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Fooling Some Of The People All Of The Time: A Long Short (and Now Complete) Story (2010)

by Joel Greenblatt(Favorite Author)

3.96 of 5 Votes: 3

ISBN

0470481544 (ISBN13: 9780470481547)

languge

English

genre

History & Biography

publisher

John Wiley & Sons

review 1: Honestly 95% of this book is pretty depressing, seeing how long fraud is allowed to persist. Then the company finally collapses at the end. Amazing how so much corruption within the gov't ranks is allowed to persist. Equally sad is the comment at the end when under investigation the SBA admitted to not even wanting the money back (tax payer $) after BLX admitted to defrauding them. I guess when it is only taxpayer money and not your own money you don't have skin in the game so who really cares if you don't need to act on $200mm of fraud. The happy result at the end is actually bittersweet considering how agonizing the rest of the story is due to regulators and the company dragging their feet/denying/lying for the majority of a decade.
review 2: This is ove... morerall a good book, however it does tend to get very technical and I would recommend staying away unless you are a passionate investor / want to learn how a short investor thinks. The entire book is about David Einhorn’s saga of shorting Allied Capital. The things that you find out about Allied almost makes this book seem like a movie given how many opportunities the SEC / SBA had to shut these guys down, but chose not to investigate, despite the warnings Greenlight gave them. It all starts off with a speech Einhorn gives at a conference detailing his research around Allied Capital and a number of discrepancies he has found in the accounting by Allied and its reporting methodology. The book walks you through countless incidences of Allied reporting certain loans at face value and then dropping the face value to 10% after the next quarter out of nowhere. Upon further investigation, it is clear Allied knew these loans / properties were worth nothing several quarters in advance, however they delayed the write down for a long time. It is scary the amount of fraud that went on here in terms of reporting / disclosure and misinformation Allied provided to the public in the form of blatant lies. You truly learn how much one of the greatest investors in the world digs into a company to short them as Einhorn knew that company cold from the different accounting methodologies to different assets at the company to different managers at each of the operations. BLX, one of Allied’s portfolio companies, was a corporation full of fraud that ended up costing the SBA hundreds of millions of losses. This is prime example of why the salaries for some of these governmental employees should be higher as the SBA simply did not care whenever Einhorn presented the facts to SBA about how they were being completely fooled out of their money and never took the time to investigate. Einhorn spent several years bringing this in front of the SEC / SBA before they finally decided to investigate. Einhorn always said that he was going to donate the proceeds to charity and at the time of the completion of the book, he had still not made any money on his short. Despite him saying this, Allied continue to accuse Einhorn of making up rumors in order to drive down the value of the stock so that he could become rich off his investment. However, I believe Allied did eventually take a nose dip whereby Greenlight did make a significant amount of money on their investment. Allied still is public today and trades, although I assume must have a different management team in place now after all the scrutiny all the individuals went through in the book. It is just scary to know this is what happened at a public company as can only imagine the things that happen in some private companies completely under the radar. In 2002, David Einhorn, the President of Greenlight Capital, gave a speech at a charity investment conference to benefit a children’s cancer hospital. He was asked to share his best investment idea, so he did. He described his reasons why Greenlight had sold short the shares of Allied Capital, a leader in the private finance industry. Greenlight bet that the stock would decline because the company’s business was in trouble and its accounting was corrupt. Einhorn’s speech was so compelling that the next day, when the New York Stock Exchange opened for trading, Allied’s shares remained closed. So many investors wanted to sell or short the stock that the NYSE could not balance all the sell orders to open Allied’s trading in an orderly fashion.What followed was a firestorm of controversy. Allied responded with a Washington–style spin-job — attacking Einhorn and disseminating half-truths and outright lies. Rather than protect investors by reviewing Einhorn’s well-documented case against Allied, the SEC — at the behest of the politically connected Allied — instead investigated Einhorn for stock manipulation. Over the ensuing six years, the SEC allowed Allied to make the problem bigger by approving more than a dozen additional stock offerings that raised over $1 billion from new investors. less

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