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Monthly Archives: July 2008

So, anything happen while I was away?  Not to worry, Overstock fans, the loyal shareholder base will have this bid back up quickly, what with none of those pesky non-borrowing shorts to get in the way…

Now we come to a rather disjointed section whose slender common thread seems to be to introduce us to the generically named Market Reform Movement.  It starts, oddly enough, with a description of Patrick Byrne nominal day job, CEO of Overstock.Com, which Mitchell rather left-handedly describes as “at least for a while” looking like a potentially serious competitor to Amazon.  As in, not anymore of course.  Of course that didn’t stop Byrne from asserting that Overstock deserved to be valued as richly as Amazon, despite small issues like Amazon having long ago gotten over its chronic money-losing tendencies and Overstock, not so much.

The Market Reform Movement is described as a product of an era where “you don’t have to be entirely normal to make a positive difference in the world”.  Although what happens when your definition of a “positive difference” is part of what’s abnormal about you, is a question not addressed.  (The answer, sadly, is all-too-frequently such miscarriages as the so-called “9/11 Truth” movement — but that’s a subject for another blog, or should I say many other blogs.)

The section then swerves into an aside about the identity of the “Easter Bunny”, who also refers to himself as “Bob O’Brien” (to the great annoyance, no doubt, of the CNBC commentator of the same name), and the need to protect it.  The whole thing seems a bit much, given that Patrick Byrne has not been martyred in any of the many ways he has predicted over the years, nor has anything foul befallen Phil Saunders, the individual most commonly named as the man behind the long ears, who Mitchell partway names himself but then stops short in an “aren’t I just bursting with integrity by not repeating the full story” way.  And then, he just dismisses the whole matter with a “whatever” as if he wasn’t the one who went off on that tangent in the first place.

And then, something funny happens: Mitchell declares Byrne’s whole movement “mainstream”.  (Please note that this was written well before SEC Chairman Cox unaccountably gave it his rub.)  Members of Congress (who, as we know, never jump on a bandwagon they don’t fully understand), “brave” individuals inside the SEC, the US Chamber of Commerce (whose reputation is not the least bit sullied by the number of its prominent members found to be engaged in stock fraud), famous trial lawyers (see Congress), respected economists (as if there exists a market theory not embraced by a gaggle of them), and “recovering stockbrokers” (poor Mark — how was he to know that stockbrokers were about to be portrayed as victims in this whole scheme?) are listed as the membership that establishes it as mainstream.  Missing from that list is any segment of the media, but of course that just makes them all part of the conspiracy.

All of the above come together on a single conclusion: hundreds of companies have been victimized by this grand conspiracy, yet not one can be named that was even a marginally healthy and fraud-free business before the short-sellers invaded and took it down.

And that is where this most-awkward-thus-far of sections leaves it.

Next week: Mitchell gets naked.


August 12, 2005 may have been “the proudest day of Patrick Byrne’s life”, as this week’s section of Deep Capture states, but it’s just possible July 15, 2008 may well have surpassed it.  To listen to advocates of Byrne and Mitchell’s movement, the order issued that day by SEC chairman Chris Cox was tantamount to an admission that Overstock’s frequently-delusional CEO is exactly the kind of man we need telling us how to run the equity markets.  And to listen to the words of Cox himself… if that’s not what he’s trying to say, he could do with a lesson or two from someone more versed in the art of communication.  Like, say, President Bush.  Seriously, does Cox still think that tossing bones like this is going to satisfy the complainers?  Anyway…

One day before the events of this section, on August 11, 2005, Overstock filed a lawsuit against Rocker Partners (now Copper River Management), a hedge fund, and Gradient Analytics, a research firm, with conspiring to drive down the price of Overstock’s common stock and profit through short-selling.  On the following day, Byrne held a special conference call discussing the suit.

Five hundred blue chip investors are said in the piece to have been on the call.  I suspect that by the end, at least 495 were surprised that the men in white coats had not yet arrived.

If you’ve followed the Overstock story at all, you may have heard of the “Miscreants’ Ball” (a reference to something else, and I frankly could care less what) presentation, and that it what attendees of the conference call got.  Among many, many, many other things, Byrne asserted that at the head of one of the grandest conspiracies in world history, was a mysterious figure he called the “Sith Lord”.  He went to some lengths to specify at that time that he had a specific individual in mind, a claim he has not only since retracted, but actually suggested the idea of the “Sith Lord” being anything other than a metaphorical construct was an invention of his detractors.

But truly, Mitchell’s piece does not even come close to capturing the… grandeur of Byrne’s presentation.  For that, I will defer to the scribework of Tracy Coenen, who captured Byrne’s speech in loving detail in a recent entry on her blog.  (Note: The blog entry contains a link to the actual transcript, that which is quoted in her blog is someone’s summation.)

Really, to look at this section of Deep Capture out of context, and not knowing the author, one would strongly suspect there was an element of sarcasm in the author’s glowing summary of Byrne’s rant.  And yet it’s all straight-up.  Mitchell truly believes Byrne’s presentation to be a work of genius and furthermore believes that history will regard it as a landmark speech, right up there with the greats:

“I have dream”
“Fourscore and seven years ago”
“They’re going to bury you under the prison”

Next week: By the time you read this I will be on summer holiday.  If I still care about any of this when I get back, and if there’s still a stock market, we’ll move on to the next section, which is about… well, honestly, I’ve read it over three times just now and am still not sure.  I’ll figure it out later.

And now even a podcast?  I don’t want to say they’re oversaturating their market, but sheez, how’s a guy supposed to even keep up?  In other news: Woof.

“And it all starts when Patrick Byrne gets a phone call from the Easter Bunny.”

I ask you, with an opening like that, how could Mitchell’s former colleagues at Columbia deny him the Pulitzer?

The date, strangely never mentioned in Mitchell’s piece, was January 28, 2005, and the occasion was the fourth-quarter conference call for Overstock.Com’s 2004 fiscal year.  For that year, according to the SEC filings that would not be made for another seven weeks, Overstock lost $5 million, though it claimed positive cash flow from operations of $24 million.  The results were generally categorized as strong, and while the lack of true profit was disappointing, most institutions were still willing to give the Utah online retailer some slack.  Of course, the company also had its share of critics, as all public companies do.

But nobody, at least nobody not in on it, was expecting what was to follow.

Mitchell, at least for now, writes very credulously about what occurred.  CEO Byrne receives a call from an anonymous person calling himself the “Easter Bunny” and, unaccountably, does not immediately hang up.  To be sure, Mitchell’s account has Byrne sounding very skeptical.  “But the Easter Bunny persists”, Mitchell writes, even though the only thing allowing him to persist was the goodwill of the person taking the call.

Our leporid friend goes on to make some as-yet unrevealed predictions, so let me respond in kind with a couple of predictions of my own, namely that Mitchell will prove to know full well that this incident was not, in fact, where the story begins, nor was it the spontaneous event that he currently portrays it to be.

Of course, I’m cheating a little with those predictions, using a dastardly technique called “reading ahead”.  On the other hand, who would begin a trek into the jungle without at least some kind of idea where the destination lay?

But as bizarre as this incident may have been, it was nothing next to what would follow later that year.

Even as the journey begins there is much trepidation.  Mitchell continues to write at a rate that far outstrips the ground we’ll ever be able to cover.  What will things be like, if and when we emerge from the other end?  Will it even be the same story?  Or will it have retroactively updated itself as other aspects of this story have?

Having previously viewed our author through the eyes of the man who is now his boss, let’s move on to what he has to say for himself.

For all the buildup that Byrne gave to the prestige of the Columbia Journalism Review, it’s not long at all before Mitchell starts running counter to that by casting aspersions at his former employer.  Actually, the timeline he lays out is a moderately confusing one.  Apparently it goes like this:

  • January 2006: Mitchell begins work on first version of Deep Capture.
  • November 2006: A hedge fund (unnamed) who happened to be one of the (many) subjects of Mitchell’s work offers CJR a sizable donation.
  • Later that month (reported on November 25, 2006): Mitchell resigns from his post at CJR, for reasons unstated.
  • Shortly thereafter: CJR accepts the donation from the hedge fund.

The only apparent report of Mitchell’s resignation at the time appeared on a blog at UNC, which noted Mitchell’s very perfunctory comment at the time, and went on to note that Mitchell had been previously criticized for sloppy journalism and being part of a culture of recalcitrance in defense of the review’s own reports.

At any rate, Mitchell seems to want to leave the impression, without actually directly stating as such, that the hedge fund in question “bought” his resignation from CJR with their donation to the cash-strapped publication.  And so Mitchell’s story might have gone untold had it not been for the intervention of — surprise! — Patrick Byrne.

At this point Mitchell goes into what he seems to consider the centerpiece claim of his work, that the 1929 Crash — and subsequent Great Depression — was an event deliberately triggered by hedge funds or whatever their equivalents of the day were, and that the same tactics are once again in use today, with the same goal.

After plugging the “team” that helped him with the report (including, interestingly enough, some “gonzo computer hackers” and a “one-time foreign intelligence agent”) while conspicuously not naming any names, he goes on to predict the outcry from the mainstream media that his “vigilante journalism” will provoke.

But then again, given the effort being put into getting Mitchell’s work any publicity at all, I’m guessing the “outcry” is rather not up to the author’s expectations.  Again, at a little under 40,000 words I tend to think part of the problem is a lack of digestibility, even with the helpfully marked-off sections.  Indeed, it is one of this blog’s hopes to be able to break the whole thing down into more approachable chunks and in so doing derive something more amenable to a thorough evaluation.

So much for introductions.  Next, onto the prologue, where things start going loopy in earnest…