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Latest Comments17 Comments
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
The whole REIT industry is down. You know that. In many cases it has nothing to do with quality of management or portfolios. Management doesn't control that stock price (and can't without violating the law and risking stockholder lawsuits). They can recognize the state of the market and the position there company is in relative to the market and take steps to prevent things from getting worse. That is what "getting ahead of the curve" is all about: taking actions that you'd prefer not to take before you are forced to take them.
That won't stop "analysts" like yourself from ignoring the action and its implications, assuming the worst based on numbers taken out of context, and broadcasting a general feeding signal to shorts. Neither will it prevent you from being investigated as per www.marketwatch.com/ne...
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
It would be naive to think that they took these actions without consultation with Credit Suisse, but that seems to be a base assumption of this article.
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
Seeking Alpha has done nothing I can see to give the article the same prominence that Mr. Weston's piece. While this is a poor substitute, there is now at least some mention of it here.
[SA Editor Mary Hunt responds: Both articles had equal "prominence" as originally posted. The reposting of Mr. Weston's article is precisely for the reason of addressing concerns such as those you raise.]
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
Crystal River Capital: Deleveraging to Wait Out the Storm
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
You miss the most important part of the press release. Callable debt is down to $25 million from the $78 million you failed to report in your article (a serious omission, since the company reported $107M in unrestricted cash in the same presentation).
The press release did not report the companies cash position, which it might easily not know at this point in the 2Q results computation cycle, but with debt down $53 million from the figures ignored previously, it is a safe bet that their cash exceeds their credit facilities.
We will know more when their 2Q numbers come out. It is doubtful they will match the projections of a flawed analysis based on already outdated data. In the meantime, you appear to have perpetrated a fraud. Congratuations, I suppose. Hope you covered your positions.
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
This article is something else. It has been reported as "news" in many places, but is demonstrably substantively wrong on many points. If it appeared on a bulletin board, I wouldn't care to much. I'd respond, but that would be the extent of my action. Free speech is accompanied by the responsibility to speak wisely. When one doesn't, there can be consequences.
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
That's pretty much the way I see it. One of the biggest drops in the stock this year and only one piece of proximate news. The bullseye has certainly been painted on Greg. I gather you are volunteering to be regarded as a party to a stock manipulation, as Seeking Alphas editors have.
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
It is unclear what will happen as a result of this article. Clearly the CRZ is already down 47 cents this morning on a day when, at least so far, the market, and most REITs are up. In this Mr. Weston appears to have succeeded in having his way with the market.
I expect that CRZ's 2Q results will prove this article an embarrassment, however. Seeking Alpha will have to live with the consequences of allowing such shoddy research.
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
Just to be clear. I've been in and out of CRZ several times in this market. The sweet spot for Commercial MREITs right now is in the 15%-28% range. If the yield falls below 15%, its probably time to sell. When its gets much above 28%, its probably a screaming bargain. That range has changed somewhat over the last ten months, but I've made a lot of money trading yields based on this general algorithm, and I'm ahead on CRZ overall, even now. But even if I wasn't, I have no reason to be bitter. This is at least a $6 stock in the not to distant future. If they maintain the dividend at this level, probably considerably more than that. If you had driven it down below a dollar, and there is a remote chance it will get there without your article, I'll have a screaming bargain ... and the right kind of bargain. Better to make money building value than destroying it.
There is no censorship here. Your article appeared online for almost two days, and can still be found online if you know where to look for it. Censorship is all but impossible on the Internet. What happened was the legitimate exercise of a documented editorial policy.
Attacking "SmoothJazz" for "low quality" writing ignores a fundamental reality. He is a far better and more careful analyst than you appear to be based on this article. His writing is generally excellent, in my experience, as I would expect from someone who does computer system architecture. In any case, there is no real anonymity on the Internet. Anybody can be tracked down if there is a need to do so.
Indeed, his analysis of NovaStar, could be a model for some of the ways in which you could improve your writing. First, he actually understand the difference between the different kinds of income that REITs report. You don't seem to appear to. Second, he restricts his analysis to that which is known. Third, he documents some of the unknowns in stating why he might be wrong. He is, in short, neither pumping nor bashing (and because of the numbers, some might interpret the piece either way), but doing a balanced analysis.
It remains to be seen whether NovaStar and other pure play residential REITs provide a model for what will happen to pure play and predomininantly commercial mREITs. You would like to equate CRZ to pure play residentials (most of which are dead or on life support), but the truth is that NO predominently commercial mREIT has done anything more problematic than deleverage in order to avoid the possibility of margin calls. That's just a fact. That could change, but it is not yet in evidence that CRZ is, as you call it, a failing company.
I don't see any reasonable equivalence between your piece and the Greenberg article you cite. Greenberg sticks to the facts. NovaStar really did reach a deal with MassMutual. His interpretation of those facts was open to debate, which occurred, but I don't see anyone challenging his ethics. I only see one mention of possible "legal action", but there is a name associated with it. It may be BS, in that case, but it is not anonymous.
To be clear. I didn't threaten you. I simply observed that your article was both careless with its facts and self-serving in ways that have led to legal problems for others. I occasionally teach media law and have served on national commissions on what kinds of laws the Internet needs. I am reasonably familiar with the relevant precedents here. My view remains that you overstepped considerably relative to those precedents. You should probably thank SA for pulling the article, as it may have saved you a world of trouble.
Best of luck.
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
> Predicting the demise of CRZ is not too bold a move considering that its stock has plummeted over the past year, from about $25.50 to about $3.50.
A minor logic error, but significant, as it is his first (and I would argue strongest argument). A stock price has no relationship to a companies ability to withstand a stock market downturn. Many other factors, including available cash, debt position, and cash flow, have a great deal more bearing on the question. Realistically, CRZ has taken a hit in a cyclic sector downturn. Many companies with good cash flow and a minimal debt position have not only survived such downturns but risen to achieve substantial returns for shareholders. CRZ has both. Greg acknowledges neither in the remaining article.
> The values of CRZ’s assets have fallen dramatically, but these declines are not reflected in its overpriced stock.
Here the author ignores an important data point. The company announced a strategic change at the end of 1Q and made a management change consistent with that strategic change. They decided to de-leverage, to sell off assets and reduce debt (note that I've already marked "debt position" as something that is important to survival in this market). They announced in advance that would sell assets and that income would fall as a result. They predicted that the de-leveraging would reduce the dividend by about half, to 30 cents (which suggests that the sale of assets would reduce taxable income by half). The stock has fallen substantially since that announcement, the 30 cent dividend, and the stocks deletion from the Russell 2000. None of these factors play in Greg's analysis. I won't comment on the possible hyperbole of the "overpriced stock" comment beyond noting that, based on the information I've already provided, that the market has in fact, priced a large drop in CRZ's assets into the price. We won't know how inaccurate until the 2Q results are published, but the stock has a 35.8% yield (something Greg notes in the article) and facts I will supply below suggest that the company currently has a book value that may be as high as $6.40/share (a possibility that Greg directly contradicts based on outdated data, but more on that below). Hyperbole may not be material inaccuracy, but the hyperbole is not, in fact, supported by facts in evidence, as we will see below.
> Nor is the risk that the company could be suddenly wiped out by an inability to pay margin calls or meets its credit default swap obligations.
CRZ explicitly sold assets with the stated intent of reducing this risk. We won't know until the 2Q results are announced how good a job they've done with this, but other REITs have reduced or eliminated repo debt with similar strategies and there is at least one substantial indication that CRZ has as well. Here I refer you to slide six of the an April 8 SEC filing (files.shareholder.com/...) in which CRZ purports to have reduced its repo debt from $1.2 billion to $28 million, well within the $100 million of unencumbered assets that the company claims on the same slide. Here we have a clear material inaccuracy which Greg proceeds to compound.
> I do not even think the company will be able to pay its next quarterly dividend.
CRZ has already announced its next quarterly dividend, a fact which is absent from Greg's presentation. That dividend has already gone ex-div, which means it is already off the books and in a restricted cash account. It pays the dividend on July 28. Dividends can, of course, be cancelled, but readily available information suggests that this statement is materially inaccurate. If, by chance, he is referring to the 3Q dividend, he simply does not have the information on which to base such a claim. The date of the 2Q results announcement hasn't even been set yet, but those results will provide the first real view of any data that might support or refute this claim.
> The market largely agrees, which is why stated dividend, if paid, would result in the stock having a yield of 34%. If the company does not announce that it is suspending its next dividend, its creditors will probably either issue margin calls or file a suit against the company to enjoin the dividend payment.
This is an extreme claim that Greg no basis for making, as he has no idea what creditors remain, who they are, or what basis they have for filing such a suit. We know that as of April 8, that repurchase debt had been reduced to $28 million. We known that the 2Q results will provide some transparancy on the issue, but slide 8 of the presentation cited above provides additional insight into what we may see 2Q. The total of all repo debt, including funding facilities (reduced from $80M to $48M) and repurchase agreements (reduced from $1.2M to $28M) is $76M, well within the companies available assets.
Smooth Jazz challenges this in another important way: "You appear to be assuming CRZ isn't generating the REIT income from it's assets to pay the divvy. That doesn't make sense either. Sure, paying divvys reduce GAAP book value. But that assumes the business isn't generating cash to pay it. You do realize cash from operations INCREASE book value don't you." It is fair to presume, based on the dividend alone, that CRZ is in fact generating income sufficient to pay its dividend. Greg presumes the opposite.
Indeed Greg later responds to this aspect of Smooth's critique by presuming criminal intent on the part of CRZ management: "So you think companies that are doing very poorly never try to make it look like everything is honky dory? Besides the obvious reason of "keeping up appearances" I can give you two other plausible explanations. (1) suspending the dividend would cause the stock to drop at a time when management is considering an equity offering. (2) if the company is clearly on its way to insolvency or already there, paying a dividend is a way to return money to shareholders rather than creditors. In this sense the company was acting in the best interest of its shareholders by paying a 30 cent dividend, despite its gigantic Q1 loss." sbgicon icon calls him on this: "I read where you think they are paying the dividend to get money to shareholders before they go under? I believe as an attorney that you know this would be fraud." This fraud allegation occurs within the article as well.
> Balance Sheet Review
Much of the balance sheet review is an estimation of the value of CRZ's portfolio based on a comparison with the CMBX and ABX. This is a questionable methodology for a number of reasons. Chief among these reasons is that it applies the general to the specific. Even if one were to assume that the CMBX and ABX were accurate, some companies would have better quality loans and some worse. Without data (especially the 2Q data), Greg is not in a position to assume which end of this spectrum CRZ (or RWT, to whom he applied this methodology previously) is at. The accuracy of the the CMBX and ABX is open to question, however. See, for instance www.reitwrecks.com/200... and www.bankstocks.com/Art... (references which I've read previously and Smooth Jazz provides in the comments). Both of these articles are based on hard data. Hard data to assess Greg's article won't be available until 2Q, but the data available suggests he is wrong.
Greg is using a methodology (both in this and the RWT article) that is likely to be materially inaccurate. As Smooth Jazz puts it in his comments, these indexes are "arbitrary, arguably manipulated" and "may not reflect reality." Smooth also correctly notes the effects of "SFAS 159", which "allows the company to mark the CDO Liability debt to match the asset marks, thereby offsetting your draconian net worth scenario." Finally, Smooth notes that "the company declared a 30cent divvy on June 17, suggesting that barely 2 - 3 weeks ago, they felt they were not only solvent but in a position to pay 30cents." Smooth asks Greg at this point "DID YOU ATTEMPT TO CONTACT THE COMPANY BEFORE PUBLISHING THIS ARTICLE TO SEE WHY THEY WOULD DECLARE A 30CENT DIVVY 2 WEEKS BEFORE YOU TELL THE WORLD THEY ARE GOING BANKRUPT?" Greg does not ianswer this question in his comments other than to indicate that the company may be knowingly misrepresenting its assets (e.g. committing fraud).
Smooth summarizes the problem here nicely: "I clearly agree that CRZ has impaired assets and their value has dropped since 1Q. My problem is that you are able to broadcast dubious bankruptcy headlines on a public blog, based on quetionable market indices, without a response from the company, barely a couple weeks after they decaled a divvy. If your scenario turns out to be wrong, then at a minimum you owe the company's stakeholders an apology for using a well known public blog to push your short position."
This is a valid concern given the April presentation. That doesn't mean CRZ may not have more write downs 2Q (I would expect some given the April presentation, but the sale of assets could actually result in write ups, as they are no longer on the books). It does raise questions about Greg's assertion that CRZ is not positioned to weather the storm.
> Commercial Real Estate Loans
This section opens with a critique of CRZ's accounting of commercial loans. He is operating on opinion here. CRZ's accountants apparently disagree with him, but that's not the problem in this section. His primary argument here involves minimalist case studies of two commercial borrowers, one of which has defaulted on a a part of its loans (leaving more at risk) and the other of which apparently is guilty of the cardinal sin of winning a bidding war in a New York City real estate purchase almost four years ago. His most recent data point on this sale is over six months old, and he appears to have made no attempt to refresh the information. It may be that both of these loans will fail, but Greg oversteps once again in extending from the specific to the general, as he uses these properties as a basis for re-estimating CRZ's entire commercial portfolio. The change isn't huge. He restates the value of the commercial real estate loans at $210M against 3/31 numbers of $231M. It remains that the methodology of the revaluation is highly questionable.
> CRZ’s lenders, however, may want to consider the value of this property in determining whether to continue to loan the company money. I certainly would do so, and choose not to renew CRZ’s credit lines and issue margin calls to maximum extent the terms of the loans allow.
I've already reviewed the relevant credit lines above. CRZ does have a large debt associated with its commercial portfolio, but it is not short term repo debt (the kind that depends on renewal of lines). Margin calls simply aren't at issue for CRZ right now. Indeed, that's why CRZ restructured its portfolio 1Q. This statement is not only materially inaccurate, but attempts to incite actions on the part of CRZ's creditors. It can be regarded, in short, as an attempt to manipulate the market.
> Going Out With a Bang or a Whimper?
> CRZ reported equity of $132.6 million as of 3/31/08, or $5.33 a share. As of 6/30/08, the probable mark-to-market of the MBS securities portfolio will reduce that to $61.6 million, or $2.48/share.
It also reports, on April 8, that it has paid down its repurchase debt and funding facilities to a small fraction of what they were while rasiing or freeing up $107 million of cash, leaving it with $100 million of unencumbered assets. We won't know the entire picture (the combination of restricted and unrestricted cash) until the 2Q report, but all of the estimates that Greg uses in this section are based on outdated numbers that have already been updated in the public record (just one line up in CRZ's SEC filings from the information he does use). I have already indicated that these figures translate to a book value as high as $6.39. I doubt the number will be that high, but I do expect it will be well above the current stock price. He may be right in his mark to market analysis, but he has already started from a dubious number, given he amount of change in CRZ's portfolio reported in April. If he's right, then the current share price actually fairly represents book. If he's wrong, and ignoring the April 8 report suggests that he probably is, then he has understated the companies value. The rest of his subtractions are even more dubious, leading Greg to conclude that:
> with no profitable business model, a company whose stock has book value of less than 0 is worthless.
Ignoring the obvious hyperbole of this statement, he commits a cardinal sin of omission, because the value of CRZ in the moderate to long term is in its continuing cash flow from the payments on its loans (e.g. its funds from operations), the taxable earnings they generate, and the 90% of taxable earnings dividend they provide to shareholders. If CRZ can maintain a 30 cent dividend, a possibility that seems likely given that they have sold their lower performance agency assets in favor of a range of higher performance assets while dramatically reducing their debt, then (at current margins), CRZ is likely to pay investors back for their current investments faster than once every three years. The expectation that a CRZ without significant callable debt can in fact do this from cash from is hardly hyperbole: it is the most likely outcome. If this is a whimper, its a whimper with a 35.8% annual return (at current prices).
> Instead of this “whimper” scenario of a relatively slow and graceful decline to below $1/share, margin calls on CRZ’s repurchase agreements or required cash payments pursuant to the terms of its credit default swaps may cause a sudden meltdown.
Greg proceeds to justify that statement by drawing on a large number of examples of melt-downs in residential real estate. This is a common rhetorical move these days, but an inappropriate one. Residential real estate had a major melt-down. It took a number of residential lenders (including some with strong portfolios, even now) down. The presumption that the same will happen to a predominently commercial portfolio is a large leap and, in my view, a material misrepresentation of the current commercial real estate environment. Other analysts have made better justified extensions from residential to commercial by referencing recent history, but they generally ignore the fact that history is actually contradictory on this point. Greg makes a much more specific case, and one that has no real basis in the most current data from CRZ.
> Most of CRZ’s reported Q1 repurchase agreements were paid back in Q2 with the proceeds from the sale of its agency-MBS portfolio. That, however, still leaves $22 million in repo lines subject to margin calls.
This is materially inaccurate, if trivially so. As of April 8 the company had $28M in repurchase lines subject to margin calls. It is significant, however, because he fails to note that, again as of April 8, the company has $107M in unrestricted cash to cover such calls, were they to occur.
> It’s possible the company will try some tricks such as writing down the value of its debt to stay above the $100 million mark, but there is only so much time to delay the inevitable. With a market cap well below $100 million, its clear that the market doesn’t think the company has that much equity. Last quarter 33% of the company’s write-downs were in securitized assets on its balance sheet, so this trick is still not enough to keep the company’s equity above $100 million given the extent of its likely writedowns.
Greg is apparently willing to accuse the company of fraud at this point. He makes the point again, more stridently, in his replies to comments, as noted above. I'm sure that every company works the books as best they can, but accountants have to sign off on them consistent with generally accepted accounting practices. Greg is also willing to assert that the markets valuation of a stock is a better indication of a companies equity value than the books are. The market, however, is subject to many kinds of manipulations, few of which ever have to pass an accountants scrutiny. This is a commonplace argument, but it is an apples to oranges comparison or, to put it bluntly, a fallacious argument. If his statement is, in fact, materially inaccurate (not unlikely), he has opened himself (and perhaps Seeking Alpha) to a charge of slander or libel.
> Another problem that could suddenly bring down the company are its two remaining credit default swap (CDS) positions. The company closed out six CDS in Q1, losing $10.4 million on the transactions. The company’s exposure on these remaining defaults as of 3/31/08 appears to be $4.8 million. Losses in CDS have to be paid with cash to the counterparty, and CRZ had very little unrestricted cash as of 3/31/08.
A clear material inaccuracy. As of April 8, CRZ has over $100 million in unrestricted cash. It is well able to pay its rather minimal CDS exposure.
> The time to get out of a long position, or start building a short position through the purchase of puts and the shorting of calls, is right now. At best, CRZ should be trading somewhere near an estimate of its book value, which is under $2 and dropping by the day as more and more homeowners and commercial developers default on the loans underlying CRZ’s mortgage portfolio.
Here he concludes by repeating several material inaccuracies. He does not know the companies book value, but existing data suggests it is far closer to $6 than the $2 his faulty methodology suggests. He does not know what, if any, new defaults CRZ is experiencing. Nonetheless, he recommends abandoning ship with prejudice (both selling your long and entering a short position via puts or shorting of calls).
> Disclosure: Short TMA, Long CRZ puts, no position in other companies mentioned.
Another material inaccuracy. Greg is also put and short on RWT, which he mentions in the article. This is disclosed in subsequent discussion when he is congratulated on selling his previously reported RWT position.
More to the point, his position suggests that the material inaccuracies and faulty methodologies used in this article have been chosen with the intent of manipulating the market.
I would hope that this clarifies my prior note, but I would also refer you to another of Greg's comments, in which he admits to knowingly creating a short by exercising a put. If nothing else in this article painted a target on Greg's forehead, this comment does, because the SEC is actively looking for scapegoats in this arena. By disclosing this in an article in which he grossly misrepresents CRZ's current position, he sets himself up for additional SEC interest as well as opening the possibility of a slander or libel suit (which could easily touch Seeking Alpha as well).
This article should be pulled and an apology posted for the gross negligence of the writer in his apparently willful errors of omission and commission. I will reinforce this by returning to the top of the article:
> Crystal River’s Q2 Write-Downs Could Bankrupt the Company
He has not made a case for this at all. He ignores the impact that ongoing cash flow on this outcome, misrepresents the companies rather small remaining callable debt position as a likely path to margin calls (which he attempts to incite) and bankruptcy, and materially misrepresents the companies probable book value using a series of questionable methodologies.
> I think that the company - within two to six months - will be insolvent and its stock worthless (and trade like other worthless REITS such as Thornburg Mortgage (TMA) for under 30 cents a share for awhile as it awaits delisting).
I see no evidence of this at all. If anything, CRZ has set itself up to survive the current market onslaught with a continuing 30 cent dividend based on higher earnings. We won't really know one way or the other until we see 2Q or 3Q data, but there is data that is more recent than Greg uses ... and he ignores it completely.
To be clear. CRZ may well reach penny stock territory, especially with articles like this published on otherwise repected blogs. It may well face delisting as well. Neither of these outcomes, if they occur, are likely to substantively change CRZ's income, default rate, or dividend.
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
Greg,
Your readers should feel free to GOOG davisfoulger on Yahoo as well. I don't cover nearly as much territory as smooth, but we share something in common. We analyze stocks and look for good value based on that analysis. I really couldn't care less where this stock or any other is in two weeks or two months. I care about two to three years from now or longer.
I see pumpers come through the boards I participate on a fairly regular basis. I generally challenge them. I see bashers come through the boards I participate on a regular basis too. I generally challenge them as well. In this market, at least, pumpers don't seem to care much, but bashers often label folks who are just trying to do good analysis as pumpers. Bad news. The world is not dichotomous. People don't become pumpers just because they challenge your incomplete analysis.
In this market, at least, just using the term "pumper" to describe smooth or I says more about the bias you brought to your article than anything else you've said. People who look at my history will find a fair bit of balanced analysis, especially relative to the kind of short term weather forecast you are making. You would do well to find a little balance, yourself.
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
As I indicated to Wes, my long positions are doing fine. Some are not doing so well right now. Others are quite profitable.
I would note, however, that in this market, there are very few profitable positions at the moment. A long position is evidence of nothing but a willingness to take a long view (several years at this point) and a willingness to build capital rather than destroy it.
I could be wrong, but I believe you have grossly misrepresented CRZ. If you have, and the price goes down anyway, I will almost certainly profit from your misinformation over the long term, but lots of other people will not. Some will actually believe what you say and sell, turning unrealized losses over the long term into realized losses in the short term.
The women who suggested that you take a course in Ethics was not wrong. You are creating harm. You will probably prefer to label that as bile. Lets just say you won't find many people who agree with you when presented with the facts.
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
My long is doing fine, thank you. I should note that people are fined and sometimes do time for engaging in fraud on the long side as well.
That is the key point here. A naked short is a fraudulent transaction. So is selling overselling a position on the long side. But shorting has a special problematic status; so much so that it is completely illegal (even at the level of borrowing) on some markets. No long position ever caused a depression, but excessive shorting has been regarded as a key cause of the great depression ever since it occurred. Indeed, the SEC was created specifically to reign in shorting and excessive margins. It did a good job with this until the late 90's, but lax enforcement has allowed things to go deeply out of control.
Mr. Weston has made claims to being an honest reporter analyst, but has ignored a large amount of evidence and and misrepresented the small amount of evidence he did have. There may indeed be a problem with the property in New York he mentions, but there may be no problem at all. Surprise at the size of an offer does not translate to a failed loan. He quotes the seller without offering the buyers perspective or information. Beyond that he offers two properties, one clearly failed and one not, as exemplars for what will happen to the rest of CRZ's portfolio. He may be right. Heck, it might even happen in two weeks or two months. But he has not offered anything close to the level of evidence necessary to make a claim of imminent bankruptcy and ignored a great deal of evidence that suggests the opposite. Worse, his time frame explictly ends at options expiration and before quarterly reporting. He has engaged, in short, in well established logical errors, and at least gives the appearance of having done so with the intention of profiting from the misinformation.
When, pressed, he offers no reasonable defense at all, but labels the posts made here as "bile". In short, he simply doesn't get it. All the information I offered is well supported in legal precedent. All the information smooth offered is high quality. I don't see any bile in any post here (although I've seen some elsewhere). Mr. Weston has simply failed to do his research, and I won't be surprised to discover that he hasn't really done his research on FED or RWT either. The stock price offers no evidence on this, as it is far too easily manipulated. Only the quarterly reports of these companies will give us any clear sense of what is happening. One hopes that those who have shorted or written puts on these companies have the wisdom to cover their positions before the quarterly reports come in.
Crystal River’s Q2 Write-Downs Could Bankrupt the Company
I'm going to put this simply. People have, in the past, paid huge fines and gone to jail for this kind of article and, especially, the admission he made about knowingly naked shorting shares. Its not easy. The SEC, by its own admission, doesn't have the tools to attack illegal naked shorting, but you can make it easy for them. Hedge funds don't make it easy. I won't tell you how they don't make it easy. It appears that Mr. Weston has made it easy, and in a very public, even flamboyant set of articles that say "look at me".
The feds may not have the tools to attack illegal naked shorting, but they are looking for scapegoats that they can take down. Nobody can stop the behavior right now, but they can discourage it, and Mr. Weston really has painted a target on his forehead. They may not have the tools to do everything they'd like, but they do know how to track down brokers, gather evidence, and line up a brokerage statement against a set of very public articles and to recognize really damning evidence. I'll tell one thing that Greg wouldn't want any jury to look at: the smirking picture he uses at the top of his articles.
As for the issue of libel/slander, there is existing legal precedent for such suits against individuals by businesses for on-line statements. Businesses have won in the past where a malicious intent has been established. Seeking alpha may (and I stress may) be protected by those precedents, but it does have an editor and looks more like a newspaper (where precedents that extend liability to the publication have long been established) than a bulletin board (where the service provider is protected so long as they don't pre-screen messages and make appropriate deletions when requested).
I'm not making this stuff up and I'm not threatening at all. Mr. Weston appears to have gone on a self-serving crusade of sorts. I'm sure he has another real estate financial in his sights for next week. I'm simply indicating that the self-serving element of his articles, combined with the patent lack of research that Smooth Jazz (a extremely good analyst in my view) has documented, sets up the possibility of some serious legal consequences.