Goldsmith comment: Porter will return to the Digest on Monday. Enjoy the weekend.
Media darling Lenny Dykstra is back in the headlines... We started following Dykstra's financial career when he e-mailed us in 2005 asking for a job. We wished him the best of luck, but declined. Jim Cramer of TheStreet then hired Lenny and later went on record saying, "He's one of the greats in this business," this business being the stock market... Incriminating video here.
Dykstra's post-baseball career is riddled with sketchy dealings and fraud – including his claim that he's recommended 111-straight winning option trades and zero losers, an impossibility. Employees at The Players Club – his investment magazine dedicated to professional athletes – claim they were never paid for their work and were asked for their credit-card numbers so Dykstra could reserve a private jet.
His "empire" came crumbling down this week when "Nails" filed for Chapter 11 bankruptcy protection, claiming only $50,000 in assets and more than $31 million in liabilities. In an incredibly weird interview, Dykstra defends his position in life, saying he's not bankrupt... He's just reorganizing to protect himself from "predatory" lenders.
It's ironic the man responsible for The Players Club – a magazine dedicated to saving professional athletes from financial ruin – is himself going bankrupt... But he says his situation is different because he was "lied to and defrauded."
"When you get lied to by a bank, you can't stop that... Meaning, when a bank loans you $20.5 million at 12% [for a house], there's not a lot of humans that can make that payment... OK? Not a lot. So, the thing is, about the bank fraud, what can you tell somebody about that?"
Apparently Nails didn't read Dan's Digest this week... Remember, Lenny, "Nobody owes you a thing."
Despite being bankrupt and (as evidenced in the video) mentally stymied, Dykstra says he's still "livin' the dream."
This is a must watch video for the weekend.
Obama's newly appointed "compensation czar," Kenneth Feinberg, has his first big challenge at hand. Feinberg, who has the power to decide compensation for the 100 top earners at the seven firms receiving the most bailout cash, must rule on the $235 million in retention bonuses AIG plans to pay employees of its financial products unit – the unit largely responsible for the firm's collapse.
While we don't condone huge bonuses for executives who ran their company into the ground, the fact stands that AIG agreed in contract to pay its executives this amount. The government should not have the power to overturn existing contracts. This AIG bonus debacle could set a scary precedent.
Goldman's traders are once again "walking on water"... The bank is on track to report its largest profit since it set record earnings in 2007. Bank of America analyst Guy Moszkowski says Goldman's 2009 trading profits will eclipse the 2007 record... And its 2009 compensation will rise 64% from last year to $17.9 billion.
After Goldman received its TARP funds, it resumed business as usual – taking highly leveraged bets with the firm's money. Meanwhile, its surviving competitors pared risk – allowing Goldman to take greater control of the market.
Once the other banks see Goldman is once again raking in profits from proprietary trading, they'll ratchet up their risk so as not to be left in the cold... This whole cycle will start over again.
New highs: AmeriGas Partners (APU).
We mentioned George Soros this week and didn't receive a single angry e-mail. What's happened to you? feedback@stansberryresearch.com.
"I saw a great T-shirt the other day... 'If you think healthcare is expensive, wait til it's free.'" – Paid-up subscriber Matt
"'Drug-addled, rent-subsidized welfare recipients living next door' – currently in that situation. Not very happy about it. Frankly, every time I see them, my blood boils. My parents went thru sh*t to put me thru college. I spent 6 years and a sh*t load of money getting a technical education. I work hard as an engineer. With all of that, I bought the only property I could afford – a 2 bed flat.
"Funny thing is, my neighbour is on welfare. Why? No particular reason. He always has been. Does he work? No. Why not? Too hard/Cant be bothered. I paid £80,000 for my flat a few years ago. At the peak, it was worth £130,000. At that point, the welfare system sold him his flat for £27,000. An overnight profit of over £100,000. All for being lazy all his life. Why didn't anyone tell me I had that option? Seriously. Can somebody please explain to me where I went wrong? I can't bear the fact that I pay to support him and his ilk. Nobody supported my parents or me. I have no problem helping out when people are really in need. But not this." – Paid-up subscriber Manu
Regards,
Sean Goldsmith
Baltimore, Maryland
July 10, 2009