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

All too much of what we do in financial journalism is rush around to get the “scoop” on some big announcement by some corporate chieftain. Things like, the announcement of a new product, a management reshuffling or a bunch of firings. All important stuff and all stuff that could impact earnings and stock movements. But sometimes the big picture of what really is working for a company or is ailing it, gets lost in the scoop chase.

So that’s why we took a step back to look at some potentially radical solutions for fixing Bank of America, which right now has come to represent much of what remains broken with the U.S. housing market.

The point of the story was to look at ideas that bank CEO Brian Moynihan might be reluctant to do. Ideas that would drive shareholders and bondholders batty. But the kind of ideas that ultimately may be necessary to not only fix the bank, but also repair the nation’s sick housing market and equally sick economy.