My apologies for the lack of blogging lately. Once again, my busy schedule has prevented me from sharing my observations. I did write an article for CNBC.com last week on the trouble with Apple’s recent rally and why I would buy Exxon over the iPhone maker if I had to choose between the two stocks. In case you missed it, you can find it here.
I am going to try to write more in the coming weeks. I have also been invited to become a contributor for Yahoo Finance, so please stay tuned for details on that and other news.
Thanks again to everyone who has bought the book and to everyone who has written to me about it or posted comments here and elsewhere. I am especially grateful to those who have taken the time to write positive reviews on sites like Amazon and Good Reads. Thank you!
I realized in all the excitement with the release of my book this week that I haven’t taken a moment to wish everyone a Happy New Year!
I’d also like to thank everyone who has emailed me and left comments here and elsewhere complimenting the book*–not to mention the editors at Amazon who named it one of the Best Books of the Month and the folks who have written about it this past week like Bram de Haas at Seeking Alpha and Martin Zwilling at Forbes. My co-writer Jesse Powell and I worked hard on the book for several years and I’m quite proud of it, so it’s great to hear that people are appreciating what we produced.**
Okay, now back to blogging.
It’s the silly season in the financial world. Everybody and their uncle is going around like Carnac the Magnificent making all sorts of predictions about what 2015 will bring. Of course, nobody actually has a clue what’s going to happen ten minutes from now, let alone six or twelve months down the line. Our economy and our markets are so massive, so complex and dynamic, that only a fool or an egomaniac would offer his outlook and advice for the coming year.
That being said, here is my outlook and advice for 2015:
Astronomers constantly scan the night sky for supernovas so that they can observe and study how stars die. It’s a fascinating process. Right now, a very large corporate supernova has begun and it is just as fascinating–and educational. Unfortunately, I was forced to cover my short position in the dying company because my prime broker now charges me an exorbitant “negative rebate” to short stocks. But I’m still watching from a distance.
In case you missed it, something unusual happened last week: a dishonest money manager went to prison.
Former hedge fund manager Larry Goldfarb was sentenced to 14 months in prison for pocketing $6 million from side pocket investments and diverting money for his personal use. I write about Goldfarb in my book (available for preorder here!). He was a prominent figure in the Bay Area investment world. To his credit, he gave a lot of money to charity and worthy causes. Unfortunately, a lot of it wasn’t necessarily his to give. He was busted a couple of years ago and promised to repay his investors the money he took from his fund. But Larry couldn’t stop being Larry and now he’s going to federal prison because of it.
According to the federal prosecutor in charge of the case, “instead of paying the agreed upon restitution and disgorgement, Mr. Goldfarb spent hundreds of thousands of dollars on various personal indulgences, including Golden State Warriors season tickets, private air travel, and vacations.”
Mr. Goldfarb is a poster child for many people on Wall Street and in investment management: smart, personable, and shamelessly unethical. He is another example of why Wall Street, far more than corporate America, needs tighter regulation. But the truly disturbing part of Goldfarb’s career might not be the illegal stuff he was prosecuted for–it’s the legal activity one of his former employers practiced right out in the open.
Last week, I posted an article on Seeking Alpha on the troubled biotech firm Dendreon (DNDN). Eighteen months ago, I shorted over 200,000 shares of the company. As I said in the article, even though the stock has lost its half its value, I haven’t covered a single share, and I doubt I ever will. Why? Because it’s a classic example of what I call a dead-company-walking. In the near future, probably less than two years, I believe it is destined for one fatal outcome: bankruptcy.
This prediction, and the fact that I have sold the stock short, generated a fair amount of negative reactions to the piece. One commenter declared that all short sellers should be “iviscerated” (sic). Yikes! Others respondents were less colorful, but no less angry. They blamed short sellers like me for bringing down what they believe is a good company with a beneficial cancer drug. But blaming shorts like me for Dendreon’s demise shows a fundamental misunderstanding of corporate capital structures and how bankruptcy works.