Monday, August 15, 2005

“I’m Not a Cokehead” and Other Truths from Patrick Byrne, CEO


WARNING: THIS MAN RUNS A PUBLIC COMPANY.

I agree that CEO’s who spend time worrying about shorts or obsessing about shorts are fools. And that most of the CEOs who tangle with shorts are crooks...

I believe there’s been a plan since we were in our teens to destroy our stock, drive it down to $6 to $10...

These are the folks I’m going to talk about….Leon Black I’ve put in there just because he’s a well-known financier hedge fund guy. Got nothing to say about him. Sort of putting him in as an example of a -- just somebody in a hedge fund...

Jim Caruthers is an interesting fellow. He’s up at Eastborne Capital, north of San Francisco. Eastborne has an “E” at the end. It’s funny because there’s a fellow holding himself out in a nearby location by the name of Jim Karruthers, with a slightly different spelling, holding himself out as a private investigator from Eastborn Investigations, no “E” at the end. I know that couldn’t be this Jim Caruthers, because that would be a felony for a person to hold himself out as a PI when he’s not. And that PI has a very interesting relationship with a certain lawyer in Detroit who has some very odd practices that maybe we’ll have time to get back to...

Kevin Ingram was a prominent fellow in the late 1990’s in Wall Street. He left Wall Street, started a dot com. I think it was crashing. He got caught attempting to sell Stinger missiles or obtain Stinger missiles for some Pakistani ISI agent, who turned out to be undercover feds. In fact, he agreed to work on obtaining a nuclear trigger for them. So he went to the pen for a few years. He’s out now and he’s basically a gopher for some of these folks...

I finally wrote Herb and I said, “Herb, is this some subtle way of approaching me? It’s okay if it is, but I’m just not into that.” He just seemed obsessed with me. Well, oddly enough, he stopped in February, more or less stopped writing about me. And the same week practically he stopped a blog was created by Jeff Matthews who runs Ram Partners. And in my view, I think the assignment got passed from Herb to Jeff...

And somebody, a politically connected investor with the hedge funds calls up the SEC or the DOJ and says hey, you know, “Listen I was just having breakfast with George and Laura and they sends their regards. And by the way, I know a guy on Wall Street who’s come across something you really need to take a look at.” And so then one of the hedge funds goes in, sends somebody in with this white paper and they try to get an investigation started. That’s how the basic system works...

And they turned that into a white paper that said Byrne is tied up Al-Qaeda and terrorism and money laundering and you ought to look at this guy...

I’ll only talk to a Wall Street Journal reporter with a phone on because they’re such crooks…

Well, something else funny happened. My phone went dead, my phone went dead and a message came up in Spanish that said this has been diverted to some telephone company in Mexico and the line was out...

As this went on I started realizing that there was actually some more orchestration here being provided, by what I’m calling here is the Sith Lord…He’s one of the master criminals from the 1980s, and he’s back in business. But I’m not going to. I’ll just call him the master mind today...

So, in the words of Wayne and Garth, “Squeeze me?”

By the way, Carol Remond has something stuck in her craw about the fact, most people I think understood that when I said “those I took baths with” to mean like my cousins and brothers, whatever, girlfriends. She’s calling around and saying that there’s a, Byrne has a gay bathhouse cabal and that’s where this has been organized. Something about the whole bath reference has steamed Carol. My theory is it’s because she’s French…

I put information down there that I was gay. And…I put information down that I was a coke head. Now my apologies to my gay friends, both within and without, outside the company, I don’t mean to equate the two. I don’t care. I’m a libertarian and I don’t care at all. In fact I don’t give a hoot if anyone thinks I’m gay, but I thought that by keeping, by putting that information down on one channel and putting the coke head information down the other channel, I would then know if it leaked…

On the coke head thing, and by the way, I’ve never, with one exception, I’ve never even seen cocaine in my life so in case you’re wondering, no, I’m not a coke head...

I made something up. I said, “I’m going to Venezuela, I’m going to need some bodyguards.” Well, there’s no way he could really say no. And he’s a fine guy. I mean, I don’t envy him. So I went in to see him and he met me, brought a witness and my guess is he was taping it...

So that’s where we are. You may think I’m nuts…. If you think I’m nuts about all this, just ignore. Just ignore me. Just don’t do anything about it...

I like these guys, they’re sort of guys out of a John Grisham novel, real smart, O’Quinn is a great big strapping Texas cowboy. He sued Texas, he sued big tobacco on behalf of Texas and won $17 billion, pocketed a couple of it himself. And now he just funds lawsuits that he thinks has a social purpose. And we met. It was like two lost brothers meeting because we’ve come from very different directions to the same conclusion...

Why not take it to the authorities? Well, to that I say, “The SEC, come on, look at those, the graph of the Miscreants Ball and tell me the SEC is up to taking something like on. They’re up to going after Martha Stewart on a good day. They’re not up to taking on a web like that. They probably are afraid it might cause volatility.”

Did I stutter? Did I stutter or did I say I was going to take this fight to you? Well now you know what I meant. And lastly, the man I’ve identified here as the Sith Lord of this stuff I just say, you know who you are and I hope that this is worth it, because if the feds catch you again, this time they’re going to bury you under the prison. And I’m going to enjoy helping.

Those are the words of Doctor Patrick M. Byrne, Chairman and CEO of Overstock.com, reprinted straight out of the conference call transcript announcing a lawsuit against short-sellers.

"Squeeze me?" and "Sith Lord" and "Stinger missiles" and all.

For first-time readers, Overstock.com is a money-losing, internet-based enterprise whose stock is currently recommended as a “BUY” by Legg Mason analyst Scott Devitt and W.R. Hambrecht & Co. analyst Craig Bibb.

Nobody can make that up.


Jeff Matthews
I Am Not Making This Up



The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.

155 comments:

SellToWhom said...

OSTK, Byrne, Bob Obrien, NCANS, have gone from laughingstocks to truly frightening. Frightening because it is clear that Byrne actually believes this absolute nonsense. (And yes Bob OBrien it is all sheer nonsense.)

Publishing your phone number and email is truly a low blow.

This 'conference call' and accompanying slide show should be required reading not for Investing 101, but Psych 101.

Jeff, keep up the fight exposing these frauds for what they are.

An Investor said...

I see big problems for the directors of this company. Talk about a liability...

Jeff Matthews said...

"selltowhom": thanks, but I have no problem with Byrne publishing my email to Kathryn Huang Hadley.

I wrote nothing in there that I wouldn't have published here, except my cell phone number.

Patrick Byrne, on the other hand, has written emails he would not be happy to see published here.

More interesting, frankly, was Kathryn's reaction to my email. Rather than simply delete it or email me back and tell me I have Patrick all wrong...she went to the company.

I find that fascinating.

poletown said...

HOLY FREAKING CRAP. Are you serious? I'm at a complete loss of words here. Mr. Byrne speaks like he just took a double hit of crack and crystal-meth at the same time. The guy is paranoid, and all over the map.

He's really the CEO of a publicly traded company? If that's possible, God help us all...

--Craig

market crasher said...

I guess he bought Andy Grove's book..."Only the Paranoid Survive". Problem is Dr. Bryne needs to read it and not just look at the cover and think being paranoid is a management skill one should rely on especially on conference calls. Can't wait for the next conference call. I wonder if some analyst will recommend people buy the stock based on how many people are on the call like that dope from MER did with TYC?!!

Shreyas said...

Are you kidding? This is a Gong Show. This is a serious disconnect in almost every way, in a kinda surreal way.

Its_strange said...

Byrne can and will tell us about drugs , sex, the press , the SEC , the hedge fund world , conspirators and just about everything but the diamond deal and the Eydeas lawsuit...amazing! Hey Patrick, before i forget ,what relationship does Fisher and Macklin have with Legg Mason and W.R. Hambrecht ?

HFCriminalsSuck said...

Warning, Jeff Matthews is a Rocker friend and an exassociate. Warning, Matthews does not beat his wife.


Hey Jeff, you're truly pathetic and I hope Dr. Byrne sues your pathetic ass for defamation and libel.

Your kind of "business" men is the scum of the Earth.

gvtucker said...

I read Jeff's transcript, and I just couldn't believe it was accurate. It had to be paraphrased, or out of context, or something.

But no. It was accurate in every way, and not misleading at all. And this guy runs a billion dollar company. It amazes me that there is anyone out there that wants to buy the stock for any reason other than orchestrating a short squeeze. And who knows, it might succeed. The stock's already up abou 40% after the conference call, even though it is almost impossible to imagine that the call would give any long investor comfort.

Betting on a short squeeze isn't exactly a high probability way to generate a positive return. Because even if the short squeeze happens, the one thing that is inevitable is that the stock will eventually drop.

bks said...

(Also labeled 'overweight' by Doug Anmuth at Lehman. I think the only analyst at a company involved in the November offering that doesn't have a 'buy' on them right now is Aaron Kessler at Piper Jaffray.)

Paul Hoeper said...

Jeff~ You are doing a great job!! Below is some additional information you may find interesting on Overstock:

I used to do a lot of biz. with Overstock as VP of Sales and Marketing of
>USA Inkjets, their primary supplier of printer cartridges...
>
>I left USA Inkjets when I found out they were putting Chinese cartridges in
>Made in the USA boxes...I also allerted Overstock to this, but they
>continue to knowingly market and sell this company;s fraudulent products
>(import / Export fraud)


These links show some of the USA Inkjets products that are chinese made:

http://www.overstock.com/cgi-bin/d2.cgi?page=proframe&prod_id=682211

http://www.overstock.com/cgi-bin/d2.cgi?page=proframe&prod_id=399120

http://www.overstock.com/cgi-bin/d2.cgi?page=proframe&prod_id=373572

They note "Made in USA" in the Description line and display the box, which also states "Made in USA"

Overstock is marketing them as MADE in USA...

Sith Lord said...

Ok, I confess. The Sith Lord is me.

I was sleeping with this charming exotic dancer and later she winds up with the CEO.

I want my gal back and the best way is to get his money.

Sith Lord

mfairview said...

For a person who detests yahoo type posters, Jeff certainly makes them feel at home.

So a few facts:

1) If you've not heard the Webcast yet, check it out:

Video & Transcripts: http://www.shareholder.com/overstock/

2) Byrnes on CNBC shortly after: http://www.vmsdigital.com/MyFiles.aspx?Onum=B6AA2C8D-B6D9-4623-B5C0-37B128860FFF

A few odds and ends:

1) Some strange coincidences between Rocker, Milberg & Weiss, and The Street.Com:

http://ncans.net/milberg.htm

2) Many believe Michael Milken is the one that Patrick references as the Mastermind or Sith Lord in the webcast.

A bio of Milken can be found at: http://en.wikipedia.org/wiki/Milken

Do note that Rudy Giuliani was directly responsible for putting Milken away in the 80's and coincidentally his name is on one of the law firms assisting Patrick in this suit.

A few additional quotes from the webcast not chosen by Jeff to post:

1) Patrick refers to some odd entries in the SEC FAQ at: http://www.sec.gov/spotlight/keyregshoissues.htm

To date I've yet to hear any good explanations for the items he brought up. I would appreciate those in the know to share their thoughts.

1a) F. Grandfathering Under Regulation SHO

...The grandfathering provisions of Regulation SHO were adopted because the Commission was concerned about creating volatility where there were large pre-existing open positions. The Commission will continue to monitor whether grandfathered open fail positions are being cleaned up under existing delivery and settlement guidelines or whether further action is warranted.

**** As Patrick notes, (and I'll paraphrase), it wasn't but 1.5 yrs ago they [SEC] were denying the existence of Naked Shorting, now they're worried about creating volatility for the prior violators.

1b) 11. Can I obtain fails information?

Currently, threshold lists include the name and ticker symbol of securities that meet the threshold level on a particular settlement date. Some investors have requested that the SROs provide more detailed information for each threshold security, including the total number of fails, the total short interest position, the name of the broker-dealer firm responsible for the fails, and the names of the customers of responsible brokers and dealers responsible for the short sales. The fails statistics of individual firms and customers is proprietary information and may reflect firms' trading strategies. The release of this information could be used to engage in unlawful upward manipulation of the price of the securities in order to "squeeze" the firms improperly.

**** My interpretation to this point goes something like: "So naked shorting by everyone but the MM's are illegal, however some institutions use it as a trading strategy". Hmmm...

2) An interesting rule from the NSCC (an Self Regulating Organization): http://www.nscc.com/impnot/notices/notice2005/a6029.pdf

"The approved changes create a uniform standard limiting NSCC’s liability to direct losses caused by
NSCC’s gross negligence, willful misconduct, or violation of Federal securities laws for which there is
a private right of action. In addition, the changes: (a) memorialize an appropriate commercial
standard of care that will protect NSCC from undue liability; (b) permit the resources of NSCC to be
appropriately utilized for promoting the accurate clearance and settlement of securities; and (c) are
consistent with similar rules adopted by other self-regulatory organizations and approved by the
Commission."

Anyone interested in starting an SRO with me, getting it sanctioned by the SEC, and then creating God like rules to govern itself?

You're right on this one Jeff. One simply cannot make this stuff up.

Chris Fischer said...

Maybe I'm oversimplifying this a bit, and I definately know I'm repeating stuff. but..

No matter who is connected with who on Wall St., or who conspired with who to sell short at the same time and write negative articles, etc. For you longs, wouldn't this all be a moot point if Overstock, the company, was actually doing well and making money, instead of booking continued loses?

At this point, Overstock is a pretty heavily followed company. I work for another NASDAQ company of about the same market cap, and we're not nearly as heavily followed, even after our stock has tripled in the past year.

My real question for the longs is, considering that not everything at Overstock is in order - they are still not profitable, they're having a lot of IT issues, etc., why is your CEO so obsessed over something that has nothing to do with Overstock's growth or profitability? What percentage of his day is he devoted to this kind of garbage, organizing law suits and NCANS instead of figuring out how to make his company turn a profit? If I was a shareholder, I would be outraged.

I don't care who knows who on Wall St or who writes what - if Overstock could be consistantly profitable and grow earnings and revenue at these large multiples, this wouldn't matter, and you'd probably have the most massive short squeeze ever.

That last company I remember that was targeted negatively by Wall St. was Google. Look at what happened to them after a few breakout quarters.

But then again, Google has never had to have a spokesperson announce that it's CEO "is not currently under any psychiatric care and that he was sober when he gave the presentation."

mfairview said...

Chris, fair questions.

Regarding the company and the CEO

1) I believe they're expected to go profitable next year. They have minimal debt, a good reserve of cash, and doubling in revs YOY

2) The CEO consistantly buys shares in his company on the open market (www.insidercow.com), takes no salary, and refuses all bonuses offerred to him. If he's a conman only interested in bilking people out of their money, he sure is bad at it.

Regarding the crusade against shorts..

1) You'll note that the lawsuit has nothing to do with shorting. It is about a hedgefund conspiring with an independent research firm to unfairly denigrate the company. Something not unlike what Spitzer did against the brokerage houses.

2) In his most recent presentations, he laid out the state of the union with respect to OSTK shares-- something, as a long, I am very interested in. Certainly I am concerned about groups that attempt to damage the company through illegal actions.

Regarding your final comment on the spokesman. I doubt it was spontaneously announced as you make it seem. I'm sure you are not so naive to believe that it wasn't queried in such a way to make it sound as such.

I do find it odd that people assault him for trying to stop illegal activities that are happening in our markets (is it because he's a CEO and couldn't possibly do both?) The SEC and NSCC publishings that I referenced earlier should have made one pause in itself.

HTH

tahoe kid said...

To 'MFairview,' repeating an earlier post which you may have missed. Lehman Brothers no longer sees 'a profit' in 2006. After the Q2 results, they lowered their 2006 estimate from a 2c profit to to 60c LOSS. That sounds like another "Swing and miss! Strike 3!" kind of year for Overstock. As for 'It's Strange's' reference to the Macklin/Fisher/WR Hambrecht connection, it goes something like this: John Fisher is a former MD of the Consumer Group at Hambrecht & Quist, Macklin is a former President of H&Q (and a lousy one at that) so that makes both FOB's (Friends of Bill H.). Macklin has the dubious honor of being a member of the Board of Directors of MCI Communications and got to keep his seat on the Worldcom Board so he could preside over the largest accounting fraud in US corporate history. Nice job, Gordon. FWIW, Gordo got the original gig via a friendship he had with Bill McGowan who founded MCI when Gordo was President of NASDAQ. Gordo retired from NASDAQ to become President of H&Q. WR Hambrecht was the lead underwriter of Overstock's IPO. For the record, John Fisher is a good guy (yes, I have met/knew him), Gordo is a true idiot (yes I met/knew him too), Bill Hambrecht is a good guy (met/knew him) and that is where the disconnect is on this OSTK. I am appalled that Fisher allows himself to be associated with this circus. Bill H. while a decent guy has had research coverage of some very iffy companies over the years: Lernout and Miniscribe to name two. And for those of you who think that Bryne's behavior on the conference call (I listened to all of it) was anything other than a complete joke than you deserve to swallow this worm of a fantasy hook that Milken is the Sith waiting to steal OSTK at $6.

DaleW said...


Regarding the company and the CEO

1) I believe they're expected to go profitable next year. They have minimal debt, a good reserve of cash, and doubling in revs YOY


A good reserve of cash for what? Their burn rate is awfully high relative to their cash level. Doubling in revenues? Yeah, wonderful when they have a positive cash conversion cycle on the incremental revenues, they need to set up SPEs to sell diamonds with a fishy background, and the incremental gross margin on those revenues is so paltry as to not even keep up with their higher operating expenses.

2) The CEO consistantly buys shares in his company on the open market (www.insidercow.com), takes no salary, and refuses all bonuses offerred to him. If he's a conman only interested in bilking people out of their money, he sure is bad at it.

This assumes all confidence games look the same. Some people actually try to dress theirs up in different clothing -- this doesn't mean they're not cons.

Regarding the crusade against shorts..

1) You'll note that the lawsuit has nothing to do with shorting. It is about a hedgefund conspiring with an independent research firm to unfairly denigrate the company. Something not unlike what Spitzer did against the brokerage houses.


My guess is this company would still be screwy and so would the CEO if there were no one shorting the stock and no one talking about it.

2) In his most recent presentations, he laid out the state of the union with respect to OSTK shares-- something, as a long, I am very interested in. Certainly I am concerned about groups that attempt to damage the company through illegal actions.

You should be equally concerned with the entirely legal actions of your entirely whacked-out CEO.

Regarding your final comment on th spokesman. I doubt it was spontaneously announced as you make it seem. I'm sure you are not so naive to believe that it wasn't queried in such a way to make it sound as such.

Uh, maybe they responded in that way because it sounded to some listeners like the CEO was inebriated and is disturbed.

I do find it odd that people assault him for trying to stop illegal activities that are happening in our markets (is it because he's a CEO and couldn't possibly do both?) The SEC and NSCC publishings that I referenced earlier should have made one pause in itself.

I find it odd shareholders are so satisfied with how their CEO spends his day.

Its_strange said...

The Mobil gas station i go to on a regulator basis raised prices about 10% in the last week. It just might have hit a level where people start seriously watching thier money. And heating season is right around the corner. Retailors had better pay attention . Better run thier businesses and focus . What does OSTK plan for the holidays ?

Fred said...

Whether the company is profitable or not is irrelevant. Its wheter the CEO is a wingnut. To know that, we'd need to know if Rocker is doing what they claim. I just read on the YAhoo chat room that milken did hire Jules Kroll to investigate Boesky. So there's the Kroll-milken link. If milken is doing what he was in the 80's and using hedge funds this time this will blow up bigger than hiroshima.

Byrne reads pretty rambling, but I downloaded his slides and read along and it hangs together other than the tangents, whch could be his style of talking. If the hedge fund/milken/kroll stuff is real and he has afidavits that will get him there in discovery this will be bigger than enron, and overstock will trade over 200 on speculation. If he can get the feds on this I can tell you as a law enforcement man they will be pitbulls with a name like milken in the game.

I say lets wait to hang the ceo until we know all the facts. It seems plausible so far.

Its_strange said...

Do we now know what/ who OSTK will blame disspointing future results on ?

Its_strange said...

Have we found out who bought those 126 diamonds at the end of the quarter that Jeff mentioned ? Has Macklin looked into it ?

mfairview said...

Tahoe, Yahoo has 12 analysts listed and an avg. estimate of 0.26 earning for next year with the low estimate at (0.23) and high estimate 0.73.

http://finance.yahoo.com/q/ae?s=OSTK

I recall Patrick saying they will scale back on the aggressive growth path once the company hits 2B in revs. They are on schedule to do that in 2007 (estimates, again from yahoo, for 2006 are in the 1.2-1.3B range so 2B in 2007 seems reasonable to me).

I don't know or have ever met any of the people you have mentioned. It is unfortunate that Gordon Macklin, who is on their BOD, is the one of 3 people you dislike from that group.

DaleW: We are both entitled to our opinions. As you served up no facts or questions in your response, I have no comments.

Fred: I agree with your assessment that the trial will be one for the ages. The stakes are staggering.

BTW- The last few responses are more aligned with what I was looking for at this blog. My thanks to the contributors. Would still appreciate comments on the SEC/NSCC publishings. They couldn't possibly be this arrogant or obtuse could they?

DaleW said...

aleW: We are both entitled to our opinions. As you served up no facts or questions in your response, I have no comments.

You are welcome to your opinion. The facts are the company is burning through a ton of cash in operations and in the financing line. I disagree with the assessment that this company has lots of cash relative to this and I wonder how they are going to raise capital given the CEO's bravura performance the other day. Maybe he'll put the bear hug on Dad for more capital in addition to the board seat. Forgetting the X-Files thing the other day, the bear hug he put on his Dad regarding the chairmanship of the company was absolutely ridiculous.

As for facts and how they work in investing, I have found the weighting of facts and the assembly of an argument in an investment hypothesis is much more important than having every last fact that everyone else has. It's an efficient market -- the facts eventually come out, but the incorrect ordering of facts can persist for years in a stock.

Sith Lord said...

Stormy baby. I am Sith Lord and I want you back!

http://mrbssithlord.blogspot.com/

Its_strange said...

What does one do if they take Bob's and Patrick's advice and get their stock certs and than need to sell in a fast market. I mean timing is very important in high beta stocks ? What should they do Bob ? Patrick ?

tahoe kid said...

I didn't say I disliked Macklin. I said he was an idiot. I actually think he's a very pleasant guy. I just think his track record speaks for itself. He is not qualified to sit on the board of a publicly traded company.

mfairview said...

Jeff, I'm wondering when you are gonna pull the leash on Sith. Surely this isn't what you are intending here or is it ok because he's taking cheap shots at Byrnes? The fact that you instigated this Stormy/Exotic dancer business in error, I would think you'd be quicker to rescind and respond appropriately.

Reposting an interesting claim from Dave Patch (of www.investigatethesec.com) regarding one of Byrne's new lawyers. This is the same Dave Patch who Byrnes references in the CC about having his pictures taken at his house by some anonymous individuals and posted on the net which, in turn, started the whole O'brien/Cohodes affair (something many believe that Jeff is making too big of a deal of). This posting is gotten from Mark Cuban's blog-- Mark seems to enjoy Jeff's work. I'm posting the entire entry for completeness.

BTW- Looks like Byrnes picked up another 14500 shares on the open market yesterday (www.insidercow.com).

DaleW: Do you really believe OSTK will burn through it's cash before going profitable? If so, I'd enjoy debating that with you.

----

35. Posted Aug 16, 2005, 5:44 PM ET by Dave

Jon,

I think you should review the list of Attorney's that Patrick Byrne has enlisted. On that list is Brent Baker. Mr. Baker IS a former SEC Enforcement Attorney working for the commission earlier this year. He worked on the naked shorting issues and resigned over the abuses he was requested to stay away from.

Mr. Baker has written to me personally and called this "more than a problem, it is near approaching a systemic breakdown". The other attorney with Baker is the Former head of SEC Enforcement in a field office as presented by Byrne.

The people he put within this campaign have direct knowledge and awareness of the problem and probably have evidence to utilize to boot. How else would these Industry affadavits be so readily available.

Ironically Marc ignored these facts in the Blog presented as it is more self-serving to trash a stock you are short than it is to present the total picture unbiased.

Ironically, the Blog that Marc quotes as Gospel [Jeff Mathews] is getting ripped for the numerous factual inaccuracies he has presented pertaining to OSTK. Mathews is getting ripped BY HIS SUPPORTS! Notice Marc never came back to mention that either.

When it is all about integrity, we frequently see that those with excessive money fail the integrity test. They are too wealthy to admit fault.

-------

bob obrien said...

I can even up the ante a little. At the NCANS.net site on the news page right now is an article that puts a very plausible set of names to the Sith Lord and the Bottom Feeder.

But it gets better. I always tried to figure out how Cuban fit into all this.

Guess who he worked for when he was in his twenties? Give up?

Hint: Initials MM

Its_strange said...

Jeff posted a link from Findlaw and so did I . It appears Findlaw was wrong and Jeff removed the reference and link. Bob, you have a link that identifies Sith Lord ?

Why didn't your associate Mary Helburn and Patrick sue Rocker for naked shorting ?

Find out anything about the diamond purchase just before the quarter ended ?

Why didn't Patrick address the Eydeas lawsuit on the conference call ? I mean Patrick said it was important stockholders know whats going on a number of times.

mfairview said...

Strange, I do recall that you had first initiated the claim that Stormy was a dancer. I believe Jeff ran with it.

Regarding this "Sith Lord" that Byrnes refers to, this article on Milken has an interesting sentence.

http://www.businessweek.com/1999/99_19/b3628001.htm

Note the line: "So when he was ready to start his next business, Milken--a huge science-fiction fan who loves to make references to Star Trek and Star Wars in his speeches--decided to marry entertainment and technology with education to make learning more accessible for both kids and adults."

Regarding the bottom feeder person, Patrick refers to, this link makes a plausible explanation:

http://www.webspawner.com/users/milken1/index.html

Note the paragraph:

The second tier up from the Master Mind is a box marked "Bottom Feeder - Final Owner". This is the money guy with beneficial ownership of the sleazy hedge funds that engage in illegal activity, and supposedly directs the operations on a tactical level, with the Master Mind directing it on a strategic level. Bryne said, on his conference call, "Now, can I tell you who that designated bottom feeder was who was supposed to end up with our company? Can I tell you? I can." I can. Another fun play on words? I can. Icahn? Carl Icahn? The billionaire takeover specialist and corporate raider? If true, and Bryne's vision is correct, we have Carl Icahn acting as the money guy and tactical point, Milken acting as the Strategic thinker, and Kroll acting in much the same role as he did for Milken in the 80's - digging up dirt and doing corporate espionage on target companies.

If it is indeed these two people, you must admit that 1) Patrick has a funny sense of humor 2) He knows his adversaries quite well.

Jeff, I'm sure I owe you some copyright fees for this but "You just can't make this stuff up". (It's very catchy!)

Jeff Matthews said...

Just for this once I'm leaving a "Bob O'Brien" post up.

I advise all to read it.

It tells you better than anything I could write what kind of whack-jobs we're dealing with here.

SECFOInfo said...

You can run but you can't hide from the freedom of information. The DTCC data will discredit your pathetic position on Naked short selling.

It is a reality, it is systemic and it has the SEC freaking out.

Jeff Matthews said...

Yes, you are right, you've got the whole story dead to rights.

The link goes from the hedge funds right past the grassy knoll in Dallas, through Area 51, down the corridors of the SEC and the Trilateral Commission straight to the White House.

Have you seen who the new chef is at the White House? Do you know who she used to worked for? His initials were "MM."

Case closed.

skeedaddy said...

This is fantastic! Jeff, I'm watching you right now on CNBC and if this is a debate you are definitely winning: it is common sense vs paranoia.

Byrne is only making things worse for his company... Now you've got me thinking about buying puts.

Just in case you are the Sith Lord, you are doing a brilliant job.

'Swarming innuendo.'


Thanks for keeping wall street sane.

Andrewpoe said...

I just saw Byrne on CNBC....and god is he nuts. He took some shots at you ('those who don't have an argument hide behind smarmy remarks.' Hope he likes the fact that he's a kettle). It doesn't hide the fact that a) Overstock.com is losing money b) no one wants anything to do with them c) his conspiracy charges are total bullsh*t (and I'm not an investor).

I would love to see Byrne when making his charges actually having some quality evidence that can be proven and isn't his opinion.

Jeff, you did great on CNBC and I love how you were overblown and arrogant, but instead, let the facts speak for itself.

Andrewpoe said...

Oops, I mean you weren't overblown and arrogant. My bad.

DEN said...

That was hilarious. Patrick Byrne (CEO of Overstock) just came off looking like a total jackass.

WHO'S THE SITH LORD?!?!?!
WHO'S THE "MM"???

Good job keeping your composure up there Jeff.

Carl Tearback said...

WHAT?......lol I have to watch CNBC all day and I've never seen anyone come across as badly as Jeff Matthews.....He said nothing....Insana couldnt believe it....he prodded and prodded but Matthews couldnt think of anything to say.....i have never seen a guest that bad...he asked him to comment what Byrne just said and he answered "What"....ha......is he senile, mildly retarded or what?

Ant & Sons said...

Naked Short Selling is real and not just a market conspiracy, as our articles are trying to prove. Read about it.

http://www.antandsons.com/faceoff/overstockshortselling

The issue is not going away.

Laughing Hysterically said...

I used to think that Chainsaw Al was the nuttiest person I'd ever met in this business; Dr. Byrne is giving him a serious run for the money. He's definitely climbed into rarified territory, however, with his recent performances. It never ceases to amaze me how such a large proportion of senior executives of public companies in corporate America are complete boneheads, but the potentially clinically insane proportion of that population seems to be growing quite rapidly.

Thanks for great comedic theater on CNBC today; my colleagues and I were nearly in tears listening to Dr. Byrne.

ntsl sr said...

JM came off as smug, unrepentant and in general not very likeable. PB came off as not very forthcoming as to specfics of his allegations and trying to be cute with the facts. Perhaps it will be told if it happens in open court. If you do not like what the talking head investor says walk away from the telly clutching your money. Personally I listen to Cramer before any of these other stiff shirts. Good Luck.

Brian Fleming said...

LOL.... What an idiot Dr. Byrne is; I can't believe this guy has a doctorate.

Who is the Sith Lord?
Who is MM?

Maybe it is the Dukes from the movie "Trading Places."

Its_strange said...

Patrick and his NCANS associates , Bob & Mary seem to think the naked shorting is happening on the overseas exchanges. Why ain't they going after them ? Perhaps they aren't interested on real answers

Carl Tearback said...

that Bryrne guy may be completely insane but at least he appeared somewhat LUCID....10 years of watching CNBC and Matthews is the all time worst guest Ive ever seen

Its_strange said...

Why, because he was soft spoken ? Because he runs money and isn't hollywood ? Because he felt Patricks claims were so absurd they didn't deserve comment ? I guess things would have been different if Patrick identify Sith and his partners

Carl Tearback said...

soft spoken?.....Insana couldn't get him to expand on anything.....it was like it was beneath him to be talking on CNBC...lol....he looked like a complete ass....almost as funny as that economics proffessor who told that guy to "shut the hell up" about a month ago on CNBC

Its_strange said...

Should Mary Helburn sue her lawyers for allowing Patrick to flap away about Sith Lord and naked shorting ? I mean his appearence on CNBC today just underscores the notion the suit is just a attempt to squeeze

Its_strange said...

If Byrne has proof of a crime , like he claims, couldn't the gov force him to identify the players ....identify Sith Lord ?

leewhee said...

Lots of dotcoms have been taken out behind the woodshed, yet we never saw the CEO of Amazon, Yahoo, etc., modeling the latest in tinfoil-hat fashions.

Seems to be like Byrnes has disconnected from reality. Maybe he knows that OSTK is doomed to fail and the only way he can handle it is by going off the deep end.

Anyone who knows anything about e-retailing can plainly see that OSTK is a fourth-rate e-commerce platform---and that's being generous. And when you combine a failing biz model with a nutjob CEO, look out below.

Seems like Byrnes is going to try and take as many as he can down with him. But enlisting the "help" of fellow foil-fashionistas like "Bob O'Brien" will only hasten his demise.

Great theater, of course, but bad business.

Its_strange said...

I see Macklin still doesn't do his job.

Roberto said...

My blog continues to follow the naked short selling news. I support Overstock and Dr. Byrne. Jeff came off as a real you know what today. Wasn't it funny how he tried to laugh off the fact he made such nasty posts about Stormy Simon that were proven to be inaccurate. Jeff I hope you get sued and loss your azz on OSTK puts. I hope Byrne puts you, Cramer, and Herb all out of business. You're the problem with America.

http://www.nasdaqtrader.blogspot.com

mfairview said...

If nothing else, there is a lot of attention now being paid to this area of the market thanks to the "theater". Dollars to donuts that not all of them are mocking Byrnes.

Sam S. Park said...

Mr. Matthews, I saw your appearance on CNBC today… and let me say that you held your position very suavely in confronting that lunatic Overstock.com CEO. I’ve never seen such a paranoid individual such as Patrick Byrne. Like many of those who have posted on your blog, I had initially found this character to be amusing; but now, I truly find this person beyond frightening. Props to you in analyzing their flawed business model and clearly pointing them out.

“May the Force be with you.”

Sith Lord said...

People wonder who the Sith Lord is. It is me no less.

Why is there any doubt?

Incidentally Yahoo! has removed all my posts.

But I know why. Mr B has connections you see.

I guess I will have to solve this with a Stinger Missile.

Sith

Sith Lord said...

This was not a threat. I could not obtain a Stinger Missile since Mr B has exposed my source of them!

SECFOInfo said...

The SEC Freedom of Information showing 200 million fails in a single day vindicates Byrne whether it's happening in his stock or not.

Matthews, Cuban and all the other naysayers will be exposed. It's coming.

Mike Onghai, CFA said...

Jeff,
With all due respect, Patrick Byrne looked a lot more intelligent than you today.

Chris Fischer said...

Roberto-

I think you're dead wrong. People like Jeff and Herb are what America needs. Maybe if there were more people like them, gigantic frauds like Enron, Worldcom, etc., would get exposed sooner and you wouldn't have people loosing all their retirement savings, etc.

There are tons of fast talking CEO's out there. We've already seen Patrick lie and actually STAGE things on a conference call. Jeff badmouthing Overstock does nothing to hurt Overstock's business. If OSTK wasn't losing money and burning cash, it wouldn't have to worry about shorts.

ninkiga said...
This comment has been removed by a blog administrator.
ninkiga said...

Patrick Byrne described Jeff Matthews perfectly: smarmy innuedo backed-up with nothing. Mathews was evasive, couldn't provide a straight answer to a single question, and back-pedaled the entire time, just like his smear of an Overstock VP.

There's this thing called credibility, Matthews, and you don't have any. You worked for Rocker, you wrote for TSCaM, and Greenberg and Eisinger are both your former TSCaM colleagues. No wonder you can't provide a straight answer to a simple question.

Why don't you bring your WSJ columnist buddy and former TSCaM colleague, Jesse Eisinger, next time so he can explain that citation for trespassing in Nevada last May?

You have so much venom for Bob O'brien posting Cohodes' address from a publicly available search engine, so what do you have to say about a WSJ columnist breaking the law by trespassing in a gated community and harassing a 78-year-old woman?

What would your reaction had been if O'brien had shown up at Cohodes' house uninvited and knocked on his door? So what do you have to say about Eisnger? Nothing, you arrogant, hypocritical jerk.

One last question, how did Eisinger get the address for that woman he was harassing? By illegal means? We know where Cohodes' address came from, but where did Eisnger get the address for this lady?

You just can't make this stuff up, can you? Take some advice. Stay off TV and away from witness stands. You come across as a complete weasel.

credibility said...

Mr Matthews,
It's a shame that people use such profanity on your blog, I'm sure that is not what you want here. I enjoy reading your posts and the comments from 'its strange' and others. But these ostk longs are really nasty individuals. It appears that they don't get any attention at their blogs and ncan sites so they need to come over here to be heard. When I start to read a comment , after the 1st or second line it becomes such a turn off that i don't even continue readng their post.
Keep up the great work.
I guess their posts are helpful, because i realize what kind of mentality is long such a bad business model. Its not like their the Peter Lynch's of the world giving market savy reasons for being long.
Are those 2 buy recommendation still out there after the 10Q was filed this morning? I mean they couldn't have read the Q today and still kept their "buy" ratings.(or could they?)

Its_strange said...

Who signed the affidavit ? I'm sure you are reading this blog . Please identify yourself . You signed it , you clearly expect it to be made public . Or was Patrick pulling a smoothy ?

Its_strange said...

And Patrick made it clear........the crimes are STILL UNDERWAY ! Right now ! As we speak ! He has a signed affidavit ! He went on TV and let the whole world know crimes were underway , right now ! ..Did the Gov demand to see who signed the affidavit ? Shouldn't they have ? Shouldn't they step in and protect the public from the criminals ? Certainly the person who signed the affidavit had to figure the Gov would act to stop a crime that are in progress or underway. ....Now ain't it beyond bizarre that Byrne didn't take the affidavit to the SEC..

This is not reasonable behavior. This makes no sense and yet we have Wallstreet analysts calling it a buy.

Sith Lord said...

Sorry Stormy

Underling Jeff Matthews has withdrawn his suggestion that you were ever an exotic dancer and I should apologise to you on bended, grovelly knees.

Sith

PS. You still look exotic to me.

Your Lord

mfairview said...

This blog is truly degenerating. I didn't realize they found the citation for Jesse; The internet is the great equalizer. So far, Byrnes is on the mark.

Per Byrnes in the CC:

And Jessie Eisinger was given the
assignment to basically track down O’Brien. And I think it was more than that. He actually, he found me at a conference I was in. And I refused to talk to him without a tape recorder on because I’ve dealt with the Journal before and they’re
just a bunch of dishonest reporters. Over and over and they’ll play this trick by the
way where they say you - I mean - I’ll only talk to a Wall Street Journal reporter with a phone on because they’re such crooks, or with a tape recorder on. And
literally I’ve had them do that and then afterwards say - write me a little email that says oh, my tape recorder turns out to have been broken, but don’t worry, I took
good notes. Well, they’ve done this once to a friend of mine and they did it once to me, so now I only talk to them with a tape recorder on. But Jessie really wasn’t doing an interview. He was there to show me he had obtained my banking record. He had obtained records of two wires I sent or a few wires, he didn’t even have all the records, but of some wires I had sent to this organization NCANS to pay for an ad in the Washington Post and stuff. Now, I’ve been public about that. I don’t know why it was such a big deal. I’ve been public. Yes, I paid for that. I largely wrote the ad, I 50% or more wrote the ad.
But it was really, as far as I could tell, I had two other folks that were listening, was basically to tell me hey, we’ve got access to your wire information at O’Brien’s.
Well, something else funny happened. My phone went dead, my phone went dead and a message came up in Spanish that said this has been diverted to some telephone company in Mexico and the line was out. The same hour that happened,
you see, they got a hold of O’Brien’s cell phone record, they got a hold of O’Brien’s cell phone records and they started calling everywhere O’Brien had called. And I know this sounds like a John Grisham novel, but bear with me. They started calling everywhere he had called. So for example, there is a woman, who she is a psychiatrist who has a patients only telephone number. That number
started getting calls. Who was doing the calling? Jessie Eisinger from The Wall Street Journal. Some lawyers O’Brien had called, a guy they think is O’Brien’s
brother who has some alcoholic problems and sort of easily set off. They were literally calling him six times an hour at one point. That was Jessie Eisinger of The Wall Street Journal. Same with - there’s an elderly lady in Las Vegas that was just picking up the phone, “Jessie Eisinger” hanging up over and over and over harassing her. Jessie eventually flew to Las Vegas and trespassed within a
gated community and would not leave this woman’s porch hoping, trying to get her to confirm that she was Bob O’Brien’s mother, until the neighbors seized him and they called the police and the police arrested him and they cited him. And evidently he had a tantrum on the porch and was screaming, “This is bullshit. I’m a reporter for The Wall Street Journal.” But the police cited him in this community in Las Vegas."

Per Jeff Matthews on his blog on Jesse:

As for truly cheap shops, "It's Strange" takes one by picking on Jesse Eisinger--who happens to be one of the most aggressive reporters at the WSJ and has done more than his share of exposing hypsters and scamsters.

Per the Nevada Police:

http://ncans.net/img/Eisinger%20citation.pdf

It kinda writes itself doesn't it?

Jeff Matthews said...

Stormy Simon was identified as "an exotic dancer" in a Utah Supreme Court document available at "FindLaw" which summarized the verdict against murderer David Mead, at whose trial Stormy Simon was a key witness, for reasons I will not repeat here.

The reference to her as "an exotic dancer" was later removed from the document, which was removed from this site and replaced with the revised court report.

settlements said...

Jeff,

You claimed on CNBC that you do not know how to naked short and that you put order flow through a Prime Broker who MUST borrow stocks to settle trades.

If that is the case, what does this transcript of a December 12, 2004 Bear Stearns Conference Call mean? This statement is being made by the GC of Bear Stearns..

“To give you that brief introduction in Reg SHO, the history how we got to where we are today. For the past several years we have been hearing from many different regulators regarding their concerns about the increase in the level of fails that they are seeing. They believe, and they have stated on numerous occasions, that one of the primary causes of the high level of fails was that various participants in the short sale process, prime brokers, executing brokers, clients, were not following already established rules.”

Regulators telling BS for years that Prime Brokers, executing brokers, and CLIENTS were not following established laws. The result of these indiscretions are what have created the growing number of fails on the books.

Now, isn't the only way to generate a fail is by selling a security that you did not have access or control of - NAKED SHORTING so to speak.

When Scott Ryan and Market Maket Ryan and co. were taking kickbacks to illegally short for 3 Hedge Funds, who do you think those Hedge Funds were?

hundredyearstorm said...

From today's NY Post. Based on reports, it sounds like there are a whole lot more Byrne emails just like these.

"In early October last year, a very unhappy Byrne questioned Bethany McLean, a senior writer for Fortune magazine, about her 1995 decision to leave the analyst-training program at Goldman Sachs to become a reporter.

In the bizarre e-mail rant, he preposterously asked whether she tired of performing sex acts for Goldman traders.

McLean declined to comment on the e-mail for the article and denied any knowledge of a Sith Lord.

A statement from Overstock.com confirmed the e-mails, but said they lacked context."

Since the company confirmed the email, we know he wrote this. So does Byrne owe McLean an apology? Is this acceptable behavior for a CEO? Is she part of the miscreant's ball, or did she just have the temerity to question the business model of the great Overstock?

Its_strange said...

Well i guess when Rocker files the suit we will learn who Bob really is. .....

DaleW said...

Per the Nevada Police:

http://ncans.net/img/Eisinger%20citation.pdf

It kinda writes itself doesn't it?


This is hilarious. This isn't from "Nevada Police," this is from the rent-a-cops at the lady's trailer park / development / golf community. This indicates the police were not called. The worst that could happen to Mr. Eisinger with this citation is he can either pay the fine or he will be called to appear before Jerry Seinfeld's dad at the executive session of Boca del Vista.

This is very different than the thuggery purpetrated against Marc Cohodes and his family.

Its_strange said...

wait a minute...you are telling me rent-a-cops gave him the ticket ? ...lolol !! ...Well i guess he has something to tell his grandkids

ninkiga said...

Dale W said The worst that could happen to Mr. Eisinger with this citation is he can either pay the fine or he will be called to appear before Jerry Seinfeld's dad at the executive session of Boca del Vista.

Or the lady could sue him and the WSJ for trespass, intentional and negligent infliction of emotional distress, and outrageous conduct. Since at least some of these are intentional torts, she would be entitled to actual plus punitive damages and attorneys fees. The WSJ should immediately terminate Eisinger's employment to limit their liability. Otherwise, it looks like they condone this sort of behavior in their employees and sets them up for a greater award of damages.

Dale W said This is very different than the thuggery purpetrated against Marc Cohodes and his family.

You're right it is different. Cry-baby Cohodes just had his home address posted on a message board from a publicly available search engine. To even be remotely at the same level of thuggery as Eisinger, someone would have to show up uninvited at Cohodes' residence and beat on his door until he called the police.

Quick call Bill Alpert, Barrons hedge-fund shill. Maybe he wants to do a story on this poor lady and print a copy of the citation and the incident report.

ninkiga said...

Its strange said Well i guess when Rocker files the suit we will learn who Bob really is.

I doubt it. RP already tried this against a poster on the TTWO board and they lost without ever finding out the identity of the poster. Google Marc Cohodes and TTWO. It's a laugh. The suit made Cohodes look like a thin-skinned fool.

hundredyearstorm said...

Gee, no outrage over Byrne making sexual jokes at Bethany Mclean? Fine, since so many on the side of O'brien pilloried Jeff for his posting someone else's erroneous information about Ms. Simon, will we hear outrage that Bob did the same thing about Mark Cuban's "alleged" connection to Milken? Here's Obrien's mea culpa.

Re: Cuban at Drexel? Bobo Totally FOS!
by: ncansd3 08/17/05 10:47 pm
Msg: 37090 of 37365

That was emailed to me without attribution.

It happens. I was mistaken. The emailer indicated that it was Cuban.

He was wrong.

Obviously.

It's been a long day.

DaleW said...

Or the lady could sue him and the WSJ for trespass, intentional and negligent infliction of emotional distress, and outrageous conduct. Since at least some of these are intentional torts, she would be entitled to actual plus punitive damages and attorneys fees. The WSJ should immediately terminate Eisinger's employment to limit their liability. Otherwise, it looks like they condone this sort of behavior in their employees and sets them up for a greater award of damages.

I said the worst that can happen with this citation. I'm sure the lady can sue all she wants.

On the other stuff, I don't find it funny that pictures of people's family are posted, the family is threatened, and their address is posted on the internet. Fine, people can find it, but that doesn't excuse posting it.

And as far as "beating on the door" goes, that can be exaggerated in the same way the claim the police hauled him away was exaggerated. Maybe Eisinger knocked a few times. There's nothing illegal about that. If he was indeed invited into the community or allowed to enter by a resident, I fail to see what law was broken if this was not part of a larger pattern of harrassment by Eisinger.

Doesn't change the fact that even if the whole Sith Lord thing is true that Byrne still shouldn't be spending all his time on this. This still has all the hallmarks of a very good short. Too bad LEAPS on this are not traded. The March puts are a little too short for me.

Sam S. Park said...

Jeff,

I guess you missed that analysts' and fund managers' secret annual meeting regarding Naked Shorting.

See, it's an old Sith mind trick, but you make a trader think that he borrowed a stock, then his brokerage shorts it and credits your account. (It like blindly robbing this guy's clothes, and this poor guy is left "naked" except for his boxer "shorts"... hence naked shorts). It's complicated, and you'll need to achieve Master Sith Lord status before you can use this tactic.

Or you have traders engage in this naked short position by entering into some forward contracts, swap positions, and some private contracts... then you call in some favors; but there are probably some legal restrictions with this method. That's why you need Stinger missiles. You tell regulators that these transactions should be allowed or else you'll release your Stinger missiles aimed at their secret underground headquarters.

Its_strange said...

Mr. Macklin, After Worldcom you have no right being on any board but i see that doesn't stop you from once again not doing your job.

Its_strange said...

Mary Helburn....You long NFI ? Why are you all over that yahoo message board ?

West Coast Contempt said...

Jeff, your appearance on CNBC on 8/17/05 was very disappointing. You communicated very poorly and came off smug and arrogant. Upon hearing that you were to appear opposite Byrne I eagerly awaited your appearance. Unfortunately all you accomplished with your poor appearance and lack of articulation was to actually give Byrne a little credibility. You appeared to miss the crux of his argument and instead behaved like a sophmoric bully childishly chiding Byrne for his use of the term Sith Lord. While I chucked at the term upon first hearing it, I came to see his point of view and understand that he was merely trying to use a hip term for Master Mind. At the end of your appearance you openly mocked Byrne about the Sith Lord comment as if you felt you had public sentiment behind you. I'm sure you now realize that you had anything but that. I am sure you have reviewed your appearance and realized what a smug blue-blood silver spoon rich kid punk you came off as.

ninkiga said...

Dale W said I don't find it funny that pictures of people's family are posted

The only people posting photos of Cohodes' family is Marc Cohodes. Max Cohodes should sue Marc for posting his photo.

the family is threatened,

Didn't happen. Post a copy of the threat or a link. If there were threats, why didn't Marky sue? Because there were no threats, liar.

And as far as "beating on the door" goes, that can be exaggerated in the same way the claim the police hauled him away was exaggerated.

Read the incident report. There are plenty of witnesses. The neighbors, the citing officer, and the victim.

If he was indeed invited into the community or allowed to enter by a resident,

He wasn't.


I fail to see what law was broken if this was not part of a larger pattern of harrassment by Eisinger.

The law was broken, several laws in fact, and it was a larger pattern of harrassment.

Doesn't change the fact that even if the whole Sith Lord thing is true that Byrne still shouldn't be spending all his time on this.

What evidence do you have that he's spending ALL his time on this?

This still has all the hallmarks of a very good short. Too bad LEAPS on this are not traded.

In other words, you're afraid to put your money where mouth is. Nothing but smarmy innuendo backed up with nothing, just like your hero.

DaleW said...

In other words, you're afraid to put your money where mouth is. Nothing but smarmy innuendo backed up with nothing, just like your hero.

Why don't you stick to the legal arguments and I'll stick to the financial ones. I put my money where my mouth is when there is ample financial reward and a margin of safety. Shorting this thing isn't a good bet and buying March puts (the longest-dated puts possible at the monent) doesn't make sense given the prices for the vol and given I am much less sure about this thing being down a lot by March 2006 as I am about March 2007. If LEAPS were available, you bet I would put a lot of money where my mouth is. I don't, however, allocate capital based on the desire to make a point or the desire to show what cajones I have. I allocate capital based on the desire to generate returns above and beyond my cost of capital. The duration of the current puts don't give me the returns I am looking for relative to the risk. This doesn't change my mind that Overstock is a piece of junk run by a guy that spends way too much time on the wrong things.

As for the Eisinger thing, send me the documents when someone prevails in a lawsuit against Eisinger. So far, he was cited by rent-a-cops and he may have to appear before a bunch of condo presidents at Boca del Vista. That's scary. Not quite the star chamber with the potential for Rikers.

ninkiga said...

How about you start backing up some of your allegations? Where are those threats that you claim were posted against Cohodes? Where are the photos of Cohodes' family members posted that weren't posted by Marc Cohodes himself or with his permission?

How about we get Eisinger on TV in a face-off with Byrnes? Eisinger couldn't possibly do any worse than your smarmy hero, and I'm sure Byrnes wouldn't mind putting some questions to Eisinger.

As far Eisinger ending up in Rikers, the story is still developing. Many federal laws had to have been broken for him to obtain ncans banking records. He might end up doing time yet.

Its_strange said...

Very interesting....A few years ago CNBC wouldn't have gotten near the OSTK story. It would have been ignored like the LHSP / Amerisoft / CNC stories. They seemed to have ignored most of Greenberg's stuff. I guest Fox has changed alot and its still not on the air.....I'm not smart enough but i bet Jeff could do a great job covering the CNBC / Fox war thats about to break out. I expect some interesting changes

mfairview said...

West Coast:

Regarding this "Sith Lord" that Byrnes refers to, this article on Milken has an interesting sentence.

http://www.businessweek.com/1999/99_19/b3628001.htm

Note the line: "So when he was ready to start his next business, Milken--a huge science-fiction fan who loves to make references to Star Trek and Star Wars in his speeches--decided to marry entertainment and technology with education to make learning more accessible for both kids and adults."

DaleW: Good catch on the police thing. I suspect first response is to the local "Safety Officer". I regret you have to downplay the event to make your point. Per the citation:

"I asked him if he had a pass. He said "No", that a woman invited him onto the property but he didn't know her name."

"I wrote him a ticket & escorted Mr. Eisinger off the property. Called the main gate. I told her what happenned. She said he scared her & thanked me for getting him of property".

He even lies poorly.

Regarding your statement:
"On the other stuff, I don't find it funny that pictures of people's family are posted, the family is threatened, and their address is posted on the internet. Fine, people can find it, but that doesn't excuse posting it."

I assume you are intending to mean the Cohodes/O'brien exchange. A few corrections, according to Byrnes webcast:

"And he posted Cohodes’ home address. Now that was a dumb thing to do, and he knows it was dumb, and actually apologized. And if you ever want to see a classy apology go and look at his website. It was not one of these apologies that says “Oh, I was wrong. But it’s - you guys are the jerks.” He wrote a really nice public apology.
All that said, he didn’t mention Cohodes’ name. And yet, within a few minutes of him posting his address some folks on Yahoo immediately recognized it as Cohodes’ address - and that’s a little bit odd - but they immediately - because it didn’t say “Cohodes” on it. But they immediately notified Yahoo that there was this kind of stuff going on and they cut off O’Brien. That’s interesting. But what’s really interesting is an article got written about it. And the article got written by somebody who left out everything about the - David Patch having pictures of himself, his wife, and the house posted up on the message board to imply we’re watching you. The fact that at picture taken in the parking lot was
posted up just to sort of send a message."

So David Patch had his picture posted. Also let's not forget Eisinger getting phone and banking records and making phone calls to private numbers. Byrne's also recants that story in his webcast and I can repost it if you need/want.

DaleW said...

How about you start backing up some of your allegations? Where are those threats that you claim were posted against Cohodes? Where are the photos of Cohodes' family members posted that weren't posted by Marc Cohodes himself or with his permission?

I am referencing a Bill Alpert column titled "A Family Threatened on the 'Net." I doubt Cohodes gave "Bob O'Brien" permission to use the picture. The intent of the posts is quite clear. It was meant to intimidate or threaten the family or incite others who were unfavorably disposed towards Cohodes.

How about we get Eisinger on TV in a face-off with Byrnes? Eisinger couldn't possibly do any worse than your smarmy hero, and I'm sure Byrnes wouldn't mind putting some questions to Eisinger.

Hey, I'd tune in for that. Who is my hero, BTW? Are you talking about Jeff? I don't know Jeff and I know next to nothing about what kind of a person he is and what he has done professionally and personally. That being the case, I can say definitively he is not my hero.

As far Eisinger ending up in Rikers, the story is still developing. Many federal laws had to have been broken for him to obtain ncans banking records. He might end up doing time yet.

I commented on him being busted by rent-a-cops at Boca del Vista. I didn't comment on this. I don't know and I frankly don't care, but if the allegations and evidence are as flimsy as the the documentation of his trespass, then I look forward to hearing about it. I would love to know why if Eisinger was engaged in criminal trespass the police were not called.

DaleW said...

MFairview,

All we have is a written report from a private security officer, in which one person alleges one thing and one person alleges another. Why should I believe the lady before I believe Eisinger. I reserve judgment. I just find it curious no police were called and I differ with the characterization that Eisinger was arrested.

If Eisginer broke a law in this case or the bank information, he should be held liable in any way the system works. I don't know him, I don't care, and I don't care about all of these antics. I just don't like the company, I don't like the CEO, and I wish there were a good way to profit from it. As it stands, shorting it doesn't work, the puts are overvalued, and there are no LEAPS to fit the timeframe that I would like to work with -- those would probably be overvalued anyway. So I will just sit back, comment here and there, and witness one of the most bizarre investment cases of my life unfold. If I can jump in on the short side at some point, I will.

hundredyearstorm said...

Byrne and O'brien made a big deal out of John O'Quinn and his firm joining in on the lawsuit vs Rocker. Byrne described him as a "great big strapping Texas cowboy". Well, looks like a judge down in Mississippi has a slightly different take than Patrick. Instead of the cowboy that Byrne paints him out to be, sounds more like O'Quinn is a fraudster and is getting called out on it...

Aug. 19 (Bloomberg) -- Mississippi lawyers noticed something odd as they took up the task of defending two dozen companies accused of inflicting a deadly lung disease on thousands of workers.

``We knew from Day One that there was simply no medical explanation for 20,000 plaintiffs to file silicosis cases in Mississippi over an 18-month period,'' says Jackson, Mississippi, lawyer Fred Krutz. Another red flag was that ``most of the diagnoses came from a handful of doctors.''

Caused by inhaling microscopic particles of sand dust, silicosis swells the lungs and can suffocate a sufferer. Sandblasters and metal workers are especially vulnerable, but because it's easily preventable, silicosis is rare.

Normally, Mississippi might expect eight cases in a year, according to government statistics and research studies.

So what's new about corporate defense attorneys' accusing plaintiffs' lawyers of concocting a ridiculous lawsuit?

In this case, they proved it.

``These diagnoses were driven by neither health nor justice,'' U.S. District Judge Janis Graham Jack, a former nurse, wrote in a June 30 court order. ``They were manufactured for money.''

10,000 Plaintiffs

From her court in Corpus Christi, Texas, Jack has been overseeing pretrial issues in 111 silicosis cases filed mostly in Mississippi and also in Texas and other states. The cases represent more than 10,000 plaintiffs suing some 250 companies, with another 10,000 silicosis cases pending in Mississippi courts, Krutz says. His firm represents 28 companies, mostly sand, gravel and equipment companies. Few are publicly traded, but among them is Ingersoll-Rand Co., which is.

The first key to exposing what happened, Krutz says, was bringing enough cases before a single judge so that all the pieces of the ``fraud puzzle,'' as he put it, would be on the same table at the same time.

What made the difference was new case law that allowed that to happen, the judge's willingness to allow the defense to look behind the diagnoses and a specially designed computer program to analyze data, Krutz says.

The result was Jack's 249-page order, which describes how a cast of plaintiffs' lawyers, nine physicians and two patient- screening firms staffed with non-medical personnel churned out mostly bogus silicosis diagnoses with stunning speed, bulking up lawsuits with thousands of plaintiffs.

Like a boulder landing in a tiny lake, Jack's order could transform the landscape or merely make a big splash.

Not Now

What's clear is that it's a public relations disaster for the plaintiffs' bar at a time when it is already on the defense. Trial lawyers remain a favorite target of conservative politicians, from the president on down.

The U.S. Chamber of Commerce has been building a database that it says detects fraud-like patterns in asbestos and silicosis cases. Congress is planning on holding hearings into what happened in Jack's courtroom.

What were these lawyers thinking?

The judge has said she'll fine the Houston firm O'Quinn, Laminack & Pirtle, led by attorney John O'Quinn, which represents about 2,000 silicosis plaintiffs. It's likely more firms will get punished.

Federal prosecutors in Manhattan have launched an investigation to see whether crimes were committed, whether by lawyers or doctors or screeners, according to court documents.

Lift Licenses

No one can read Jack's order and not be outraged by the conduct it describes. Those who committed it should get their law or medical licenses lifted, their fortunes fined and, if they knowingly committed fraud, their freedom interrupted.

As the silicosis cases head toward their doom, Krutz predicts more cases falling apart when evidence of similar conduct comes out, especially in asbestos litigation.

``This is a not the end of it,'' says Krutz, a partner in Forman Perry Watkins Krutz & Tardy. ``This is the beginning of it.''

The big question is whether such conduct is widespread, and whether existing laws are sufficient to root it out.

How Much Is Too Much

``There are hundreds of thousands of civil cases that are resolved through the civil justice system each year,'' says Frederick Baron, a Dallas mass tort lawyer, and a partner at Baron & Budd. ``Is there fraud? Absolutely. Is it more than 2 or 3 percent? Unlikely.''

There's no need to change rules based on those few, Baron says. Jack's ruling shows the system works, not that it's broken.

And it's not as if the corporate defense bar or its clients have spotless records for disclosing the dangers of their products or coughing up documents under court order. This spring, for example, a judge determined that Morgan Stanley had been ``grossly negligent'' in withholding evidence in a major civil suit brought by New York financier Ronald Perelman. Morgan Stanley fired its lawyers at the silk stocking Chicago firm of Kirkland & Ellis.

``Anyone who abuses the legal system ought to be held accountable. Period. No exceptions,'' says Carlton Carl, a spokesman for Association of Trial Lawyers of America.

Even if no laws change, no doctor is indicted and no one gets dragged to a congressional hearing because of Jack's order, ``I predict to you it will change the way mass tort litigation is defended in the future,'' Krutz says.

He says judges in mass tort cases will let defense lawyers say, as Krutz does, ``Let's stop the litigation train right now and check the passengers to see if they've got a ticket. Do you have a reliable diagnosis, whether for silicosis or asbestosis or whatever it is, from a credible doctor?''

And now lawyers know how to get the data to answer that question.

Its_strange said...

But Byrne said O'Quinn didn't need money anymore and only handled cases for the public good ! lol ! More Patrick bull, more Patrick hype , more Patrick phony nonsense.

Its_strange said...

Don't tell me Bob O'Brien and John O'Quinn have known each other for some time now ! !

http://www.forbes.com/forbes/2003/1013/066.html

O'Quinn has been looking for a huge payday with this naked short stuff for 2 years now !! When did Bob appear on the message boards ?

Its_strange said...

Milken claims he never heard of OSTK until the NY Post called and asked if he was Sith Lord. Now what do the analysts do ?

Give it up Bob , Patrick .

credibility said...

its so funny.

Has this statement sunk in?

The NY Post asked MM if he knew who the SITH LORD was?
He said HE did not.

HOW long after this statement will it be before the longs and buyers realize that this is (i think) a fact?

credibility said...

Just imagine.
Lets just say hypothetically speaking the Bears are correct and that the company doesn't deserve the multiple it trades at these days.
And Let's just say the stock did go extremely low.
How does Mom and POP who owns a mutual fund that is long this (even with all these red flags) get an explanation?
I know the answer is we don't own that much in the fund its not significant.
There could be employees of the comapny that are counting on their equity.
I remember when Alliance was criticized when Enron fell apart.
Wcom comes to mind.

I don't mean to compare this to Enron. I use enron symply as a generic word for failure.

credibility said...

i am wondering outloud.
why does Byrne continue to buy shares now?
A) he doesn't own enough.
B) he is that sure the stock is going higher and not lower.
C) he is at risk of losing control
D)he has no interest in diversifying, in order to have a more balanced asset allocation.
E)he is simply trying to create buying in the street to start a short squeeze.
F)if everything goes to hell in a hand basket, he defends himself by saying " hey I was buying, i didn't do anything wrong"

I wonder what the answer is?

Its_strange said...

The Red Herring interview Byrne gave on the 14th is perhaps the oddest of them all .

Chris Fischer said...

This is interesting. Reseller.com's rating of Overstock..

http://www.resellerratings.com/seller1634.html

Customer Satisfaction
Six-Month Rating: 3.23
Lifetime Rating: 3.80

6.58 Pricing of Products and Services
2.56 Likelihood of Future Purchases (that's out of 10)
3.97 Shipping and Packaging
1.11 Customer Service (that's out of 10)
0.57 Return or Replacement (that's out of 10)

This is out of 273 reviews. Read some of the reviews on here - they are VERY telling of the disarray that is overstock.com, from the computer systems on down.

It also explains why they're spending more and more to "acquire" customers, when 75% of them never come back. If they didn't, I think they would have blown their sales numbers a LONG time ago.

But I guess all 273 reviews are a conspiracy and fake - surely the Sith Lord has coordinated a massive PR scheme, spanning several years worth of reviews, in an attempt to drive down the share price of OSTK.

mfairview said...

Chris, that's been covered. A few more reviews at epinions (32000 v/s 300 at resellerratings.com).

http://www.epinions.com/browse/online_stores/letter_~O

I suppose if you're looking for answers to suit your model, you can always find it on the net.

Jeff Matthews said...

"epinions" is a joke.

Go to the site. Check the number of so-called "reviews" for Overstock, Amazon and eBay.

You will find 1,060 for Amazon and you will find 899 for eBay.

But you will find 35,286 for Overstock.com.

And it's not because Overstock does 35x the business of Amazon and 40x the business of eBay.

Looks like somebody spends their time doing serious ballot-stuffing on "epinions."

As for "reseller ratings," the sample sizes are small but at least it contains actual customers writing real reviews.

As "mfairview" says, you can find whatever answers suit your opinion.

mfairview said...

Jeff, that too has been covered.

http://www.epinions.com/merchant/survey_popup.html

Where do surveys come from?
This merchant allows Shopping.com to collect feedback directly from their customers after they have made a purchase. To do this, a survey is served to a customer immediately after they make a purchase. We then follow-up with the customer a few weeks later, after they should have received the product they purchased. The customers' answers to these follow-up surveys are displayed as Surveys on the Shopping.com network.

I suspect EBay/Amazon doesn't partake.

Have we pretty much covered it?

Jeff Matthews said...

"mfairview": you have confused "surveys" by the merchants themselves and the "reviews"--all 35,286 for Overstock--which anybody can just sit down and create out of thin air.

Like I just did, to see how "real" these so-called "reviews" actually are.

And like somebody else seems to be doing just to inflate Overstock's ratings on a meaningless web site.

Have we pretty much covered that you do almost no original work whatsoever?

mfairview said...

Jeff, these are real people making real ratings at time of purchase (and reverified a few weeks later). Unless you have proof otherwise, I'll take it at face value. The fact that they don't post comments is of little consequence. In fact, I would argue that it reflects more true intentions then going to a site like resellerratings.com. Would you expect someone to go to a ratings site when everything goes ok with their transaction or when something goes awry and they're upset? I'm thinking this whole Byrnes affair is really clouding your ability to reason.

Sam S. Park said...

Wow, the number of reviews for Overstock.com on Epinion does seem fishy. Amazon's 2004 annual revenue was $6.9 billion and received 1,060 Epinion reviews. Whereas, Overstock's trailing 12-month revenue adds to $641 million... yet it somehow magically managed to generate 35,286 Epinion reviews. Let me see if I'm seeing this right.

Overstock generates less than 1/10th the sales Amazon realizes, yet OSTK somehow managed to obtain 33 times the Epinion reviews than those for Amazon! Overstock must be really (and I mean REALLY) good at convincing their customers to take review surveys. Maybe it’s me, but I don’t remember being so enthused about taking customer surveys.

Mike Onghai, CFA said...

The investment case for OSTK is simple. Owns 60-70% market share in the liquidation area. For a successful business in this field in the brick and mortar space, see TJ Maxx. Low capex business model. CEO buys his own shares and does not use shares to acquire companies. Like Robert Gouizetta of Coca-Cola, the CEO defends his companies against lies made about the company's business. Recurring business model. Growing gross profits like crazy, with minimal cash burn rate.

It is not yet a slam dunk winner because some milestones have yet to be met. The jury is still out ... but i like the odds. A serious investor should really be listening to the conference calls and reading the 10-q's and 10-k's, and make his own decision -- not Jeff's blog.

Remember this: a lot of successful, great people were labeled crazy on their way to becoming successful.

Sam S. Park said...

"Mike Onghai,"

Since you seem to be a value investor, I suggest you read my two cents on OSTK on my blog:

Sam's Blog

You should read my little blog titled "Overstock is such a blah stock." Knowing what I've found and given that you're a value investor, you might want to stay away from such a speculative play.

Its_strange said...

The NY Post claims Rocker is long OSTK puts. Does that mean he is not shorting the stock ? Phil Saunders, now what ?

Its_strange said...

The Post article goes on to say the regulators are doing a sweep , a audit to get to the bottom of it all . Well Patrick, now what ? You said they were doing nothing ? Perhaps you should sue the firms the SEC ferrets out ?

settlements said...

its strange...

Maybe he is suing those that are being exposed. He is just ahead of teh game as most people are when it comes to the SEC. Weren't the states suing the mutual funds BEFORE the SEC stepped in?

Mike Onghai, CFA said...

Sam,
Your disclaimer in your blog that your analysis is not a full analysis answered your own question. Your analysis of gross margins and inventory as % of sales is too simplistic. Costco has 15% gross margins. I am not saying OSTK is same as Costco. True analysis has to be an overall balanced approach. Anyway, at least you did some work ... better than 90% of the people.
OSTK is not a slam dunk winner for reasons i cited in my previous post...

Sam S. Park said...

"mfairview" was kind enough to visit my site to tell me that I've missed something about the Epinion survey topic... I beg to differ, and I would like to share it with all of you fine people.

Excluding the companies without any review numbers, and also excluding OSKT, these are the numbers:

Sum of the reviews of ALL 127 companies with review numbers: 21,981 (compared to OSKT's 35,389)

Average: 173

Higest number of reviews excluding OSKT: 3,616

Here's my point, OSKT's review numbers stick out like the Giant (from Jack and the bean stalk) would at the North Pole among the little elves... the numbers speak for themselves. If you want this excel file, give me your email address, I'll be glad to send it to you for free.

Its_strange said...

Will OSTK answers the questions about the diamond deal ? Will it start making money ? Will it stop thier McCarthyism ? Patrick should be dismissed and oSTK should start over. Until than you can figure on more money down the drain.

Sam S. Park said...

Mike,

You're exactly right, I didn't do a full extensive analysis. I just didn't want to waste too much of my time on OSTK (warning signs outweighted the good). It's just that there are better plays out there.
Man, you have more guts than me. Seriously, thanks for visiting and good luck with your investment endeavors.

mfairview said...

Strange:

I just don't know why you don't call in to the CC and ask him yourself or maybe just write him? It's not like he hides behind a rock. You've asked the same questions here again and again expecting us to know when it's clear we don't.

I pulled this off their investor relation site (Please post your findings):

Media Relations
Scott Blevins
Director of Public Relations
801-947-3133
sblevins@overstock.com

Investor Relations
Kevin Moon
Director of Investor Relations
801-947-3100
Investors@overstock.com

Board of Directors
Board of Directors
Overstock.com, Inc.
6350 South 3000 East
Salt Lake City, Utah 84121
boardofdirectors@overstock.com

Sam:

I am not questioning the appearance of their numbers among others. I'm stating why it is as such. Their customers are surveyed by shopping.com when they purchase an item and reverified again a few weeks later after they've received an item. This is why their number is so large. Are you saying that it's large because they are noodling with it?

BTW- Looks like Byrne's responded to an article written by a FOOL journalist a few days ago. He seems to have issues with Jeff and holds no punches.

Sam S. Park said...

mfairview,

I'm not suggesting anything like "manipulation." I don't really like to take cheap shots. I just noticed something that stuck out and was wondering all possible explanation to something that simply sticks out so much. I was simply stating my thoughts... nothing more and nothing less.

Jeff Matthews said...

Sam: stop apologizing. You're right, "mfairview" is wrong. Epinions is a joke.

Anybody can post any "review" they want on Epinions without actually buying anything. There is no control, no check, no nothing.

Go ahead and do it. Anybody can, which is why Overstock has 35,000-and-counting so-called "reviews" while Amazon and eBay average 1,000.

Most likely it's the same guys who spend all day on message boards obsessing about naked shorts who are sticking fake reviews on Epinions to make Overstock look more popular than it is.

They seem to have no other lives. Keep doing your own work. It's the only way to make money in this world.

Its_strange said...

I read the Fool interview . I think Patrick has serious troubles. Jeff removed the link to Findlaw once he learned it was incorrect. How much money do you think OSTK will make or lose before these lawsuits go to trial ?

Its_strange said...

So Patrick fired a "mole" who he believes was talking to hedge funds. Hey mole , can you fill us in ? Whats going on inside that place ? Is it as strange as it appears to be ?

mfairview said...

And resellerratings.com checks their reviews how? By asking politely it appears. Does that work for you Jeff?

-----

Store Survey

On the next page we will ask you a few questions about your experiences with this store, and you will be able to write your own review. We ask that you only submit a review if you have placed an order from this store, and if you have given the store an opportunity to deliver your merchandise in a reasonable amount of time.

It is very important that your review stick to the facts about your purchasing experience rather than speculate about experiences that other people may have had.

In the future if you ever want to edit your responses for this store, visit this page and you will be able to edit your written review and survey responses.

-------

Its_strange said...

I just wrote a review of Overstock on epinion and i have never bought a thing . Yep, its silly

mfairview said...

Strange: Do it another 5000 times and you may skew the reporting. Starting to get the idea of why more numbers for ratings are better? If I didn't know better, I'd think Jeff was eluding to a conspiracy by OSTK longs to noodle with the OSTK epinion numbers. LOL

Its_strange said...

i just called Overstocks customer service..They hung up , just plain hung up ...you don't you try 1-800-843-2446...

Mary, why did you buy the stock the same day your associate at NCANS Bob O'Brien called into OSTK's conference call and acted as if he hadn't ever talked with or met Patrick ?

Chris Fischer said...

Wow. I just read the Motley Fool article Overstock reply. If I was a shareholder, I would be ABSOLUTELY FURIOUS.

Q. How much is this litigation going to cost Overstock shareholders, including the money needed to defend against the defamation suits that have already begun to come your way?

A. It has been costly to date. Now it is in the hands of O'Quinn, Christian, Voyles, and others. They took this (along with all countersuits) on contingency.

So instead of doing things like growing the business, improving customer service, etc., this is what Patrick is spending shareholder money on? This lawsuit is frivilous and makes OSTK a target. I've yet to read one article from an independant source that suggests this lawsuit is a good idea.

Chris Fischer said...

Itsstrange-

You're not joking! I just called and did it myself. Navigated through the menu and tried to return an item. Got 2 rounds of "We're sorry, all our customer service reps are busy" and then, 2:19 into the call, got hung up on.
I wouldn't draw any conclusions from it, but if I was long, I'd be concerned. Especially paying all that money to "acquire" new customers who are unlikely to return.

I'd make a good bet that OSTK will miss sales numbers this quarter.

Jeff Matthews said...

"mfairview" may publish his conspiracy stuff on Yahoo.

mfairview said...

Jeff, what of RegSHO and FTD's are conspiracy and warrant deletion of my prior post? Are they disallowed words or topics here?

Jeff Matthews said...

Old old old news, posted here many many times by you and Phil Saunders and the other Overstockians. You'd spend your time more effectively going to the SEC, not to a blog.

DaleW said...

The investment case for OSTK is simple. Owns 60-70% market share in the liquidation area. For a successful business in this field in the brick and mortar space, see TJ Maxx.

TJ Maxx is a very nicely focused model, which Overstock is not. Overstock looks more like Big Lots but with worse operating controls, a "messier" store with worse merchandising, and a quickly deteriorating balance sheet.

Low capex business model.

Which doesn't apparently stop them from spending tons of money elsewhere.

CEO buys his own shares

Not such a great idea when they're burning as much cash as they are and the crazy conference call and lawsuit may increase the cost of capital.

and does not use shares to acquire companies.

This is irrelevant. It's the value of what is being issued against what is being acquired that is important.

Like Robert Gouizetta of Coca-Cola, the CEO defends his companies against lies made about the company's business.

Like Zzzzbest, too.

Recurring business model.

Huh? No. It's a transaction-based model with some wheezing efforts at more recurring lines.

Growing gross profits like crazy, with minimal cash burn rate.

Minimal? Not in relation to cash on hand. Both operating FCF and financing cash burn are high relative to cash.

It is not yet a slam dunk winner because some milestones have yet to be met. The jury is still out ... but i like the odds.

Some of us think the odds are terrible.

A serious investor should really be listening to the conference calls and reading the 10-q's and 10-k's, and make his own decision -- not Jeff's blog.

A serious investor should do all of those things and more.

Remember this: a lot of successful, great people were labeled crazy on their way to becoming successful.

And there are a lot of stock pumpers who acted the same way you-know-who is acting.

somervillec said...
This comment has been removed by a blog administrator.
Mike Onghai, CFA said...

DaleW,
That is why there is a market ... we shall see. I just want to add 2 comments to your reply.
Recurring? I know people who shop at Overstock repeatedly. Transaction-based? Yes. Does it form habits for people to repeat the transaction? Yes.

People tend to discount issuance of stock and options when they value a stock. If you have a manager who understands the value of stock, buys his own stock, does not issue much options, you have a strong tailwind in your favor.

Anyway, this is a market. And we disagree on many issues. But we shall see ...

Mike Onghai, CFA said...
This comment has been removed by a blog administrator.
Mike Onghai, CFA said...

I just read the motley fool article of Byrne's response to the 12 questions.

That Stormy bit was very interesting. Anyway, whether OSTK crashes or not, I like this Patrick guy. It took 10 years for Buffett's
speech agains stock options to be treated with legitimacy ... So I am not surprised that there are
so many incentives stacked in making Patrick look like a big fool .... ( see Charlie Mungers' speech on Incentives)

DaleW said...

Recurring? I know people who shop at Overstock repeatedly. Transaction-based? Yes. Does it form habits for people to repeat the transaction? Yes.

Even if someone shops over and over again at Wal-Mart, that doesn't make it recurring. Recurring is a regular billed relationship, usually contractual, many times not. "Recurring" is your cable bill, your phone bill, monthly wastewater treatment services, what a utility pays GE to maintain their turbine, etc. It's not a retail relationship.

People tend to discount issuance of stock and options when they value a stock. If you have a manager who understands the value of stock, buys his own stock, does not issue much options, you have a strong tailwind in your favor.

Not if the underlying stock is worth jack. That CEO should be issuing all the stock possible.

Byrne likes to say many things that push the Buffett followers' buttons, but in the end, I am still unconvinced his company is good, it adds value for customers, his platform is robust, and he isn't overconfident on the price of the stock. I personally think they are a lousy retailer running huge cash losses on investments that won't pay off and I personally think Byrne's time allocation is so far off it's ridiculous. I also think the bear hug he put on this dad was crazy and indicates how screwed up he is. Read this: "Secondly, thought I'd give people advance notice that I've asked my father to become Chairman, and we're going to do that I think at the next board meeting...So I'm letting you know in advance, I'm going to propose him for that. I'm not sure if nominated he'll run and if wins he'll serve, but we're trying to get him to be chairman." Would you do that to your father? Maybe when I was a foolish teenager running a lemonade stand, but not now, not as an adult. This is some wacky stuff here.

Just look at what he does, not what he says. Buffett doesn't buy back stock to "signal" undervaluation while I think that's exactly what Byrne is doing. Why else would OSTK buy back so much stock this year and buy back or buy call options given their cash burn rate? Because they think it's such a great deal? Well, we'll see on that. This just has all the bad hallmarks, that's all I'll say. Yes, you're right, that's what makes a market and that's what we all live and die by every day.

Its_strange said...

Phil claims he will busy writing a book so he will not be posting like he has . I guess the squeeze failed so he is about to disappear . Now Patrick and Mary are holding the bag . ....

DaleW said...

That Stormy bit was very interesting. Anyway, whether OSTK crashes or not, I like this Patrick guy. It took 10 years for Buffett's
speech agains stock options to be treated with legitimacy ... So I am not surprised that there are
so many incentives stacked in making Patrick look like a big fool .... ( see Charlie Mungers' speech on Incentives


The funny thing about Byrne is he just needs to say a few magic words from the vocabulary of Buffett and Munger and he hooks all the Buffett people. Just think about it for a second...look at the way this guy acts. It's all a very slick game to draw upon incantations from the book of Buffett but otherwise totally flounder operationally and act like a complete freak. At least Byrne knows how to program to the right investors -- just invoke Dad's friend's names and you're home free. I've read all Munger's things, I know about Buffett, and I know what Byrne is trying to communicate. I guess I will remain one of the Buffett followers who prefers to believe this thing is a total piece of junk, Byrne is unstable, and this is a really bad investment at this point.

Sam S. Park said...

DaleW has hit this exactly right on the nose! Nice...

Sam S. Park said...

Going strictly on OSTK’s recent quarterly figures, the company’s burn rate (excluding capex) is approximately $3.4 mil. At this rate, its cash reserves and recent quarterly numbers imply that OSTK will run out of cash in about 9 months. Working cap burn rate gives a slight glimmer of hope for OSTK, suggesting that it has almost 15 months.

What are they going to do about cash if they don’t drastically improve operating and net margins? I can understand that Pat Byrne uses his company to favor consumers, but this comes at the cost to its bottom line figures. He doesn’t want to “play the Wall St. game” and gives little importance to EBITDA. Growing top line is easy when you’re practically giving things away, but what does that mean for its shareholders?

Pat Byrne seems like he’s reluctant to issue more shares to float. Like DaleW pointed out, its cost of cap is most likely to go up as banks would most likely second guess before lending to OSTK (who knows how it would be spent). I’m not sure funding his crusade would reflect a prudent investment.

Was all of this commotion a bad and costly publicity stunt to get people to visit overstock.com? Pat Byrne takes the insults and then passes the company off to his father. Whatever the case, its business model makes little investment sense. They need to seriously improve operations. Its future simply remains too uncertain, especially with all of its hoopla going on now.

Mike Onghai, CFA said...
This comment has been removed by a blog administrator.
Mike Onghai, CFA said...

sam,
re-read the footnotes on the q with regard to the cash flow and the balance sheet statement. u r missing something.

anyway, everyone should make his opinion with investing.

we just have to sit and wait and see ...

Sam S. Park said...

Hey Mike,

Remember, I'm not about personal attacks, and I'm only going to spend like 15 minutes of my spare time to look into OSTK. Anyways, could you be more specific as to what I have missed? I haven't gone through the q in-debth. However, I did find this from their q.

We believe that the cash and marketable securities currently on hand, amounts available under our credit facility and expected cash flows from operations will be sufficient to continue operations for at least the next twelve months. While we anticipate that, beyond the next twelve months, our expected cash flows from operations will be sufficient to fund our operational requirements, we may require additional financing. However, there can be no assurance that if additional financing is necessary it will be available, or, if available, that such financing can be obtained on satisfactory terms. Failure to generate sufficient revenues, generate profitability or raise additional capital could have a material adverse effect on our ability to continue as a going concern and to achieve our intended business objectives. Any projections of future cash needs and cash flows are subject to substantial uncertainty. See “Factors that May Affect Future Results.”

What happens after the 12th month? This statement is too vague. Maybe they're basing this number on the working cap burn rate, in which case... what happens after the 15th month? Just a thought.

Or

We may be unable to generate sufficient cash flow to satisfy our debt service obligations.

Our ability to generate cash flow from operations to make interest payments on our debt obligations will depend on our future performance, which will be affected by a range of economic, competitive and business factors. We cannot control many of these factors, including general economic conditions and the health of the internet retail industry. If our operations do not generate sufficient cash flow from operations to satisfy our debt service obligations, we may need to borrow additional funds to make these payments or undertake alternative financing plans, such as refinancing or restructuring our debt, or reducing or delaying capital investments and acquisitions. Additional funds or alternative financing may not be available to us on favorable terms, or at all. Our inability to generate sufficient cash flow from operations or obtain additional funds or alternative financing on acceptable terms could have a material adverse effect on our business, prospects, financial condition and results of operations.


Or are you referring to the part on how they completely depend on the 4th quarter and the holiday sales? One out of four... I don't like those odds.

Mike Onghai, CFA said...
This comment has been removed by a blog administrator.
Mike Onghai, CFA said...

Sam,
I think everyone should make his/her own decision. I think you should read the annual reports for at least the last five years, get all the transcripts of the conference calls, read the 10-q's and then afterwards, read the same stuff about its competitors such as TJ Maxx, Smartbargains, Ecost, Amazon, Ebay. Honestly, it will take you maybe 2 months to finish all the readings.
Then, you can make up your mind.
If you have time, do some more scuttlebutt research. If you have friends who are employees, try to get as much edge as you can. Figure out the risks/rewards. Be prepared to be disappointed with not having a conclusion after all this work. There is no short cut.
That's about all I am going to say. I can't give you my answers and insights. You have to make your own decision.

Mike Onghai, CFA said...

Sam,
I forgot to mention the proxy statements.

Sam S. Park said...

No thanks. You make a very valid point, but I'd much rather spend my serious time doing ALL and more of those things on a better company.

Sam S. Park said...

By the way, you shouldn't be trading with information from "friends who are employees." That would be walking on thin ice... but I'm thinking that you were refering to non-material inside info.

Mike Onghai, CFA said...

I meant scuttlebutt research, not material info. I usually just read ... others tend to do more scuttlebutt .... but my main point is if you don't have conviction on an idea, you can get swayed by Mr. Market. The more conviction you have, always the better. Good luck.

DaleW said...

The more conviction you have, always the better.

There's conviction, endowment bias, confirmation bias, vividness bias, and just plain overconfidence. I disagree the more conviction, "always the better." Many times, sure, but sometimes high conviction paves the road to a zero. Not that I haven't been there before -- I have.

Mike Onghai, CFA said...

There's conviction, endowment bias, confirmation bias, vividness bias, and just plain overconfidence. I disagree the more conviction, "always the better." Many times, sure, but sometimes high conviction paves the road to a zero. Not that I haven't been there before -- I have.

oh well, that's part of the investing game. can't win them all. at some point, there will be a winner. everybody's just gotta make his own decision or stay on the sidelines.

Its_strange said...

Herb Greenberg wonders why the analysts haven't had anything to say about Patricks recent behavior and i haven't read thier thoughts about the lawsuit either. ..............Forture reports Rocker hasn't been served any papers yet.... Patricks teams up with NCANS , he devotes large parts of his conference calls to thier naked shorting cause yet the suit against Rocker has zero to do with the issue....and the BoD are in hiding. .What gives ? Could their investment bankers please explain ? Oh, by the way Phil, how is business ? You see the P/E growing ?

DaleW said...

Herb Greenberg wonders why the analysts haven't had anything to say about Patricks recent behavior and i haven't read thier thoughts about the lawsuit either.

In this litigious day and age, why would any director of research allow their analyst to comment?

Forture reports Rocker hasn't been served any papers yet.

Why is this not surprising? Phony people love to invent phony lawsuits.

and the BoD are in hiding.

That's not surprsing, either. The state of directorship in the US is poor. Why should OSTK be any different?

I would love to know, BTW, when Ovetstock's board meets next. I would find it interesting if Jack Byrne shakes off the bear hug his son put on in the Q2 call. Why has the board meeting not taken place yet and where's the announcement on JB becoming Chairman?

Its_strange said...

Heres the thing..I don't believe Bob O'brien was walking down the street one day eating a tuna sandwich and out of thin air he decided to start NCANS and contact Patrick and put out a huge effort to hide his identity...I can't find a connection between him ( Phil Saunders ) and Herb and Rocker....Maybe its Gradient , who i only know of from Herb's writings. Maybe its Gradient that prompted Phil to save the western world from fiancial dissater ?...Truth be told i'm a retail , small guy who ain't trained in wallstreet in any way. I wouldn't know what to think about this if Patrick didn't act so strange and if Bob didn't go to such ends to hide his name

Its_strange said...

Look at Patrick's "life long " law firm of Bracewell & Guiliani . Go to thier website . They are more than qualified to sue for " unfair business practices" . Why did Patrick need to bring in this big strapping naked short lawyer ? Could it be because its all about the squeeze ?

settlements said...

In Kevin Kelleher's theStreet.com Article, David rocker is quoted as saying;

"From a functional matter, it is almost impossible to do a naked short. We don't do any -- first of all, if you dealt with Goldman Sachs, you would know they are not about to risk their charter for David Rocker -- or for any other client for that matter," Rocker says.

But then it was only recently that Spear Leeds was fined heavily for doing just that; risking their charter for clients:


Goldman Sachs unit pays $1 million in fraud case
By Finfacts Team
Mar 22, 2005, 22:05

NASD found that to avoid detection by DTC through the tracking system, Spear Leads completed delivery on the sales of IPO shares for its customers by borrowing shares from third parties rather than moving shares from the IPO Control Account. That way, it appeared that the customers still owned their shares, and the sales were not detected and included in the IPO Tracking Report. Once the time period for tracking sales of IPO shares under the IPO Tracking system was over, Spear Leeds replaced borrowed shares by delivering shares from the IPO Control Account back to the third-party lenders.

Goldman bought Spear Leeds in 2000. The unit was renamed Goldman Sachs Execution & Clearing L.P. in January.

and...


FULLY AWARE. Killeen, who pleaded guilty to two felony charges, has made grave allegations against major Wall Street firms and personalities--including NYSE Chairman Richard A. Grasso, who Killeen insists was aware of improper trading by floor brokers. He also maintains that floor brokers for Goldman, Sachs & Co. (GS) and other firms engaged in improper trading and that the largest specialist firm on the NYSE, the white-shoe brokerage Spear, Leeds & Kellogg, was fully aware of Oakford's illegal use of floor brokers to trade stocks. That is denied by Spear.

Jeff Matthews said...

Spear, Leeds is not a Prime Broker, as is Goldman Sachs.

While it may appear to the retail odd-lotter that they are one and the same merely because Goldman bought Spear, they are in fact quite different businesses.

Furthermore, "settlements," if you are alleging Rocker naked shorted, then you should be aware that a member of Overstock's own legal team--Carl Koerner--admitted to the New Jersey Law Journal that Rocker did not naked short, and that this was not the subject of the lawsuit. [NJ Law Journal, 8/22/05]

So you are on your own with that one.

padawancowboy said...

Mr. Matthews,

I am a fan of the blog. As a college student and investor, I generally enjoy your sharp and objective insight.

That said, I recently started following the news about OSTK. While I have agreed with your analysis of the company's questionable performance in the past--I do not own OSTK, nor do I plan to--I think your have lost the capacity for objective commentary on the stock.

Clearly you are now engaged in a very personal fued with Dr. Byrne and that is clouding your judgement. While I agree that the stock is a dud, your CNBC interview did not help the cause. Byrne may tell a wild story, but he clearly carried the debate. What motivated you to go on the show in the first place? You are a writer; Byrne is a former academic and clearly more comfortable in a public debate.

How can you say with certainty that the things Byrne is alleging didn't happen? And is naked shorting that hard to imagine? Honestly, Jeff; you know as well as anyone that money finds opportunities in markets like water finds seams in concrete.

I'm just trying to offer a young person's perspective. Let's have more of the old Jeff and not this new, public display of petty emotion. Stick to the blog and running your fund; no more debates with seasoned debaters.

PC

settlements said...

Jeff, I am well aware of the issue pertaining to Rocker and Naked Shorts. In fact, it is my belief that in many circumstances the Hedge Fund is unaware that the short sale executions transacted on tehir behalf never settle.

These Hedge Funds will pay a premium to short hard to borrow stocks yet, according to an economic professor [Leslie Boni] working as a visiting scholar to the SEC, the firms routinely fail these trades due to the high cost to borrow. It was dubbed a "strategic fail".

Now you ask why they would do such a thing - MONEY. Hedge Funds like Rocker mean business volume and revenue. When Rocker wants to short he does not call up and say - "Naked Short X shares of Company XYZ" he sells sell me short x shares of company xyz. Rocker never receives confirmation of trade settlement (Borrow, transfer of title, etc...) he receives a confirmation of trade execution.

My point in the previous post was simple. Rocker claims Goldman would not engage in activities for clients that could jeopardize their charter. Based on past performance that is in fact not true. Goldman, as well as Spear Leeds, have seen enforcement activities for aiding clients in trading against the rules.

Here is one to consider: Directly taken from a December 2004 Bear Stearns Conference Call on Reg. SHO. The speaker in this transcript was the General Counsel to Bear Stearns:

"To give you that brief introduction in Reg SHO the history how we got to where we are today. For the past few years we have been hearing from many different regulators regarding their concerns about the increase in the level of fails that they are seeing. They believe, and they have stated on numerous occasions, that one of the primary causes of the high level of fails was that various participants in the short sale process, prime brokers, executing brokers, clients were not following already established rules."

What exactly does this person mean by increase in fails due to "Prime Brokers, Executing Brokers and Clients" not following established laws?

Harvard Homeboy said...

I noticed this comment from one of the board's posters, which I had to comment on:

"It took 10 years for Buffett's
speech agains stock options to be treated with legitimacy ... So I am not surprised that there are
so many incentives stacked in making Patrick look like a big fool .... "

Buffett and Byrne both have an x and a y chromosome. There the comparison ends, okay?

And no one needs to make CEO Byrne look like a big fool. Byrne has created a full-time job of doing that himself.

Anyway, I hate to rain on this parade, or whatever, with all the chatty dialog about the Sith Lord, crackheads, exotic dancers and stuff, but I'm just curious if someone on here has access to the research report prepared by Gradient.

I, for one, would like to read it or at the very least would like to see someone abstract or summarize it here for those of us who are interested in the investment merits of overpricedstock.com or, closer to the mark, the lack thereof.

nuniek nur sahaya said...

yeah. i think that when Byrne said O'Quinn didn't need money anymore and only handled cases for the public good ! lol ! More Patrick bull, more Patrick hype , more Patrick phony nonsense.