Third Avenue: The Intersection of Greedy and Stupid

David Barse

David Barse, recently fired as CEO of Third Avenue: Those who can’t do, pontificate. (Image: http://www.wsj.com)

Third Avenue Management, an investment manager that runs hedge funds, mutual funds, and other portfolios, is located at 622 Third Avenue in Manhattan, an address that makes sense given the firm’s name. But considering how outrageously stupid we now know these people are, it’s a surprise that Third Avenue isn’t on First, Second or even Lexington Avenue.

On December 9, Third Avenue’s CEO David Barse, who’s since been sacked, announced that, in a possibly illegal move, the firm was closing its Focused Credit Fund (“FCF”) and barring the fund’s investors from cashing out, the latter move a shocker because the ironically abbreviated FCF (a finance-speak acronym for what is clearly lacking here: ‘free cash flow’) is structured as a mutual fund, which by definition allows investors to liquidate their positions on a daily basis. FCF’s assets were transferred out of the mutual fund into a liquidating trust to manage the gradual sale of the remaining rubbish. To explain why they shuttered the fund, Barse ever so graciously issued a letter to the fund’s shareholders, part of which is below:

Investor requests for redemption, however, in addition to the general reduction of liquidity in the fixed income markets, have made it impracticable for FCF going forward to create sufficient cash to pay anticipated redemptions without resorting to sales at prices that would unfairly disadvantage the remaining shareholders…Third Avenue will manage the Liquidating Trust in order to obtain the best overall outcome for the beneficiaries. Third Avenue will not charge any fee for those services.

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Exclusive Glimpse of ‘New’ South China Morning Post Under Alibaba Control

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The South China Morning Post will take its content in a different direction under Alibaba. (Image: http://www.buzzfeed.com)

Last Friday, Alibaba (ticker BABA), the Chinese e-commerce Leviathan with a $200 billion market cap, announced that it was buying the South China Morning Post (“SCMP”), Hong Kong’s biggest English-language newspaper. The 112-year-old broadsheet is popular for its English-language format and the editorial board’s intrepid reputation (or life-threatening stupidity/naiveté) for covering not only political contretemps on mainland China but also the Communist Party’s gobsmackingly disgraceful suppression of human rights, topics from which mainland journalists understandably shy away for fear of being “disappeared.”

Laying it on extra thick, as would any self-respecting grifter, Joe Tsai, Alibaba’s no doubt unironically titled Vice Chairman, reassured SCMP’s readers in a press release: Continue reading

ISIS Pharmaceuticals Swamped with Jihadi Wrong Numbers

A source at ISIS Pharmaceuticals (ticker ISIS) has told Bud Fox News that the company was inundated with phone calls last week from men who mistakenly thought that the company was a US-based offshoot of Islamic State of Iraq and Syria, aka ISIS. Company spokesman Stuyvesant Gudgeon explained:

We’ve been swamped. I took several calls myself. These men are convinced that we represent ISIS here in the States. Some had looked through our annual report and concluded that the table showing our drug pipeline was actually a list of chemical weapons that caused the conditions addressed by each drug. One guy called and asked how quickly ATL1102 would cause Muliple Sclerosis and could it be put in the water supply. Another guy asked to speak to our chief financial officer because he needed money- he said a guy at his mosque could get an RPG if the caller could produce enough cash. 

Here is the pipeline table from the company’s 2014 10-K:

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Would-be jihadis mistook these drugs for chemical weapons. (Image: ISIS 10-K, http://www.sec.gov)

These misguided, US-hating Mujahideen manqués aren’t the only ones who have been fooled. Hous Bin Pharteen, Professor of Islamic Studies at Beaver College and author of the soon-to-be-published Allah vs Challa: Islam and the Defeat of Zionism, appeared equally misled when reached for comment by Bud Fox News:  Continue reading

Bill Ackman, Hedge Fund Trash Talk, and the Straw Man Fallacy

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In Bill Ackman’s spat with Warren Buffet… (Image: http://www.marketwatch.com)

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…he brought a straw man along for backup.  (Image: http://www.veteranstoday.com)

From the “People in Glass Houses Shouldn’t Throw Stones” category comes the laughably Pecksniffian rich man’s row between hedge fund manager Bill Ackman, head of Pershing Square Capital, and Charlie Munger, who has been Warren Buffet’s fidus Achates/gal Friday for years.

It should be noted that Ackman is a self-inflated weirdo who started crying like a 5-year-old denied a toy while addressing Target shareholders back in 2009 during his high-profile and losing proxy battle against the company. In absurd fashion, he later attributed his breakdown to the poignancy of a JFK quotation (“We will pay any price, bear any burden, meet any hardship“) that he used in his own remarks. Apparently, Ackman is so outrageously egotistical that he believed his quest for Target board seats was comparable to JFK’s intention to “assure the survival and success of liberty.”

The windbaggery started earlier this month when Munger hopped on his exceptionally wobbly high horse and called Ackman’s investment in Valeant Pharmaceuticals (ticker VRX), down about 50% this year and recently under fire for jacking up prices on its drugs way beyond industry standards, “deeply immoral.” Continue reading

Amazon Opens “Brick & Mortar” Bookstore, Will Close Internet Operations

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The CD section at the new Amazon bookstore is a bit cramped but has it all. (Image: http://www.casualoptimist.com)

Finally recognizing that the internet is just a fad and will soon go the way of the eight-track tape, Amazon (ticker AMZNopened a “brick & mortar” bookstore in Seattle last Tuesday. Although the company’s official line implies that the store is designed to peddle Amazon products like Kindle, Echo, Fire TV, and Fire Tablet by giving customers a place to try them out, Jezebel Pantzaroff, Professor of Marketing at Northern Indiana Normal School and author of the soon-to-be-published Don’t Name Your Product “Crunky Nude Balls,” had this to say about the surprising move by Jeff Bezos’s loss-producing monstrosity (net loss of $241 million in 2014):

The Fire Phone, cloud computing, delivery by drone, you name it- this company is just a dog’s breakfast of half-baked ideas. It’s like they put a bunch of Philip Dick novels in a blender and just guzzled it down. Amazon Fresh? What the hell are they thinking? Food delivery? I mean, Webvan and HomeGrocer were two of the most spectacular failures of the dot-com bust. And the pilot for Amazon Studio’s new show “Patriot” is about a spy who sings folk songs. C’mon, does he live on the Island of Misfit Toys? Is he friends with the cowboy who rides an ostrich? The jig is up. The company’s operating margin was 1.1% in 2012, 1.0% in 2013, and 0.2% in 2014. So it appears they are going back to the basics. I’ve been told that they will open 1,000 bookstores a year for the next five years and shut down internet operations after the Christmas holidays.

Bodhi Yoho, a tattooed semi-professional gamer who devours comic books, rarely goes outside, and hasn’t read a novel since failing to finish Hunger Games back in 2009, nonetheless works at the new bookstore. He told Bud Fox News that he’s excited to be part of the “new” Amazon: Continue reading

Yahoo’s Marissa Mayer: ‘Most Overpaid CEO in History’

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Bombardment: Yahoo CEO Marissa Mayer likes banner ads a lot more than you do.  (Image: http://www.comm181.pbworks.com)

These days, political correctness seems to dominate academia and university life to such a laughable extent that comedian Chris Rock won’t even perform on college campuses. As an aside (and then on to Yahoo), here’s a very recent example of PC run amok, although we at Bud Fox News desperately hope it’s a tall tale: At Pamona College in Claremont, CA, the student government association (“ASPC”) voted against funding Pamona’s participation in a party called “Mudd Goes Madd” that was being planned for all five schools in the Claremont consortium (Pomona College, Scripps College, Claremont McKenna College, Harvey Mudd College, and Pitzer College) because the party’s name is offensive. According to the Claremont Independent, one of the student hosts for the event released a statement that she received from the ASPC; it included the following passage:

We are disappointed at your choice of the name for the event, as well as your rationale for allowing the name ‘Mudd Goes Madd.’ Your disregard of the concerns of the mental health community and their allies trivializes the issues that we deem extremely important to our community. Further, the exclusion of the mental health community in the discussion of allowing the event name is inappropriate.

Chris Rock won’t be playing Pamona any time soon.

If NYU is anywhere near as sensitive as Pamona, then on September 9, NYU Marketing Professor Scott Galloway, looking and sounding a bit like Bruce Willis, put a bull’s eye on his back (and guaranteed himself a first ballot entry into the Bud Fox News’ Plain Talkers Hall of Fame) when he said the following about Yahoo CEO Marissa Mayer:

I think Marissa Mayer is the most overpaid CEO in history right now…A CEO who has made some of the worst acquisitions in the history of tech…If she hadn’t announced she was pregnant with twins, she’d be out of a job within six months…She got a reprieve from death row because she’s pregnant with twins. I realize how awful that sounds, but she’s going to go down as the most overpaid CEO in history,..We should put a bullet in the head of the story called Yahoo. It’s time to euthanize this thing.

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Missing in Action: Mary Jo White and the Toothless SEC

"I swear to recuse myself, so help me God"

I swear to recuse myself, so help me God” (photo: New York Times)

Over a long and storied career, Securities and Exchange Commission chairwoman Mary Jo White developed a reputation for being a tough prosecutor and litigator, belying her diminutive stature. But she’s not so tough anymore.

As U.S. Attorney for the Southern District of New York, when she wasn’t facing down mobsters like John Gotti, she was putting terrorists like Ramzi Yousef (the 1993 World Trade Center bombing mastermind) under the hot lamps. After her time as a prosecutor, she spent 10 years as chair of the litigation department at Devevoise & Plimpton, a white shoe New York City law firm.

As an unfortunate byproduct of this otherwise fruitful juridical pilgrimage, Ms. White came to know many characters on Wall Street, big business bosses, regulators, law makers, and prosecutors. When one runs in these rarefied circles long enough, you eventually become friendly with many of your “adversaries” and a system of favors and quid-pro-quo’s develops which helps maintain a stasis between the various powers of big business, government, and regulatory institutions.

A fine example of this is found in the story of Gary Aguirre, as well detailed in this Rolling Stone piece.

Aguirre joined the SEC in September 2004. Two days into his career as a financial investigator, he was asked to look into an insider-trading complaint against a hedge-fund megastar named Art Samberg. One day, with no advance research or discussion, Samberg had suddenly started buying up huge quantities of shares in a firm called Heller Financial. “It was as if Art Samberg woke up one morning and a voice from the heavens told him to start buying Heller,” Aguirre recalls. “And he wasn’t just buying shares — there were some days when he was trying to buy three times as many shares as were being traded that day.” A few weeks later, Heller was bought by General Electric — and Samberg pocketed $18 million.

After some digging, Aguirre found himself focusing on one suspect as the likely source who had tipped Samberg off: John Mack, a close friend of Samberg’s who had just stepped down as president of Morgan Stanley. At the time, Mack had been on Samberg’s case to cut him into a deal involving a spinoff of the tech company Lucent — an investment that stood to make Mack a lot of money. “Mack is busting my chops” to give him a piece of the action, Samberg told an employee in an e-mail.

A week later, Mack flew to Switzerland to interview for a top job at Credit Suisse First Boston. Among the investment bank’s clients, as it happened, was a firm called Heller Financial. We don’t know for sure what Mack learned on his Swiss trip; years later, Mack would claim that he had thrown away his notes about the meetings. But we do know that as soon as Mack returned from the trip, on a Friday, he called up his buddy Samberg. The very next morning, Mack was cut into the Lucent deal — a favor that netted him more than $10 million. And as soon as the market reopened after the weekend, Samberg started buying every Heller share in sight, right before it was snapped up by GE — a suspiciously timed move that earned him the equivalent of Derek Jeter’s annual salary for just a few minutes of work.

The case seemed open and shut, but as Aguirre would soon find out, it was mostly shut. In the summer of 2005 when Aguirre told his boss he planned to interview Mack, things “started to get weird”. Aguirre was “contacted” (read hounded) by folks from Morgan Stanley, then an aide to New York Attorney General Eliot Spitzer, then the SEC got a call from one of the firm’s top dog lawyers: none other than, you guessed it, Mary Jo White, herself the former U.S. Attorney for the Southern District of New York- the top cop on Wall Street. Continue reading