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Collection of e-mails John Hempton wrote regarding accounting issues at Fairfax


fenris
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I just read the emails.

 

It sounds to me like they really believed that Fairfax was some sort of sinking ship being papered over, and that their short position would profit when the facts came out.

 

You can even see John Hempton's email to the guys at Longleaf asking w.t.f. they had a large long position for.  He seems to genuinely believe Fairfax was not going to recover.

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Taibbi's new book has a section on the Fairfax saga and the interesting thing was that many of the shorts (according to the book's writing) seemed to genuine turn when FFH started the big lawsuit.  They didn't seem to turn because they were afraid of Fairfax's accusations against the shorts, but they turned because Fairfax started disclosing details during the lawsuit about European subs and supposedly shady dealings as part of the lawsuit.  At that time, it seemed that many shorts realized that what they thought was a fraud was not (you don't disclose where the bodies are buried in a lawsuit asking for discovery right???).

 

I haven't read the whole Taibbi piece, but this make intuitive sense to me.  Fairfax cleary had some seriously bad actors working against it, but I've always believe that many / most of them must have genuinely felt they were a fraud or destined to fail.... you just don't attack a company you believe is viable to make a buck on the short side (unless you are doing a short term trade)... it's just not rational.

 

I'll be reading through these, but I think Hempton believing they were a fraud was my expectation.  The guy was wrong, probably overly aggressive, and way too lose with words and probably shady in some actions, but I think he truly thought he was right.

 

My 2 cents, thanks for the link.

 

Ben

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I wonder when they did their discovery. If it was before the CDS boon then it's interesting, but if it was after they could have been easily shored up with their CDS bet.

 

It's an interesting read -- Hempton comes off genuine and knowledgeable.

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I wonder when they did their discovery. If it was before the CDS boon then it's interesting, but if it was after they could have been easily shored up with their CDS bet.

 

It's an interesting read -- Hempton comes off genuine and knowledgeable.

 

He's a dick!  He would actually call shareholders and try to convince them Fairfax was going to fail.  Why would any analyst do that? 

 

When you discuss Wall Street behavior and how things like "The Wolf of Wall Street" occur, it is because you have unethical conduct that occurs beyond what would be considered within the duties and job description of specific occupations. 

 

These guys took way too much upon themselves and the lines they were willing to traverse to prove they were correct were scary and absurd.  Combined with the zeal of certain Wall Street's more famous retards...Herb Greenberg and Jim Chanos...you had a very dangerous mix of slander and libel targeting a specific stock.

 

My personal opinion is that there were participants in the short attack that were fortunate to have escaped incrimination, unlike their insider trading colleagues who were hunted down in the last couple of years.  How Stevie Cohen was taken down, and not these dipshits, I have no idea.  All I can say is that the government went after the biggest fish, even though many smaller fish deserved to be gutted and fried as well!  Cheers! 

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He's a dick!  He would actually call shareholders and try to convince them Fairfax was going to fail.  Why would any analyst do that? 

 

When you discuss Wall Street behavior and how things like "The Wolf of Wall Street" occur, it is because you have unethical conduct that occurs beyond what would be considered within the duties and job description of specific occupations. 

 

These guys took way too much upon themselves and the lines they were willing to traverse to prove they were correct were scary and absurd.  Combined with the zeal of certain Wall Street's more famous retards...Herb Greenberg and Jim Chanos...you had a very dangerous mix of slander and libel targeting a specific stock.

 

My personal opinion is that there were participants in the short attack that were fortunate to have escaped incrimination, unlike their insider trading colleagues who were hunted down in the last couple of years.  How Stevie Cohen was taken down, and not these dipshits, I have no idea.  All I can say is that the government went after the biggest fish, even though many smaller fish deserved to be gutted and fried as well!  Cheers!

 

Hey Parsad,

 

I got a feeling we would never fully agree on this subject.

 

Hempton seems eccentric but I would never say he is a dick. If I genuinely believe someone is holding a stock I believe has accounting gimmicks and could go to zero -- I hope I would do exactly what Hempton did. I think it's the right thing to do.

 

Definitely wouldn't consider Hank Greenberg or Jim Chanos "retards". They both have a long history of uncovering frauds and warning investors about bubble'ish stocks.  I know you know this.

 

The foreign subsidiaries (Fairfax Gibraltar, nSpre Re in Ireland) and NMS Cayman transaction + all the characters involved make it a fascinating story. 

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Most of it seems pretty tame, but this stands out as potentially incriminating.

 

Monty,

Just so you know - I have convinced my boss to have a bit of a go at Fairfax Financial. Can you lay off it for tonight... and tomorrow.

 

I will let you know when we are not trading. There should be plenty of room for you there anyway.

 

JH

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He's a dick!  He would actually call shareholders and try to convince them Fairfax was going to fail.  Why would any analyst do that? 

 

When you discuss Wall Street behavior and how things like "The Wolf of Wall Street" occur, it is because you have unethical conduct that occurs beyond what would be considered within the duties and job description of specific occupations. 

 

These guys took way too much upon themselves and the lines they were willing to traverse to prove they were correct were scary and absurd.  Combined with the zeal of certain Wall Street's more famous retards...Herb Greenberg and Jim Chanos...you had a very dangerous mix of slander and libel targeting a specific stock.

 

My personal opinion is that there were participants in the short attack that were fortunate to have escaped incrimination, unlike their insider trading colleagues who were hunted down in the last couple of years.  How Stevie Cohen was taken down, and not these dipshits, I have no idea.  All I can say is that the government went after the biggest fish, even though many smaller fish deserved to be gutted and fried as well!  Cheers!

 

Hey Parsad,

 

I got a feeling we would never fully agree on this subject.

 

Hempton seems eccentric but I would never say he is a dick. If I genuinely believe someone is holding a stock I believe has accounting gimmicks and could go to zero -- I hope I would do exactly what Hempton did. I think it's the right thing to do.

 

Definitely wouldn't consider Hank Greenberg or Jim Chanos "retards". They both have a long history of uncovering frauds and warning investors about bubble'ish stocks.  I know you know this.

 

The foreign subsidiaries (Fairfax Gibraltar, nSpre Re in Ireland) and NMS Cayman transaction + all the characters involved make it a fascinating story.

 

So you feel comfortable with an analyst calling up large institutional shareholders and smaller private shareholders and trying to persuade them into selling their stock in a company without any proof?  And you are ok with this when you know that analysts like John Gwynn were also releasing their reports early, and a group of journalists were colluding in writing stories about Fairfax at specific points of time when information was going to be released?  Even when one of these journalists, Herb Greenberg, is on the record that he had never read a Fairfax quarterly or annual report?  This is ok with you?

 

I find that people have short-term memory as long as people make them money or provide any other useful analysis.  Make me a buck or save me a buck and I'll forget your sins!  Cheers!

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Guest longinvestor

I wonder when they did their discovery. If it was before the CDS boon then it's interesting, but if it was after they could have been easily shored up with their CDS bet.

 

It's an interesting read -- Hempton comes off genuine and knowledgeable.

 

He's a dick!  He would actually call shareholders and try to convince them Fairfax was going to fail.  Why would any analyst do that? 

 

When you discuss Wall Street behavior and how things like "The Wolf of Wall Street" occur, it is because you have unethical conduct that occurs beyond what would be considered within the duties and job description of specific occupations. 

 

These guys took way too much upon themselves and the lines they were willing to traverse to prove they were correct were scary and absurd.  Combined with the zeal of certain Wall Street's more famous retards...Herb Greenberg and Jim Chanos...you had a very dangerous mix of slander and libel targeting a specific stock.

 

My personal opinion is that there were participants in the short attack that were fortunate to have escaped incrimination, unlike their insider trading colleagues who were hunted down in the last couple of years.  How Stevie Cohen was taken down, and not these dipshits, I have no idea.  All I can say is that the government went after the biggest fish, even though many smaller fish deserved to be gutted and fried as well!  Cheers!

 

+1.

 

If you were a shareholder during those days (I was), this was all real and the only thing between my money and Zero was Prem's integrity and most importantly, loyal shareholders who would not sell, no matter what. After living through this movie (it is still fresh in my mind), it was clear to me that the only thing between the shorts and lots of money was also Prem's integrity and loyal shareholders.....this is why they resorted to calling up shareholders to scare them, confronting officers of FFH in London, sowing hate about Prem with his pastor, engage in 7x24 rumor mongering on the message boards, engaging shill analysts etc. They needed shares and were not getting any. As much as I am happy about taking big bucks off the shorts' pockets, I, like Parsad, would like to see each one of them in jail. If you were a shareholder then, you would as well.

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It seems important enough to to note that Sanj was referencing HERB Greenberg, not Hank Greenberg as "claphands" was weighing in on.  I thought Hank Greenberg played baseball?  I definately agree with Sanjeev on this one.  Herb is one of the biggest idiots in journalism today.  I'll qualify that by saying he knows nothing about security analysis nor has he made any effort to learn or improve throughout his career (or check facts, be smart or classy...) He is simply a shill for extremely biased people and he propagates rumour and innuendo.

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Hey Josh,

 

I know you aren't expecting to get a lot of love by posting anything positive on this thread, so don't take this as piling on.  I was there back in the day with the short raids and I believe I have a reasonably unbiased view - I can represent positive aspects of Hempton, and I have (a flashback --> http://www.cornerofberkshireandfairfax.ca/forum/fairfax-financial/have-any-of-the-ffh-short-sellers-said-their-analysis-was-wrong/).

 

Let me just address this comment you made though because it gets to the heart of the way we form views, and I feel strongly about it:

 

Hempton seems eccentric but I would never say he is a dick. If I genuinely believe someone is holding a stock I believe has accounting gimmicks and could go to zero -- I hope I would do exactly what Hempton did. I think it's the right thing to do.

 

I just want to be clear, that I think you are smoking here (on the part in bold). :)  Hempton said in those letters to OSC and SEC "...I'm doing this for the minority shareholders..." or something similar.  Give me a break, he was doing it to make money.  Period.  This isn't to say he's bad, I truly believe HE BELIEVED that FFH was a fraud as I said (others may disagree, and regardless, I disagree with some of his methods of course).

 

But let's be real, he was trying to get an "investigation" announced, and this was his path.  He did this only AFTER his short wasn't working...

 

He even to this day admits that he is not shorting out of the goodness of his heart.  He actually has said publicly that he tries to follow fraudulent people so he can make money off their future (fraudulent) businesses that they take public... and he doesn't want to make those people known!!!!  He openly holds this up as some kind of demented virtue (for investment reasons).

 

His didactic letters to various regulators and auditors were social engineering attempting to be listened to (according to my eyes; soft threats about the SEC scooping the OSC, it was passive aggressive all over it).  He said the words that he felt would make them listen.

 

This is an investment board, and we are all out there trying to make a buck at the end of the day.  I believe personally though that there is more than one way to get paid in this business, and there are many ways that are less desirable than others.  We all can have our own opinion and my own on this topic is likely rather complex, but when I see someone like John Hempton being shown as an example of an investor doing the right thing when it comes to ethics, I just kind of want to barf.

 

He is smart.  He is a good (great?) analyst.  I would bet he would outperform going forward.  I read his blog and I do find his opinions to be sometimes refreshing and unique...

 

But giving him props for doing the right thing by trying to profiteer by getting a securities suit or auditor involved in a situation while claiming to be doing gods work?  Sorry, I've got say, the guy has a large body of work online, and that doesn't fit the profile.

 

Sorry for the rant. ;-)

 

I really do think the shorts had some analytical correctness on FFH (that doesn't excuse their actions) as I posted 3 years back in the thread above - being analytically correct in whole or in part doesn't make you a good guy.

 

Ben (I try to be a good guy, but I'm human to; I'm not trying to condemn Hempton, but I'm closer to condemnation than the alternative.  I do short, and think it's a good thing for market.)

 

PS - Note the timelines by the way on WHEN he sent those supposedly altruistic letters to securities regulators... it's AFTER his short didn't work out... he was trying to make something happen... he didn't do it early on because he didn't (and likely never did) give a F#$% about anyone else.  And that's fine, but let's not pretend otherwise.

 

Still long FFH...

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