Fooling Some of the People All of the Time, a Long Short (And Now Complete) Story, Updated With New David Einhorn (best classic books of all time .TXT) 📖

stock or several stocks. Specialists make a market in their stocks by displaying their best bid and asked prices and must maintain a fair and orderly market in those stocks.

Stock dividends

Distributions to shareholders in additional stock, rather than cash.

Stock split

Where a company’s stock is divided into multiple shares. For example, a 2-for-1 split of a $100 stock results in two shares worth $50 each.

Subordinated debt investment

Investment made in a debt instrument that is junior to senior debt.

Tax distribution

Taxable earnings that are distributed to shareholders.

Taxable income

The part of a company’s earnings that are subject to federal and state taxation.

Transparency

Refers to a company conducting its business out in the open with good disclosure so investors have a clear idea of its operations and performance.

Underwriting loans

The act of determining whether and on what terms to issue a loan to a prospective borrower, often based on analysis of the prospects creditworthiness.

Unrealized depreciation

The excess of the basis of an investment over its fair market value.

Walton’s birthday

I don’t know, but I would recommend a copy of Fooling Some of the People All of the Time as a gift.

Write-down

Decrease in the stated value of an asset.

Write-up

Increase in the stated value of an asset.

Year of origination

The date when a loan was issued.

Yield to maturity

A loan’s total return, stated as an interest rate, if it is held until it matures.

Acknowledgments

I am sure that many books benefit from help beyond the author’s own ability. Fooling Some of the People All of the Time is an extreme example. I have had so much help from so many people, it is impossible to remember who did what. This book is truly a group effort.

First, I want to thank my family. My wife, Cheryl, has been a tremendous helper and supporter both in a literary and an emotional sense. My parents, Nancy and Stephen; brother, Danny; uncle Robbie; mother-in-law, Judie; and sister-in-law Marcy have all helped out on many iterations and made many fantastic suggestions. Finally, I want to thank my children, Rachel, Naomi, and Mitchell, who have allowed me to spend some of our precious family time to work on this book. I hope that when they are older, they will appreciate why I felt telling this story is so important.

Next, I want to thank the entire Greenlight Capital team. My partner, James Lin, has done an incredible job helping me research, follow, and catalog the story. My other partners, Vinit Sethi, Daniel Roitman, Bruce Gutkin, and Harry Brandler, have each made enormous contributions that include everything from suggesting language, improving my memory, helping control the tone, and hunting for typos. Justin Lepone helped with a lot of suggestions and in educating our investors to keep them informed and supportive of this project. Andy Weinfeld coordinated the legal and fact-checking effort. Helen Gorgoni kept track of the various drafts and collated the comments from the many readers. Thank you all.

Thank you, James Schembari for all your hard work and writing. I really appreciate your sharp eye and help in capturing my voice. David Breskin’s efforts to polish the manuscript have been truly heroic. Thank you for playing through pain and even putting your wife’s book aside to help mine. I give thanks to Kim Scheinberg, a gem of an editor who believes that all wars are fought between the good guys and the good guys. Bless her soul. I want to thank Rich Zabel, Hyongsoon Kim, Mike Kenny, and Rex Heinke for your excellent advice. I owe thanks to Kelly O’Connor and David Pugh at John Wiley & Sons and from Sandy Dijkstra, my literary agent. Joel Greenblatt has my enormous gratitude—first for introducing me to John Wiley & Sons and second for writing a three-hundred-word Foreword that so perfectly encapsulates the point of this hundred-thousand-word book.

One of the best parts of this experience has been meeting Jim Brickman. I am inspired by his incredible dedication, persistence, research capabilities, and discoveries. Also, thanks to my friend Curtis Schenker. You really had nothing to do with this book, but you got so little credit for building Scoggin in Hedge Hunters that I thought you should get a shout out here.

Finally, I need to thank my personal and business friends who took time to read various drafts and give me feedback: Bill Ackman, Steve Bruce, Jim Carruthers, Claire Davis, Lenny Goldberg, Brian Goldman, Adam Goldsmith, Mary Beth Grover, Ian and Neil Isaacs, Daniel Loeb, Robert Medway, Mark Roberts, Jerome Simon, Leonard Tannenbaum, Whitney Tilson, Glenn Tongue, and Rob Usdan. I have taken many of your suggestions, and I hope you smile when you see them in the final book.

About the Author

David Einhorn is the President and founder of Greenlight Capital, a long-short value-oriented hedge fund. David is the Chairman of Greenlight Capital Re., Ltd. (Nasdaq: GLRE) and serves on the boards of the Michael J. Fox Foundation for Parkinson’s Research, Hillel: The Foundation for Jewish Campus Life, and the Robin Hood Foundation. David graduated summa cum laude with distinction in all subjects from Cornell University in 1991, where he earned a B.A. from the College of Arts and Sciences.

Index

A

Abernathy McGregor

Absolute return

“Absolute-return” investors

Accounting

aggressive

fair-value

fire-sale

fraud

gain-on-sale

government procedures

hold-to-maturity

leniency in

methods

portfolio lending

pyramid-scheme

SEC rules

Small Business Administration (SBA)

ACE Products

Ackman, Bill

ACME Paging

debt and equity investments

Adelphia

Advantage Sales & Marketing

Agribrands, recovery of

Akin, Gump, Strauss, Hauer & Feld, LLP

Al-Jufairi, Abdulla

Allied and advisers, list of

Allied and BLX customers, list of

Allied Capital

accounting practices

aggressive accounting by

Ares Capital’s acquisition of

assets

attacks on

Audit Committee

Audit Guide and

audit letter (2008)

BLX and

campaign against critics

class-action suit and

conference call, third-quarter earnings (2008)

credit agreement with banks

CRM as largest shareholder

dissecting

equity offerings by

Fooling Some of the People, objections to

fraud at

Goldman Sachs and

government investigations into

Lehman Brothers compared to

loans originated by

operating results of

qui tam case against

resembling Enron

SEC investigation of

shareholder meetings

stock collapse

stock options for management

stock ownership initiative

testimony at SEC about

third-party valuation assistance and

write-downs by

Alpert, Mark

American Capital Strategies

American Institute of Certified Public Accountants (AICPA)

American Physicians Services (APS)

debt and equity investments

America Online

Analysis

loss

portfolio

risk

security

sharing by investors

of Sirrom

statistical

Analysts

diggers

Merrill Lynch

Wall Street

Anti-hedge fund series, Wall Street Journal

Appreciated investments

Aquamarine Fund

Ares Capital

Armstrong, David

Arthur Andersen

prosecution

Asian market exposure

Assets

Allied Capital and

fire-sales of

growth

non-performing

Atkins, Paul

AT&T

Audit Guide

Allied Capital and

B

Back-office services

Balance sheet

BancLab

report

Bank of America

investor conference

stock price weakness