"Crazy Eddie Antar and the Temple of Doom"
Eddie Antar. The vile name itself still boils my blood and rattles my brain. To the uninitiated, or forgetful, he was the 1980's super-wily electronics salesman of the New York City area whose annoying, hyperkinetic commercials became famous. OK, infamous. With an actor screaming nonstop throughout the commercial, he would say *anything* to get you into one of the Crazy Eddie electronics stores. His prices were "IN-SANE!!!!"
Out-of-towners may remember a scene from the movie "Splash," with Daryl Hannah staring wide eyed at a bank of televisions in the electronics department of Bloomingdales while a frenzied pitchman screamed at viewers. Yes, that was a real Crazy Eddie commercial.
Legend has it that when he started his first shop in Brooklyn, he would never let a customer out the door without selling him something. Anything. He would just keep dropping the price until they said yes, sort of like shopping in the serpentine corridors of some Middle Eastern bazaar. He was successful. He expanded. He incorporated and sold shares to the public. The price of the stock soared into the $20's.
The stock price dropped. Recession related? My, that would be a nice time to buy shares in a company, I thought. Who knows, he could go national. Buy low and sell high, that's the idea after all. And the price dropped to about $6 1/4. I bought some. It dropped some more to about $5. Well, I figured, if it was good for me at $6.25 per share, it should be great at $5, no? I "averaged down," feeling shrewd all the way.
I confess my research was not that thorough, but I knew that the company had great name recognition and people DID go into the stores, most of which were opened with tremendous fanfare. Everyone within earshot knew who Crazy Eddie was. But financial troubles ensued and the stock dropped to $2. No point selling now, I thought, as I wouldn't get much back anyway---let's look for a turnaround.
Eventually the company was sold to others, who no doubt did a heck of a lot more research than I. Trouble was, the "Inventory" that existed on paper did not exist in the warehouses. There was *nothing* left in the Crazy Eddie Empire. Eddie Antar fled the country with mucho millions, and the company went into bankruptcy, never to emerge. Eddie was subsequently captured overseas with an assumed name, multiple passports, and reports of over $80 million floating around various banks in favorable countries. The assets were seized.
He was tried and convicted. (Yes!) The judge said at the sentencing, and I am paraphrasing here, that it was clear to him from the outset that Eddie was guilty, guilty, guilty, as guilty as the day is long. He then handed down a nice fat sentence, much to the satisfaction of all who had been duped.
The Court of Appeals, however, was not favorably disposed to hear that one of their judges had given up the presumption of innocence at the START of the trial, and they threw the verdict out a few months back. Eddie has to be re-tried. All that celebrating over his conviction for nothing.
Oh yeah, the moral of the story. I'd like to say it was: "There's nothing better than researching something to death before investing," which is very true. This is particularly important when suggestions and tips come to us though cyberspace from anonymous individuals, some of whom may be ignorant, some of whom may be very knowledgeable, but any of whom could be manipulative for their own gain. If it happens offline, it can happen online.
But the above moral doesn't entirely work for me. Since Crazy Eddie was investigated by others prior to the sale, and no irregularities found, I have favored myself with the conclusion that I would not have found problems no matter how hard I looked. I don't think Eddie would have let me into his warehouses to have a look around before buying a couple of shares, do you?
I'm now better attuned to market manipulations which regularly go on, and watched with interest as the head of First Jersey Securities was recently convicted for manipulating stock. And my experience with Eddie has taught me a few things:
1) Never, ever put all of your eggs in one basket, even if the company looks like the greatest thing since sliced bread. Be diversified for a number of reasons, of which this is but one. Fraud happens, it victimizes the savviest of investors, and it will continue to happen.
2) Management matters. It is legend now how it contributed to the Chrysler turnaround. A good company needs both product and people.
3) Never completely trust anyone you have met while investing, for everyone has motives to do something. Don't distrust them either, just be Foolishly vigilant. It's your money, after all; you have your own best interests at heart.
Crazy Eddie Antar---The Sequel and a Contest!
(or, Look Who's Laughing Now)
I got it! I got it! That's right campers, right here in my hands. A real live bona fide check. Yup. The one from the Crazy Eddie Securities Litigation.
I know, I know. . . since reading my original Fribble on Eddie last year ("Crazy Eddie Antar and the Temple of Doom," 7/14/95), you've been holding your breath waiting for this moment. Yeah, me too.
The staggering return I received (and if you can't read the scanned version for any reason, let me spell it out for you: NINETY-FIVE DOLLARS AND 29 CENTS!) represents---are you sitting down????---just over 6 whole pennies on the dollar, after the lawyers and accountants calculated out the loss based on the time of purchase and time the scandal became known. Yes, I *know* that was a run on sentence, but I'm excited, ok?
As I sit here at my keyboard, I can't help but think about Eddie Antar's current state of affairs. Jailed now for 4 years, Eddie is awaiting sentencing after pleading guilty to crimes related to his criminal enterprise in, basically, stealing all the money from Crazy Eddie, Inc., and fleeing the country. He will get several years more from the judge who sentences him. He will then be left a pariah in any community he attempts to re-enter.
Who says there's no justice in this world?
Currently, Eddie has scads of people clamoring for a piece of the $75 million financial pie that was recovered from a host of foreign bank accounts. Former friends, family, spouses, business partners, shareholders, and law enforcement authorities all want a piece of his butt. I got my piece in the mail.
I wonder every so often if criminals think in advance about whether or not their crime will be worth it. You know, that quality-of-life thing. Eddie is rotting in a jail cell somewhere (and with his small stature, I hope for his sake he has a private cell), while I am merrily going on with my life. Who has the better deal, even assuming he still has millions squirreled away in some off-shore accounts for the day he's set free? He's frettin' while I'm Fribblin'.
I'm not sure how much Eddie learned, but losing that money was one of the best stock market lessons I could have had. I'm just glad it happened at an early age, which, while painful, at least gave me maximum benefit. For those who are new to investing, and lucky enough to invest in Iomega or America Online, the explosive experience could be a little like going to a casino or a horse track for the first time, and hitting the jackpot. It looks too easy, and you get the feeling it always will be.
Eddie Antar cured me of that notion.
Ok---you still with me?---here is a contest!!! I'll award 10 free hours to the Fool with the most Foolish idea for spending or investing this historic windfall. Just e-mail me by Wednesday, May 29th, 1996.
And don't suggest beer. I came up with that one myself.
My sister and I finally finished up dividing my grandmother's vast estate (about $1,500 dollars worth). Among the treasures were my great grandfather's investments, including a load of old stock certificates. Everybody dreams of finding an old stock certificate from a company like Coca Cola dating back to 1920 that's worth about a jillion dollars. Let's see what I got. Hey! Quick Pay Gold Mines, Inc., 500 shares at 1 cent each. I wonder if I'm rich. . .
It seems that Great-Grandpop did a lot of investing with R.L. Shoemaker. Mr. Shoemaker sold him oil and gas leases in Mississippi. As we all know, Mississippi is a major oil and gas producing state. At least Mr. Shoemaker said so. I don't want to say anything bad about Mississippi---I've been there, and the people are nice. The state is pretty, too. But have you ever heard of a Mississippi Oil Tycoon?
What else do I have here? Let's see, some deeds to property in Colorado dating back to the 1890's---I wonder if I still own that, and if so can I afford the back taxes? Oh well, I'll let that sleeping dog lie for now.
I have some stock here in Consolidated Enterprises. Did they consolidate enterprises or were they enterprising consolidations? Hmm, Great Grandpop pooled his stock, but a sufficient number of stockholders didn't participate. They returned his stock, but kept the money he sent. They gave him another oil and gas lease though. Oh, this was in Texas. Maybe I am rich. No, I doubt it.
Oh! Look at this. . . the Lucille Black Sand Company and Parker Methods. It seems they were developing a magnet to mine 500 lbs of black sand. It was a method for magnetic gold mining. My great-grandfather was to get 15% royalties, and for this he invested $4,000 in 1940. Ouch! Now I admit I don't know a lot about gold mining. However, I tested (just to make sure) some gold in my wedding ring, and it is NOT attracted to magnets. So, either my ring is a fake, or Great-Grandpop was ripped off.
My great-grandfather was a remarkable man in many ways. He became a respected telegrapher, in spite of being physically handicapped. His one failing, though, was that he wanted to get rich quick. Those two words don't belong in the same sentence, as these old stock certificates (suitable for framing) attest. Just think if he had invested that $4,000 in a real company like GE, General Motors, or Coca Cola. . . He didn't, though, and when he died in the early fifties, he died broke.
The fact is, my great-grandfather was "Howied" (see earlier Fribbles on Howies and other Scoundrels). He obviously was on "sucker lists" that are circulated among con artists. The scams of the 30's seem silly today, but how will the Wireless Cable scams of today look 60 years from now? Two things are in common then, now, and in the future: gullibility and greed. If my ancestor had been Foolish, and had done a little research (a toy magnet and hopefully his wedding ring would do), he'd have kept his money.
If George P. Runkle had used Foolish Principles (which existed before the Motley Fools, just like Howies), he might have increased his money. It may not have bought him a mansion on Massachusetts Avenue, but he wouldn't have died at the Washington D.C. Home For The Incurables (that was the real name of the institution) either.
That in itself is a pretty good reason to be Foolish.
Trudging slowly up the stairs to the stage, Bogey grabbed the microphone. As he got on stage with all the Fools clapping in the audience, Bogey raised his hand to quiet the crowd. In a weak, choked up voice, Bogey started to speak. "Don't cheer for me broth"ahs" and sist"ahs" for I am a soul tortured! I am not worthy to stand before yooouu," he bellowed!
With face distorted and crocodile tears evident, Bogey lamented aloud "I HAVE SINNED!!!" he cried in his best Jimmy Swaggart drawl. The crowd gasped. "What hast thou done to forsake us Brother Bogey?" yelled a Fool from the audience. "I have eaten of the forbidden fruit! I have danced with the devil himself! I have stared death in the face! I have blasphemed! I have been unfaithful! AND, I have done this all in one day!!
Women covered their children's ears and old ladies fainted in the aisles. Men clenched their fists in anger and animals began to speak in tongues. Over a hushed silence, (as opposed to those really loud silences), Bogey lamented that he had bought shares of Timberland (TBL) on---ackkk---takeover rumors. A sworn-to-the-death hater of takeover rumors, Bogey had fallen by the wayside. "No sooner did I complete the wicked transaction than did the devil himself, Dan Dorfman, rear his serpent head and bash my beloved TBL!"
Bogey, down a smooth 38% on TBL in a matter of days, wept before his peers, but managed to squeak out: "Please broth"ahs" and sist"ahs," be generous and dig DEEEEP tonight, for there WILL be a collection. . . .
In a moment of quiet reflection, Bogey remembered that we all make mistakes. Too many times we read about the Monday-morning quarterback geniuses who bought XYZ 20 points ago. This time, Bogey took it on the chin hard and wanted to share his humiliation publicly. Just reinforces his belief that you should never buy on takeover speculation!!!!
---posted on The Motley Fool (11/08/95)