Unstructured Finance

By Matthew Goldstein

With money managers increasingly falling in love with their own voices and so many willing to give them a platform to air their thoughts, I’ve long thought it would be good if someone could come up with a Volubility Index that measured performance against the number of times someone was quoted or made some stock, bond, or market prediction.

It won’t be me because I’m not enough of a math geek or algo genius to even think about how to put something like that together–but it would be interesting to see the results. And given this year’s big surge in money managers spouting off–what with the Ackman-Ichan blood feud over Herbalife and and Einhorn trying to be ever so clever in trying to stop the slide in Apple shares with his iPrefers share class dividend proposal–may be it just will happen.

Anyway, the latest issue of Businessweek with its cover story on David Einhorn and the failure of the “Einhorn effect” to work its magic on Apple’s stock got me thinking again about the Volubility Index. The BW story is a long one and chronicles Einhorn’s long history of driving down the price of stocks he is shorting, but notes his plan to get Apple to unlock its big pile of cash is having limited impact on the stock–even after the Greenlight Capital manager held an unusual press conference to discuss his idea.

Personally, I don’t think it’s much of surprise that the Einhorn effect hasn’t had much impact on Apple. It’s hard for a manager to move a big cap stock like Apple through activism and it’s far easier to do that on the short side–especially with a less widely held stock like Green Mountain Coffee Roasters or for that matter Herbalife, which Ackman caused to plunge late last year with his big short thesis. For more on the trouble with moving big cap stocks, look at Ackman’s trouble with calls to shake up Target a few years back.

Carson Block’s Muddy Waters outfit has gotten a lot of early attention for its short side attacks on Chinese companies that question the accounting practices at those companies. But one short seller told me a lot of the early companies Block’s firm wrote about like Sino Forest were ripe for the picking because no one was really paying much attention.

By Matthew Goldstein 

The year is young, but so far its been a rough one for bearish stock investors with the S&P 500 is up 7.25% The surge in equity prices has left  a lot of short sellers–traders who bet on a stock sliding in value–with glum looks on their faces. And it’s with that bullish backdrop that several dozen of Jim Chanos’ closest friends gather in Miami for the noted short seller’s annual meeting of the bears.

The gathering of 40 or so people from Wednesday through Friday is a chance for Chanos and other like minded investors to kick around their best short ideas. A year ago, there was a lot of talk about shorting companies in the natural gas space.

The annual event at a resort in West South Beach is one where the invited guests are sworn to secrecy. That’s why there’s almost never any press coverage of the event, and even less coverage of the short ideas presented by Chanos & Co.

By Matthew Goldstein and Jennifer Ablan

We may not be TV people but there’s something to be said for just sitting down and doing a video interview to discuss the big issues of the day. And that’s just what we did as part of this year’s Reuters Investment Outlook Summit and it’s something we hope to keep doing as  a regular feature going forward into the new year.

In advance of this year’s summit, we did videos with noted short-seller Carson Block, bond guru Dan Fuss, OWS bank leader Cathy O’Neill, FBI heads April Brooks and David Chaves, Avenue Capital’s Marc Lasry, economist Henry Kaufman and Steven Gluckstern of eminent domain fame. The videos were frank discussions and to make them seem more natural we went outside the environs of our Reuters newsroom in NYC and conducted them in places like the  middle of Times Square, an ice ream shop and a park.

But best of all these videos broke some news. For instance, we learned the FBI is now using Twitter as an investigative tool and that Carson Block is thinking about starting a short only hedge fund.

By Matthew Goldstein

In some ways, the story of Green Mountain Coffee Roasters is one of those quirky only in Vermont business stories, with a founder who made a small fortune in the 1970s selling rolling papers to potheads and a board member who helped invent the sports bra. Yet at the same time, Green Mountain is very much a Wall Street saga, with all the requisite highs and lows for its stock and questions about where the fast-growing company is going.

And right now, with shares of Green Mountain trading around $20–down sharply from the all-time high of $115 reached last September–it’s the Wall Street story that matters most.

Critics of the company question whether Green Mountain can maintain a stranglehold on the market for single-cup coffee products with other competitors joining the fray and some patents expiring. And, of course, there’s questions about that ongoing SEC investigation into the company’s accounting practices and how it recognizes revenues.

Don’t get pranked tomorrow. Remember, it’s April Fool’s Day. Here are the latest Weekend Reads as selected by Sam Forgione.

From Fortune:

Hedge fund manager Paul Singer’s hardball approach has benefited Republican candidates as his fund battles in court with nation’s that have defaulted on their debt.

From The Guardian:

Zoe Williams writes about how Stephanie Flanders, the BBC economics editor and a former speechwriter for Tim Geithner, relishes bad news.

By Matthew Goldstein

Dan Loeb and Jim Chanos may not be the best of friends, but a five-year-old stock manipulation lawsuit filed by a Canadian insurer has revealed a one-time alliance of sorts between the hedge fund managers.

It appears Loeb followed Chanos’ lead in shorting–or betting against–shares of Fairfax Financial in 2002 after exchanging a series of emails about the Canadian insurer that summer.

Litigation papers in the lawsuit reveal that Chanos initiated the email exchange with Loeb, asking the Third Point hedge fund manager if he was shorting shares of Fairfax. Loeb responded to Chanos’ email by asking whether he should be. Chanos wrote back that in his opinion Fairfax’s  shares were “going to zero.”