, Einhorn? Not by a mile. Einhorn reminds one of a librarian.
Disclosure (“none” means no position):None
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Lehman’s Inexplicable BuyBack
Lehman (LEH) is now playing games in an attempt to trounce shorts who, based on the firms results, have been correct in their analysis of the company.
One can argue that continuing to pay a dividend while raising capital in excusable. Many dividend stocks are in income funds that if they were to cease paying the dividend would be dumped, causing a further cratering of the stock price. For this reason, the argument does hold.
The can be no legitimate reason to repurchase shares while raising cash at the same time. Unless you are playing games..
The Wall St. Journal reported:
“The Wall Street firm’s shares had tumbled nearly 15% at one point Tuesday as investors who feared their stakes would be diluted sold shares and rumors flew on trading desks that Lehman had gone to the Federal Reserve for funds. Lehman said that wasn’t true.
But a second rumor, that Lehman was buying back shares, turned out to be true, people familiar with the situation said. Such buying helped the stock pare its losses Tuesday.”
It is one thing to repurchase shares because they are undervalued, it is another to do it simply to halt a slide in a single day. It is also irresponsible when most folks figure you are going to then turn around and dump these shares back on the market in another offering to raise more capital.
Now that the rumors are out there and at least this one is true, does Lehman really think it will not spur more conjecturing? The moves smacks of desperation and that in and of itself will lead people to now attemot to anticipate the real reason and what the next move will be.
Think about it. Financials are raising money at a discount to current share prices currently. What Lehman essentially did was repurchase stock it knows it will be forced to re-issue at a loss to whomever they get to provide them more capital.
Shrewed…
They can rail against Einhorn all they want and sit there and call him names, but, until their results refute anything he says, they will lose. Why? Currnetly their results are refuting everything they say…
Disclosure (“none” means no position):None