Thursday, March 24, 2005

Overstocked and Underauctioned, Part Three

Patrick Byrne is nothing if not bold.

The Overstock.com CEO has built a tiny money-losing internet-based surplus reseller into a large internet-based surplus reseller that made money in Q4 of 2004. Wall Street’s hopes for sustained profitability have been damaged in recent weeks, however, by costs associated with the company’s $1 March shipping promotion and a sudden step-up in marketing that caught most of the analysts by surprise.

That it was caught by surprise is not entirely the analyst community’s fault. Byrne ended his Q4 conference call in January—a few weeks before the $1 shipping promotion appeared—by proclaiming the company had “passed through the tipping point.” “People’s expectations for this year are becoming more confident,” Byrne noted approvingly in his concluding remarks, saying “we can crush” those expectations. “We are really on a roll here,” he said.

In fairness, the sudden downshift from profits back to losses appears to be a part of Byrne’s flexibility in managing Overstock.com. He has, in the past, taken what he calls "Patrick Fliers," in the form of new ventures and experiments with the basic model of selling overstocked, surplus merchandise. A laudable trait, for the history of business in America is that companies failing to innovate end up being overtaken—particularly in the fast-paced world of the internet.

Such “Patrick Fliers” include the “sprinkling” of $2 million in bonuses “around the company,” in the last quarter of 2004; acquiring online distribution rights to a movie that “answered” Fahrenheit 911, on which the company lost $700,000 in Q4; and $2 million to start an Overstock.com auction site which Bryne, on his conference call, compared repeatedly to eBay.

Indeed, Byrne claimed the new auction site was already “getting better results than they do on eBay” in certain, unidentified areas. He based this on “feedback” from “the eBay power selling community.”

Based on the data at hand, however, it appears to me the Overstock.com auction site is a “Patrick Flier” not achieving liftoff.

“Part Two” of this series detailed the paltry bidding in various Overstock auction categories. Let’s now examine the travel business on Overstock.com, which Bryne described as demonstrating such improvement that “Somebody showed up here from Latin America… [saying] it’s just that we want to liquidate all of our airline tickets through your site. I mean a well-known Latin American airline.”

Indeed, he claimed "we actually had to hire people to answer the phone for the hundreds of contacts we are getting from people in the travel industry, offering us unique deals."

Unfortunately, those "hundreds of contacts" have yielded, at this moment, all of 278 items for auction in the “Travel” section of Overstock.com Auctions. And of those 278 items, 44 are listed under “Airline.” And just 4 of those 44 have more than 1 bid.

Furthermore, I cannot identify the “well-known Latin American airline” that wants to “liquidate all our airline tickets” through this site, unless that airline happens to offer hokey-looking deals using the handles “4salebyowner” and “sinbad42” and “homeauctionbiz” and “1goodfind” and “freeitemsandmore” and “gailsgoodies.”

Of all the "hundreds of contacts" that beseiged the Overstock phone lines offering "unique deals" there are six entities listing 44 airline deals, of which only 4 attracted more than a single bid. That's it.

But don’t take my word: check it out yourself. And if you happen see that well-known Latin American airline liquidating all its tickets somewhere on the site I haven't found, let me know. The snow is falling yet again here in New England, and a nice, cheap ticket south of the border might be just the thing.

http://auctions.overstock.com/cgi-bin/auctions.cgi?PAGE=BROWSE&CTG=433&SORT=7

Jeff Matthews
I Am Not Making This Up

22 comments:

BelowTheCrowd said...

The airlines have made it clear that they no longer see any reason to pay anybody to sell tickets for them. In fact, they are charging extra fees for anybody who doesn't buy them directly online from their own websites. Their websites are also turning out to be a very good way to dispose of cheap tickets they can't sell any other way (often through frequent-flier promotions).

eBay has only four pages of airline-related items that I can see, mostly people re-selling charter tickets or frequent flier vouchers. My local free site (craigslist) has an active market for certificates -- mostly southwest -- and other types of special, resellable tickets, but again, this is very low-level business.

I don't see this as a big growth market for anybody. A CEO who claims otherwise is simply not credible.

And I had to chuckle about the very concept of a "a well-known Latin American airline." Maybe it's well known in its own country, or in a couple of US cities. Realistically, only 2-3 immediately come to mind, and all of them required some thought.

[Disclaimer again: I don't follow OSTK or its CEO except in passing, but do follow airlines quite closely, often in person, usually from a coach seat at the back...]

-BTC

kpod said...

You should look over some of those entries too... phew!

The one that's attracted the most bids (item #1883500), for example, supposedly offers round-trip tickets but in the fine print five pages down gets around to mentioning that you have to book the whole vacation through them, at rack rates (that's hotel-ese for their highest rate, which no self-respecting travel agency would normally accept.)

And then towards the end, almost as if to drive home who their target market is, they throw in, almost offhandedly (actual quote, I swear): "Also I would like to ask you
"Would You Like To Double Your Money In 3 Days?" "

But hey, they're giving 1% of the auction price (81 cents as of this comment) to charity, so they can't be all bad, right?

Not that Ebay doesn't have its share of these types, but they don't usually dominate whole categories like on Overstock.

BelowTheCrowd said...

To be fair, much of the "airline" related traffic on eBay appears similar. It's a very slim category, since the airlines generally don't allow you to re-sell tickets.

Jeff Matthews said...

To be fair to eBay, however, it's worth pointing out that while eBay doesn't have much in the way of airline-related items, neither has it ever bragged that a "well-known Latin American airline" was showing up with briefcases full of tickets to sell on the eBay site; nor has eBay bragged that it had to hire extra bodies to handle the "hundreds" of unsolicited calls from travel people looking to sell on the eBay auction site. Both of which Patrick Byrne did on his last call.

What we have here--based on "kpod" and "belowthecrowd"'s observations--is a fairly large disconnect between the proclamations of the Overstock.com CEO and reality.

Jeff Matthews
I Am Not Making This Up

Tom said...

Jeff, here's what Patrick Byrne actually said: "Travel. I totally think we can differentiate ourselves. When we launched with some partners, a travel site, over a year ago, it was not a very good site. I don't think our partners were necessarily the right guys. We didn't get the customer service out of them that we expected and yet just by having it up we had 500 people calling us, offering us special deals. I have got a hotel in the Bahamas; I want to liquidate all my overstocks with you. I've got – somebody showed up here from Latin America with a briefcase because they couldn't even get a response. It's just that we want to liquidate all of our airline tickets through your site. I mean a well-known Latin American airline."

Patrick was merely talking about the *potential* for travel business on the Overstock site. That's all; nothing more. You've taken it upon yourself to add a bunch of interesting details. He didn't say that there were briefcaseS (plural); he didn't say that any briefcase was full of tickets; he didn't say that any tickets were to be sold on the *auction* site; and he didn't say the Latin American visit was a recent one.

Overstock does have a "travel" tab on their main site, and it does say that flights, hotels, and more will be coming soon. Maybe Overstock's travel success, if any, will come from their main site, not their auction site. In the conference call you mentioned, Patrick never suggested that most of their travel revenue would come from Auctions.

"For example we actually had to hire people to answer the phone for the hundreds of contacts we are getting from people in the travel industry, offering us unique deals."

Note that Patrick never used the word "unsolicited", and he never claimed that the calls were from people who wanted to sell travel on the Overstock *auction* site.

Jeff Matthews said...

"mw blogger" makes some good, factual corrections here, straight from the conference call.

Byrne's conference call comments did relate to the Overstock travel site, not necessarily the "travel" section of the auction site. He did say "briefcase" and not the plural, and did not state that the briefcase was full of tickets--although the point of mentioning the briefcase remains beyond me. Nor did Bryne state that the briefcase-bringer's tickets would be sold on the Overstock auction site, or that the visit from the "well-known Latin American airline" representative was any time in the recent past.

Bryne did, however, absolutely imply that the calls received by Overstock from travel people were unsolicited--"just by having it [the travel site] up we had 500 people calling us, offering us special deals."

Overall, however, "mw blogger" has it right on those details.

Byrne's biggest problem with the auction site may not, in fact, be the travel piece of the site. It may be simply getting enough decent merchandise--Latin American travel deals aside--to attract bids.

At last count, only 1.6% of the 140,000 listings on Overstock's auction site had 3 or more bids-- a far cry from the eBay data, particularly in light of Bryne's conference call claim that "there are certain areas on our site where [the power sellers] are getting better results than they do on eBay."

Furthermore, the overall listings appear to have peaked and are slowly leaking at about 2% a day.

Jeff Matthews
I'm Not Making This Up

Tom said...

Jeff--I'm thankful that you provided a measured, reasoned response instead of just deleting my first comment. I think that reasonable people can have different interpretations on the minor remaining question here--whether Byrne implied that the "hundreds of contacts" were solicited or not. My interpretation is that there are two time periods here--one in the past, maybe late '03 or so, where the 500 or so people called in unsolicited, although the old travel site (launched with some partners) was not good. Then there's another period, around the beginning of '05, where Overstock had to hire people to handle the hundreds of travel contacts they were then getting (I don't know if any soliciting was going on during this period).

I agree that Overstock Auctions may not succeed. If you look at the "Overstock Auction Counts" graph at dealscart.com, there is indeed a short-term downturn, but the long-term trend is yet to be determined. I believe that some free listing offering(s) are expiring around this time, so some level of downturn may be expected; also, it's still a long way down to the auction count levels of late January '05.

Anyway, in my mind, I'd like to separate these propositions:
1. Patrick Byrne is dishonest and/or crazy.
2. Overstock.com is doomed to failure.

I've looked at Overstock and Byrne quite a bit in the last couple of months, and I have yet to see convincing evidence supporting #1. If you have some evidence supporting #1, please let me know--I'd be very interested to check it out for myself.

Tom said...
This comment has been removed by a blog administrator.
Tom said...
This comment has been removed by a blog administrator.
Jeff Matthews said...

Let's make something clear, "mw blogger": I have never deleted a comment here that did not contain Infantile Message Board Language--i.e. cursing.

Unfortunately, I had to delete a few comments when the Conspiracy Theorists lost control of their emotions and reverted to the kind of language that will not be allowed on this blog.

Nobody has ever been deleted for what they said: merely when "how they said it" crossed a very clear line.

And this policy will not change. If anyone wants to drag down the discussion to the level of a message board, they can do it elsewhere, for they will not be posting here.

As for Patrick Byrne: let me correct you. I never submitted the proposition that he is "dishonest and/or crazy."

I do know a great deal more about his personality than I would like to know, thanks to some of the emails he has sent around attacking people. And I have certainly questioned the sanity of his acolytes--particularly but not limited to "Bob O'Brien." But I have never discussed his sanity here.

As to "dishonesty," well, I certainly believe there is a strong correlation between CEOs who blame their troubles on shortsellers, and CEOs whose companies blow up. Also, I have submitted data gleaned from the Overstock web site which contradict statements he has made on his conference calls (the "Build Your Own Ring" site, for example, in which he gave out categorically incorrect data regarding Blue Nile and Wal-Mart.com, not to mention the price points of the rings he is offering.) And that is what this blog is all about. You are welcome to further explore the matter from whatever point of view you bring.

As for whether Overstock.com itself is "doomed to failure," a large part of that issue is tied up, in my view, with the kind of CEO Patrick Byrne turns out to be. And on that, only time will tell.

Jeff Matthews
I'm Not Making This Up

Tom said...

Jeff said: "...he gave out categorically incorrect data regarding Blue Nile and Wal-Mart.com, not to mention the price points of the rings he is offering."

You've made three claims here. Let's examine them one by one.

1. When speaking about DIAMOND ENGAGEMENT RINGS, Byrne said that Zales and Wal-Mart dominate the low end (under $1000). In an attempt to refute that statement, you said:
-----
Go to “Walmart.com”. Type in “Diamonds.” Sort them by “Top Seller.” You will find the Top 5 sellers to be priced, in order: $697, $5,488, $1,399, $3,288, $898. I wasn’t a math major, but that’s an average price of $2,354 per ring.
-------
When I did that exercise today, I saw 1,982 items, not just diamond rings but pendants, tennis bracelets, earrings, etc. After page 1, I saw page after page after page where all items were under $1000. I see no proof that Byrne was dishonest here.

2. Speaking about DIAMOND ENGAGEMENT RINGS, Byrne said that Blue Nile had an "average order size [of] $5,500". You yourself said that for Blue Nile, "engagement rings did indeed average $5,500 in 2004". Again, you've offered no proof of Byrne's dishonesty here.

3. You said you toured the Overstock.com site, and out of the Top 20 sellers, only 5 of the rings sell for over $1,000. Again, Byrne was talking about the just-opened build-your-own ring site, not the main Overstock site where you were looking. Proof of Byrne's dishonesty? No.

If you can ever provide any proof of Byrne's dishonesty, please let me know.

Jeff Matthews said...

"mw blogger" continues to confuse my term--"categorically incorrect data," with his term--"dishonesty."

I repeat, Bryne gave incorrect data on his conference call, specifically regarding the online diamond engagment ring market.

Go to the Wal-Mart web site and look again at those 1,982 top sellers you found. The very top 10 best sellers include 9 diamond engagement rings (let's be consistent here, as you demand in the case of Blue Nile, and exclude the tennis bracelets and earings) with an average price of $1,800.

And that is absolutely not the sub-$1,000 price point that Byrne stated was Wal-Mart's territory.

Now go to Blue Nile. Search for "build your own" diamonds in the under-$5,000 category that Bryne claimed was being left open by Blue Nile thanks to its $5,500 average ticket for engagement rings.

You will find 25,636 diamonds out of 36,100 in stock that are available for $5,000 or less. And you will find 14,927 diamonds available for $1,000 or less.

Blue Nile is hardly leaving the sub-$5,000 market wide open.

"Dishonesty"? I never used the term. Hype, jabber, and categorically incorrect data do, however, all fit the bill.

Jeff Matthews
I'm Not Making This Up

Tom said...

Let's go back to what Byrne said:
"But it is where you can think of the diamond industry, up to $1000 is really controlled by Zales and Wal-Mart and mall jewelers and Blue Nile operates of an average order size of about $5,500. We intend to dominate in the $1,000 to $5,000 range."

1. Note that when he spoke about the space under $1000, he didn't say he was talking about only online sales (note that he specifically mentioned mall jewelers). He also didn't say "Wal-mart online doesn't offer any diamonds over $1000". For Wal-Mart online, you're taking 10 data points out of 1,982 and attempting to calculate a meaningful average sales price. I say your number is meaningless, even though you've used the top 10 sellers, because for all you know, those top 10 may comprise less than 5% of total Wal-Mart online diamond sales. Using your search, Wal-Mart has only 43 items priced over $1000, and 1,939 priced under $1000. If there's anyone providing categorically incorrect data here, it's not Byrne.

2. You've already agreed with me, in writing, that Byrne was correct when he specified the Blue Nile average order size of $5,500.

3. Note that nowhere does Byrne say that the sub-$5,000 market is "wide open". Companies can intend to dominate markets even where some competition already exists.

Jeff Matthews said...

Okay. Instead of "wide-open" Bryne said "we intend to dominate."

And Wal-Mart's best-selling online jewelry items are diamond engagement rings averaging $1,800 a pop, but when Bryne said Wal-Mart lives in the sub-$1,000 market, he was talking about overall Wal-Mart, not the online part of Wal-Mart, whose best-sellers are squarely in his range.

And I covered the Blue Nile $5,500 ASP, in my original post on this whole thing: the point I made then, and repeat here, is that despite the $5,500 ASP, Blue Nile sells a whole lot of product in the $1,000 to $5,000 space Bryne intends to "dominate."

Anybody else notice that today's pop-up ad on Overstock.com highlights a $149.99 "Canterbury Mink Accent Chair" with a "VERY HIGH" sell-out risk?

Anybody else recall that this product was marked "SOLD OUT" just two days ago?

Makes you wonder if Overstock really is an "overstock" reseller. In fact, that very topic will be the subject of Part Four, coming soon.

Jeff Matthews
I'm Not Making This Up

bob obrien said...

There's a problem here, Jeff. You are dishonest, by definition. You make things up.

I'm not sure why, or whether there's just so few people reading your stuff that you feel you can get away with it.

Dunno.

You deleted 4 or 5 of my posts you just disageed with. One had an "offending" word - although I haven't seen your all encompassing terms and conditions anywhere, I can appreciate that you want to spare the youth or pre-pubescents or whatever of America any "objectionable" language. You however did in fact delete slews of my posts that contained no such language - you just didn't like what they said.

I can understand that. Many don't like what they say.

But few are so dim or so filled with conceit that they believe they can delete away, and then claim, anew, that they are free of sin and in fact *never* delete posts that don't contain objectionable language.

In this case, you are making this up.

As usual.

I challenge you to repost the 5 or so posts you deleted, arbitrarily, so that your dozen or so followers can observe your level of *honesty* firsthand. Read all that objectionable, vulgar language you are protecting them from, that in point of fact didn't exist in all but the first post.

Let's just all hold our breath on waiting for you to do that, huh?

rvac106 said...

Jeff,

I was not aware that you used to write for 'the Street.com.' Not that it matters, we all must do something for living. However, I do object to the way you 'nitpick' on subjects like OSTK's CEO. Your characterizations of his language, speech style, and content leads me to believe that there may be more going on than just an objective assessment of his business. This is very reminiscent of the style and general demeanor of other graduates of the TSCM's school of journalism. If you would get ALL of the facts correct, then no one would come back and try to straighten out your inaccuracies. If you insist on 'nitpicking' others, then others will 'nitpick' you.

There was one other innacuracy I caught: You'd be better off calling Patrick Byrn an acolyte of Bob O'Brien, rather than the other way around. Knowledge is not automatically a function of wealth. Ain't THAT the truth?

Thanks for your time, and the space to respond.

Jeff Matthews said...

"rvac106": I did write for a sub-set of Street.com called Street Insight, but I am not a "graduate" of whatever "school of journalism" you perceive at Street.com.

I had written for other publications long before I wrote for Street Insight. Whatever faults you perceive in my writing are entirely my own, not the Street.com's.

As for readers "nitpicking" my posts owing to lack of so-called "facts," the only person who has ever responded negatively to my posts with actual facts has been "mw blogger," who clearly works hard at verifying facts before commenting here--although we do differ on their interpretation.

Most of the others who "nitpick" here are not nitpicking facts, they are railing against me using mostly irrational language and distorted data. "Bob O'Brien" being the most irrational and distorted of all.

He was the first to curse on this blog, and thus his days' comments--not worth much in themselves--were summarily deleted for that day, and that day only. (Others who used similar Infantile Message Board Language subsequently had those comments deleted.)

In Bob's, or, as I call him, "X-Files"'s paranoid state, he chose to consider this censorship, thinking perhaps he was saying something I feared.

He asks me to reinstate those posts: if he wants to re-write them, he is free to do so.

Besides, he has since commented many more times than anyone cared about, freely and without deletion, because he has abided by the rules of language. He has not said much of anything in the factual realm, either, but that's okay...although it gets tiresome.

Jeff Matthews
I'm Not Making This Up

rvac106 said...

Sorry to have gotten confused. I’m more used to the free for all give and take of the message boards, kind of like a real town meeting, vs the sanitized “Bush in ‘04” type ‘town’ meetings. I didn’t realize that Mr. O’Brien, MW, and I were the only ones who post here that disagree with you. That’s fine. I also wanted to take this opportunity to apologize for misspelling Patrick’s last name.

Are you very excited about the impending expose coming up on April 10th s Dateline show, on CBS? It’s purported to be all about the naked shorting scandal which some think is a big deal on Wall Street. I’m hoping that it contains a lot of facts, that will help legislators get their heads around this ‘problem,’ and give them the tools to combat it. It doesn’t seem to me as though the SRO’s (self-regulators) are able to get themselves separated from the problem, so that they can begin getting at the ‘cure.’ Some investors have been waiting more than a year for this program to see the light of day, and, some are worried that due to external pressures, political, and financial, the facts won’t get a really open investigation. Since everybody (NYSE, DTCC, NSCC,) all get to make money from the act of buying and selling shares, there is some concern that it wouldn’t be in their self-interest to let the facts get out.

I’m not sure if you are one of those who think that there is no Naked Shorting problem on Wall Street. We know that Mr. Byrne, Mr. O’Brien, and a host of others do. I think it’s worthy of note that Mr. Byrne was made aware of the NSS scandal by Mr. O’Brien, and, since then, has made the pursuit of exposure a large plank in his platform. However, if you’re looking to paint Mr. Byrne as a “CEO who blame (s his) troubles on shortsellers,” I am afraid you’ll have to look elsewhere. Mr. Byrne has made it abundantly clear that this is not the case. Whether you believe him, or not, is another matter entirely. You might want to ‘investigate’ the situation vis-à-vis USXP.OB. In that case, the entire management staff seems to be railing against Naked Shorting, and the SEC, on its own behalf, has responded with actual filings.

As far as Mr. O’Brien is concerned, I believe OSTK’s CEO was first alerted to the idea of a short “conspiracy” by Mr. O’Brien. In the now famous 4th qtr conference call, Mr. O’Brien laid out a sort of ‘game plan,’ a coordinated attack by forces that would drive a stock’s PPS down, either to cover, or perhaps create, a viable short position. I understand that 4 out of the 5 maneuvers pointed out have been accomplished. While these tactics have as of yet been unable to ‘unsettle’ OSTK’s share price, it doesn’t negate the fact that they did take place. This ‘conspiracy’ idea has now been supported, both by an Op-Ed piece in the NY Times, written by the World Legal Fund, and, in a Motley Fool article, by Bill Mann. These are just two of many recent articles and blogs on this subject. There are sure to be many more. I believe your use of the word ‘acolyte’ may have been misplaced.

Jeff Matthews said...

"rvac106"--read my extensive comments in prior posts on naked shorting more carefully than you have done thus far, and you will see that I believe that besides being illegal, Naked Shorting exists in a very minor way compared to actual legitimate short-selling; that Naked Shorting is stupid; that anyone who does it is a moron who deserves to lose their business; that in 16 years of working at and running a hedge fund I have never come across a single legitimate short-seller who engages in it; and that therefore whatever problems a company like Overstock.com has, it is not because of Naked Shortsellers.

Also, my experience is that companies that squeak the loudest when they see a shortseller are the ones that usually have a problem.

And my experience is that good companies with good management teams that run their business well eventually take out the shorts, without wasting a moment of their day whining about them or otherwise distracting themselves from actually running the business.

For a guy who always says--as you correctly note in your comment--that he is not blaming his troubles on the shorts, but rather that he is just looking for justice, Patrick Bryne spends more time than any CEO I can recall in 16 years as a hedge fund manager going after the shorts on his calls.

"The tools of Satan are among us. They are trying to ruin things," is how Bryne put it on his last call, shortly before handing over the floor to a certifiable crackpot who goes by the alias "Bob O'Brien."

If that isn't blaming the shorts, I don't know what it is.

But if you want to listen to bloggers and paranoids and root for CBS Dateline to help resolve a two-bit piece of business such as Naked Shortselling that has no meaning in the scheme of things except in the world of $5 pink sheet stocks, go ahead.

Jeff Matthews
I Am Not Making This Up

bob obrien said...

Poor Jeff. Reduced to namecalling and ad hominem attacks, as usual.

Big fact checker, the never making it up Jeff is.

Uh, Jeff, for starters, Dateline is on NBC. Not ABC. You made that up.

Tune in on the 10th. And then you will find out that your position, that naked short selling, something the SEC ADMITTED WAS A "LARGE PROBLEM" in one of their quotes for Euromoney this week, is not a problem, is as badly flawed as your inability to even get the network right.

BTW, where is your carefully worded description of posting guidelines for your blog that articulate what language will and won't be condoned? I missed it. Let me guess...you just made it up?

Funny how that happens, isn't it?

Jeff Matthews said...

Ouch! Good one, X-files! Finally, after all those comments, you report an absolute, certifiable fact!

The fact being that this Major Expose on Naked Shorting that's going Explain Everything including the Trilateral Commission, the Roswell Incident and What The Government Doesn't Want You To Know About Area 51, is actually on NBC Dateline, not ABC Dateline.

My mistake.

I guess I just don't have a handle on what's really important when it comes to investing, like TV shows and German exchange listings and stuff.


Jeff Matthews
I'm Not Making This Up

bob obrien said...

Try this fun fact out, from the Euromoney article on fails:

"The SEC's Brigagliano says the commission made a choice. "We were concerned about generating volatility where there were large pre-existing open positions, and we wanted to start afresh with new regulation, not re-write history."

So there is the SEC admitting that thee are large, pre-existing positions in stocks (fails, for you, Jeff) and that they didn't want to create volatility - that's why they grandfathered in the fails.

They didn't want to create volatility for those that would have to cover their failed positions, i.e. a squeeze on those that broke the rules in the first place.

Still think it's the X-Files? The SEC doesn't.

Oh, that's right, it doesn't fit your now provably incorrect theory that there is no problem. Except that the SEC is now on record admitting that they had to grandfather out of concern for volatility that the "non-existent" or "trivial" fails would cause. How would a small problem result in volatility that is damaging enough to require a pardon from enforcing the rules?

Doh.

Better delete the post before one of your dozen acolytes reads it.