1) The front pages of today's Financial Times and Wall Street Journal feature two exceptional pieces of journalism that are likely to bring about important and much-needed changes.
First, the FT has exposed one of London's best-known hedge fund managers as a serial sexual predator: How Crispin Odey evaded sexual assault allegations for decades. Excerpt:
For more than three decades, Crispin Odey has reigned over London's hedge fund scene as an eccentric with a reputation for delivering enormous returns as well as devastating losses. Odey Asset Management, his firm, was once one of Europe's largest hedge fund companies and Odey, the man, a character from a bygone era of finance.
An imposing figure at over 6ft tall, he cultivated an image as an unapologetically posh gentleman rebel. This newspaper once described him as "a large puppy in a pinstripe suit". He used his wealth and influence to boost the country's Conservative party, back Brexit and cultivate friendships with former prime minister Boris Johnson, among others. Although Odey's assets under management have fallen from their $13.3bn peak several years ago, he has maintained his reputation as one of London's last hedge fund mavericks.
Thirteen women who have worked for Odey Asset Management or had social or professional dealings with its founder told the Financial Times that Odey abused or harassed them; eight alleged he sexually assaulted them. The incidents – which included masturbating on a female entrepreneur after a business meeting and forcing a friend's hand on to his penis – occurred between 1998 and 2021. The FT has corroborated accounts of an abusive workplace culture through interviews with more than 40 former employees of Odey Asset Management at every level.
This is not the first time Odey, 64, has faced serious misconduct accusations. In 2021, he defended himself against a sexual assault claim made by a female banker in British courts and won. Allegations in Bloomberg, The Sunday Times and a Tortoise Media podcast have done little to hurt his standing. UK regulators still consider Odey "fit and proper", the standard senior management at financial firms must uphold, and he continues to be quoted in Britain's most influential newspapers.
Two instances of sexual misconduct took place after his court case ended. The FT found that senior executives at the firm knew about his behaviour but took 16 years to launch a formal investigation into Odey's conduct. In 2021, the company took previously unreported measures to rein Odey in – unsuccessfully. When the firm's executive committee tried a second time, he moved with the sangfroid that made him a City legend and fired them.
This is disgusting, and I hope Odey's investors and regulators quickly hold him to account.
With two of my daughters now in the workforce (ages 27 and 24; my youngest, age 21, is halfway through college), I worry about the danger predators like Odey pose to them. So I cheer when a high-profile one is exposed, as it sends a powerful signal to all the others that they will be held accountable for their behavior.
2) Speaking of protecting young people from perverts, I have no doubt that this front-page story in today's WSJ will have even more far-reaching implications: Instagram Connects Vast Pedophile Network. Excerpt:
Instagram, the popular social-media site owned by Meta Platforms (META), helps connect and promote a vast network of accounts openly devoted to the commission and purchase of underage-sex content, according to investigations by The Wall Street Journal and researchers at Stanford University and the University of Massachusetts Amherst.
Pedophiles have long used the internet, but unlike the forums and file-transfer services that cater to people who have interest in illicit content, Instagram doesn't merely host these activities. Its algorithms promote them. Instagram connects pedophiles and guides them to content sellers via recommendation systems that excel at linking those who share niche interests, the Journal and the academic researchers found.
Though out of sight for most on the platform, the sexualized accounts on Instagram are brazen about their interest. The researchers found that Instagram enabled people to search explicit hashtags such as #pedowhore and #preteensex and connected them to accounts that used the terms to advertise child-sex material for sale. Such accounts often claim to be run by the children themselves and use overtly sexual handles incorporating words such as "little slut for you."
Instagram accounts offering to sell illicit sex material generally don't publish it openly, instead posting "menus" of content. Certain accounts invite buyers to commission specific acts. Some menus include prices for videos of children harming themselves and "imagery of the minor performing sexual acts with animals," researchers at the Stanford Internet Observatory found. At the right price, children are available for in-person "meet ups."
The promotion of underage-sex content violates rules established by Meta as well as federal law.
It's outrageous that Meta has failed to adopt policies and invest sufficient resources to put an end to this terrible danger on its platform. At the same time, it's not a bit surprising, given that CEO Mark Zuckerberg has consistently prioritized profits over safety. Like Odey, politicians and regulators need to hold him to account.
3) In my March 23 e-mail, I removed video game retailer GameStop (GME) from my "Dirty Dozen" list of stocks to avoid, writing:
I have to tip my hat to management: It has done an excellent job stabilizing a sinking ship, as evidenced by the strong fourth quarter. Not only was net income $48 million, but thanks mostly to reducing inventory from $915 million to $683 million year over year, the company generated a phenomenal $338 million of operating cash flow during the quarter versus only $11.6 million in capital expenditures.
While much of yesterday's pop was likely due to short sellers getting squeezed and rushing to cover their position, there has been a material improvement in GameStop's prospects. Enough to justify a roughly $7 billion market cap today? Probably not, so I don't think the stock is a buy... But it's no longer a good short, so I'm removing it from my Dirty Dozen.
Perhaps I should have left it on my list, as the company reported weak earnings yesterday, fired its CEO – former Amazon (AMZN) executive Matthew Furlong – and canceled its conference call, sending its stock down as much as 23% this morning.
Cancelling a conference call is very unusual and doesn't bode well for the stock. Recall what happened when First Republic Bank merely didn't take questions on its last call before going under: First Republic Shares Plunge After Earnings Call Without Questions...
GameStop isn't going bankrupt – at least, not anytime soon – and I'm not sure it's a good short here, but it's definitely not a long!
4) GameStop also announced that its largest investor, Ryan Cohen, has been elected Executive Chairman.
I don't view this as a positive, given Cohen's sleazy behavior around his shares of now-bankrupt retailer Bed Bath & Beyond (BBBYQ), for which I reported him to the SEC. I wrote the following about him in my September 21, 2022 e-mail:
I'm quoted in this New York Magazine article about Ryan Cohen's pump and dump of Bed Bath & Beyond's (BBBY) stock: Beware Ryan Cohen, the Meme-Stock King. Excerpt:
It's hard to allege Cohen committed a securities violation on the basis of simply making accurate regulatory disclosures and legally selling stock on the open market – which has made many on Wall Street all the more upset. "The way he did it reeks of a pump and dump, just reeks of it," says Whitney Tilson, the CEO of Empire Financial Research, who filed a complaint with the SEC alleging Cohen engaged in securities manipulation through a pump-and-dump scheme. "This has been going on for forever – Ryan Cohen just came up with a clever, innovative, nefarious twist."
In the days following Cohen's sale, however, the true extent of Bed Bath & Beyond's woes became clear. "I think it's highly problematic for Ryan Cohen to place individuals on the board, dump all of his shares, and then the next day we learn that Bed Bath & Beyond has hired restructuring experts and now they're engaged in some financial difficulties," says Daniel Taylor, a Wharton professor who specializes in fraud...
The more respectable players in the market have turned on Cohen. "He has absolutely destroyed his reputation," says Tilson...
He's convinced throngs of retail traders he's a genius even while he's betrayed them, leaving them holding the bag of a worthless stock. As long as people like Cohen and Musk are able to do that, then there's no telling what they can do to the market or who can stop them, besides the apes themselves.
Speaking of Cohen, CNBC just aired a 43-minute documentary about him, Making of the Meme King, which you can watch on YouTube here.
5) Ukraine's much-awaited counteroffensive is underway: Ukraine launches counteroffensive against Russia. Excerpt:
The Ukrainian military's long-anticipated counteroffensive against occupying Russian forces has begun, opening a phase in the war aimed at restoring Ukraine's territorial sovereignty and retaining Western support in the war. Ukraine's troops intensified their attacks on the front line in the country's southeast, according to four individuals in the country's armed forces, who spoke on the condition of anonymity because they were not authorized to publicly discuss the battlefield developments.
The Ukrainian troops include specialized attack units armed with Western weapons and trained in NATO tactics. The attacks on the country's southeast mark a significant push into Russian-occupied territory.
Russian military bloggers also reported heavy fighting in the Zaporizhzhia region, a part of the front line that has long been seen as a likely target of the new Ukrainian campaign. By cutting south through the flat fields of Zaporizhzhia, Kyiv's forces could aim to sever the corridor of land that connects mainland Russia to the occupied Crimean Peninsula, cutting off crucial Russian supply lines. It could also attempt to liberate the city of Melitopol, which Russia has established as the region's occupied capital, and Enerhodar, where the Zaporizhzhia nuclear power plant is located.
In reality, the counteroffensive has been slowly ramping up for weeks, and early indications are promising.
My optimistic view hasn't changed from what I wrote on April 18:
My view, based on extensive reading and visiting Ukraine twice in the past two months (at one point going within six miles of the front lines) is in the 5.6% minority [that the war will end this year].
I think that Ukraine has been getting stronger and Russia has been getting weaker every day for the past six months.
All winter, Ukrainian forces have cleverly tied up Russian ones in Bakhmut, a small, strategically insignificant city – decimating Russian forces with their "B" team (Territorial Defense Forces), while resting, training, and equipping their best troops for the counter-offensive that I believe will commence in the next two to four weeks. Watch this short video the Ukrainian government posted to see the forces it has been massing.
This isn't to say that expelling Russian forces from their territory will be easy... I expect at least a month of brutal, bloody fighting, with only small territorial gains, which will reinforce the views of those who believe this will be a long, drawn-out conflict, possibly ending in a stalemate.
But I believe that Ukrainian forces will not stop, no matter how high their losses, because the idea of having Russian forces on their soil another year is intolerable. As such, their continued attacks on depleted and demoralized Russian forces will result in a breakthrough and a chaotic Russian retreat to the border.
By mid-to-late summer, having expelled Russian forces from eastern Ukraine, Ukrainian forces will likely be on the border of Crimea.
At that point, I expect them to pause and there will be a peace deal that ends the war, with two bones being tossed to Russia...
- While Russia will withdraw its forces from Crimea and it will be returned to Ukraine, Ukrainian forces won't enter the territory. Instead, it will become some sort of UN protectorate.
- Ukraine won't officially become part of NATO, but it will instead receive security guarantees that are the equivalent.
If I'm right, I think the unexpected early end to the war will result in lower energy and food prices and provide a tailwind to the markets into the end of the year.
Best regards,
Whitney
P.S. I welcome your feedback at [email protected].
