Daily Dose of Optimism

Patrick Byrne Emails BusinessWeek, Michael Steinhardt

Patrick Byrne gets into it with a BusinessWeek reporter via email, hosted on the website of "Bob O'Brien". Link

I don't follow OSTK closely, although as a regular reader of Jeff Matthews, I am kept abreast of the general details. Generally, it is acknowledged that when management fights short-sellers, something isn't right. Still, it's also unusual that multiple media sources are so far ahead of a relatively small story like this one. Perhaps the added attention afforded this episode by blogs is evidence of how web micro-communications are amplifying stories in the mainstream...

Two things to share.

First: Byrne's convoluted take on how he doesn't think about meeting Street estimates:

Regrettably, much of the rest of your question concern either quarterly "misses," which is odd, because my announced goals are always annual, or make the mistake of discussing "misses" in the context of numbers from Wall Street analysts which I have not only specifically disclaimed, I rarely if ever even read. (Look at it this way: suppose Joe announces, "Tim will score 20 points in a game of basketball this afternoon," and you disclaim that, but go out and score 18 points, or even choose to play hockey this afternoon, have you "missed" your numbers? Why are they even "your" numbers? Aren't they "Joe's" numbers? In short, are "your" numbers the numbers that you announce as your own, or are they what get assigned to you by people who don't have any idea what you plan on doing this afternoon?)

Second: Among many other things, Byrne noted that Michael Steinhardt was the son of a jewelry fence for the mob. Why this is really relevant to OSTK I am too lazy to figure out, but it was interesting to me. The excerpt below is from a 2001 Forbes article, which provides details from Michael Steinhardt's autobiography, No Bull, a book that I plan to read someday.

Perhaps, instead of being the CEO of a marginal online retailer, Byrne should become a stock market historian? - Ed

Forbes (2001): For 40 years, demi-billionaire hedge fund operator Michael Steinhardt hid from the world the truth about his father, Sol Frank "Red" Steinhardt. Now, 60 years old and in retirement, Michael Steinhardt has decided to come clean in his newly published autobiography, No Bull: My Life In and Out of Markets.

Sol was a compulsive high-stakes gambler and colorful New York nightclub patron. He was also New York's leading jewel fence, a convicted felon and pal to underworld figures such as Meyer Lansky and "Three Finger" Jimmy Aiello. The night before crime figure Joey Anastasia was rubbed out in the Park Sheraton barbershop in 1957, he and Sol were out on the town gambling together

Famous Emails: Jim Rogers vs. HBS MBA Student (Update 1)

I'm reprinting the email chain below between Jim Rogers and a feisty Harvard Business School student for your entertainment. Please note that this email exchange is over two years old, although the issues discussed are still relevant today.

I don't think that Rogers' current straits as pertains to the RIRMF should at all affect how we interpret this exchange (ie, thinking that because of Refco, Rogers' judgment is somehow suspect) - after all, it isn't that his thesis on commodity prices was poor (it was, in fact, excellent and extremely well timed), it was just that his choice of trading counterparties was unfortunate. It's not like many other informed people didn't make similar errors (see: Thomas Lee, McKinsey, etc.).

In re-reading this exchange today, I saw a tiny flash of recognition in Jim's thin skinned response. Slightly edited text is below.  - Ed

----- Original Message -----
From: Dmitry Alimov
To:   HBS Classmates
Sent: Friday, September 12, 2003 11:28 PM

Jim Rogers, a famous international investor and writer attended HBS this Wednesday. In his speech, he badmouthed Russia (in his usual style) and quoted several "facts" that were completely bogus. As you would expect, I could not let him get away with lying about our country and publicly disputed his factual claims. He basically told me I was a moron and left. In response, I sent an email to him with facts and references disputing his claims (sending a copy to my HBS classmates). What ensued is quite amazing - read attached emails. Start with the first email and read from the end (my original email), then read his response and finally my rebuttal in the second email. This will be worth your time I promise. This has already been circulated all over HBS, several other universities and in the investment community in New York. Since this is already in public domain, feel free to forward on.

Dima
__________________________________________________

Dear Mr. Rogers:

I am the “lad” who disputed your factual claims with regard to Russia today. First of all, I would like to thank you for speaking to us at the Harvard Business School.  I think I speak for my fellow HBS students when I say that we enjoyed your original views and interesting stories today. However, I must address the unfortunate reality that your facts about Russia are plain wrong. You made three principal inaccurate claims today - I will deal with all of them in sequence.

Claim #1.  People are leaving Russia

Wrong.  In fact, according to Financial Times, your favorite newspaper, Russia turns out to be the second largest recipient of immigrants after the US (see attached FT article). Oops. While it is true that Russia’s population is declining but the reasons for that have nothing to do with people leaving the country, it is things like low birth rate (only 1.2 per woman), which is an issue that confronts many European states.

Claim #2. Russia’s production of oil is declining, oil companies do not reinvest in production

Wrong and wrong.  Russian oil production has increased for the fifth year in a row (see attached Reuters article), and Russian oil majors are reinvesting in production (many of them have US GAAP accounts audited by Big Four firms you could easily have access to if you chose to look).

Claim #3. Investors are leaving Russia

Wrong again. Equity indexes (US Dollar denominated) are trading around their all time highs (see attached Barrons article), Russian bond yields are at historical lows.  As an experienced investor, surely you will recognize these as pretty convincing signs of investor confidence.

Overall state of the economy

Finally, I would like to quote World Bank’s recent report on Russia:

“The Russian Federation has made remarkable progress in tackling crisis and moving towards sustainable development between 1999 and 2002. With a much more stable political environment, the government has been able to build on experience gained in the 1990s and implement a sound reform agenda, in addition to maintaining macro-economic stability. Since 1999, assisted by high commodity prices, the economy has recorded strong growth, business confidence has revived, and poverty has declined. Russia’s sovereign credit rating has improved, although it has yet to reach investment grade. The speed and extent of recovery has taken most observers by surprise. Between early 1999 and end 2001, GDP grew by 21 percent, inflation fell from 86 percent to 18 percent, the fiscal situation turned around from a deficit of 5 percent of GDP to a surplus of 3 percent of GDP, and barter and arrears largely disappeared.”

Source: http://www.worldbank.org.ru

GDP growth of 21%?

Hardly a picture of total collapse, don’t you think?

Conclusion I believe the facts speak for themselves. I have no time or desire to try to convince you to invest in Russia. However, I do kindly ask you to abstain from spreading inaccurate information.

You are a public figure and many people including future leaders at Harvard Business School listen to you; it would be very unfortunate if they were misled by your inaccurate statements.

Finally, if nothing else, it is not good for your own public image. 

Kind regards,

Dmitry Alimov
CFA MBA Class of 2004
Harvard Business School

P.S. I took the liberty of sending a copy of this email to my fellow students so that we can set the record straight.

----- Original Message -----
From: Jim Rogers
To: Dmitry Alimov

Thank you for coming and for writing.

I rarely suffer fools gladly and even more rarely bother with chauvinistic know nothings, but since you sent this ludicrous canard: