Dumb and Dumber — From Alex Jones to Your Credit Score

Plus Shakira, Deshaun Watson, and Higher Ed’s Low Grades

Hi, folks! As regular readers of Wells $treet know, no one is dumber than I am. This puts me in a unique position to notice fellow fallible financial travelers. Hence, Dumb & Dumber, my recurring column calling out bad business behavior. (I’m also obsessed with alliteration.)

One of my favorite things about producing Wells $treet is the feedback and suggestions I receive from you. You send me D&D candidates — like the artist who threw a McDonald’s pickle on a gallery ceiling and priced the “artwork” at over $6,000, or the massive lagoon being built at a new resort outside Phoenix in the middle of an epic drought. (I need to do a deeper dive on that one down the road.) Keep ‘em coming!

Past D&Ds and other stories following the mysterious movements of high finance can be found on my homepage, and subscribe to receive these Bulletins once or twice a week direct to your inbox for free. FREE, I said. The inflation rate on zero is still ZERO.

So here we go. If you’d rather hear this week’s column instead of reading it, voila! A video!

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Dumb — Equifax Scores Badly

If you applied for a loan or credit card during a three-week period this spring but were rejected or forced to accept a higher interest rate — even though you had good credit — there’s a chance that Equifax gave lenders the wrong credit score for you.

The Wall Street Journal reports, “The scores were sometimes off by 20 points or more in either direction.“ The snafu affected millions of people.

Image by Smith Collection Gado/Getty Images

Equifax blames the error on a coding issue that’s been corrected, believing “only a small number” of people were negatively impacted.

But it’s a mess for lenders, who wonder if they need to reprice loans, or allow those who were wrongly rejected to reapply. But what to do now that interest rates are higher? And what about loans given to people whose scores looked better than they actually are?

Fun!

Dumber — Higher Education Laid Low in Court

A college education is increasingly a waste of money, IMHO (that’s “in my humble opinion,” for those of you who spent six figures on a four-year degree and don’t know what #imho means).

One reason people pay so much for college is to learn in person and to experience life on campus. Many students, however, were denied this in the spring of 2020 during Covid lockdowns — but they never got a break on their tuition.

This led to a flurry of lawsuits over breach of contract, and some of those cases are finally nearing decisions.

The Wall Street Journal reports that an appeals court recently ruled in favor of students who sued Loyola University Chicago. The court pointed out that kids were paying more for an in-person education than the cost of traditional online classes, yet when all classes went online, they still had to pay full fare.

Meanwhile, in California, a judge has ruled in favor of students who sued the University of La Verne. (“Is that next to the University of Shirley?” a friend asked.) A jury will determine restitution.

Honorable mention: The price of a college education may be ridiculous, but even dumber are some of the new essay questions that applicants must answer as more schools skip traditional metrics like test scores. My favorite dumb question is from the University of Chicago: “Who does Sally sell her seashells to?” One 16-year-old said, “This has to be a joke.”

Alas, it’s not. And my college essay answer about Sally? “She sells seashells at a 200% markup to super-woke academic admissions administrators.” Who knew we’d be nostalgic for SAT questions about analogies? Stupid is to College as Essay is to 2022.

Dumberer — Poker Player Fails to Bluff the Feds

Daniel Shak can’t seem to learn his lesson.

Shak is a successful semi-pro poker player who also runs a small hedge fund. He’s been charged by the Commodity Futures Trading Commission (CFTC) with attempting to manipulate gold and silver prices through “spoofing.”

Spoofing, in this case, is when you place a bunch of fake orders to buy or sell a precious metal to drive the price up or down, then cancel those orders at the last minute. At the same time, you place some *real* orders on the other side of the trade which benefit from your manipulation. (JPMorgan’s top precious metal traders were just convicted of doing this.)

The CFTC says Shak engaged in spoofing for three years.

But this is not his first rodeo.

“Shak already has a history with the CFTC,” writes Bloomberg’s Joe Deaux (my favorite reporter name), “having settled with the agency in March 2015 over claims that he traded during the closing minute of the gold futures market after being ordered not to.”

Shak also lost millions of dollars and put the gold market in a tizzy a decade ago when he made a staggeringly bad bet that resulted in his owning 10% of the U.S. gold futures market.

I reached out to Shak on Twitter for a reaction but haven’t heard back. For a poker player, he doesn’t seem to know when to fold.

Dumbererer — Cleveland Browns and Deshaun Watson Must Think I’m Stupid

Deshaun Watson at Browns training camp last month/Nick Cammett/Getty Images

Cleveland Browns quarterback Deshaun Watson has been, er, “disciplined,” by the NFL and benched six games because he faced a couple dozen lawsuits from women claiming sexual misconduct or assault (he’s settled most of them). One would think the punishment would take a bite out of Watson’s new, five-year contract guaranteed to pay him $230 million, or $46 million a year. The penalty should cost him $15 million.

But, wow, coincidentally, the first year of his contract only has a base salary of about $1 million, according to Spotrac (and others). So Watson’s only out around $350,000.

Oh yeah, he also reportedly received a $45 million signing bonus this year that’s not subject to any potential penalties.

A win-win for Watson and the team! You don’t think the Browns and the quarterback structured his contract this way to avoid any real financial hardship for his off-field behavior, do you? If only Cleveland was this deviously successful on the football field!

A monkeypox on both their houses.

UPDATE on 8/18: Watson and the NFL agreed to an 11-game suspension, plus a $5 million fine. Watson released a statement saying, “I apologize once again for any pain this situation has caused. I take accountability for the decisions I made.“ He later told reporters, though, that he never ”assaulted anyone or disrespected anyone. I’m going to continue to stand on my innocence.” So I’m not sure what “decisions” he’s taking “accountability” for.

Dumberererer — Orwellian Inflation

The Senate has passed the Inflation Reduction Act, which I call the “War is Peace, Freedom is Slavery, and Ignorance is Strength” Act, because it does the opposite of reducing inflation.

As the Congressional Budget Office notes, when you cut costs on things like health insurance premiums, people have more money to spend, and prices go up! Or when the government spends more taxpayer money on goods and services — like investing in green energy — that increases demand for those goods and services, and prices go up!

Normal people call this “inflation.”

“In addition,” writes the CBO, “enacting the bill would reduce the incentives of some people to work, mainly because of the enhanced health insurance subsidies, pushing down output and pushing up inflation.”

I’m not saying that lower health insurance premiums and investment in the climate are bad things, but selling this as something which reduces inflation insults my intelligence.

Meantime, I’m so glad the $430 billion bill won’t be financed by wealthy hedge fund guys who will continue to pay (lower) capital gains taxes instead of income taxes on their… income.

Quick Hits:

— Shakira says, “These Lips Don’t Lie”

Colombian pop star Shakira faces trial in Spain, where tax authorities claim she owes them $15 million in unpaid taxes, alleging the “Hips Don’t Lie” singer lived more than half of each year between 2012 and 2014 in Spain while married to Barcelona soccer star Gerard Piqué.

Shakira actually in Spain with her ex in happier times/David Ramos/Getty Images

Shakira denies the charges and rejected a settlement offer from the Spaniards, so off to court they go. Let’s hope she’s got her residency ducks in a row, because Spain is now seeking an eight-year prison term. And that’s the deal my dear.

— Is that a fighter jet in your pocket or are you just happy to screw me?

The F-35 fighter jet from Lockheed Martin is the most expensive defense program ever, yet even after building 800 aircraft, the program is still plagued with flaws, according to the Defense Contract Management Agency.

Bloomberg reports there may be costly retrofits “if major problems are discovered during an often-delayed simulation exercise” meant to test the jet “virtually” against Russian and Chinese threats. Oy.

The good news is that Russia’s military has proven itself inept. China has yet to be tested.

— Elon’s Dumbest Play

Elon Musk has sold almost $7 billion in Tesla stock just in case he‘s forced to buy Twitter, the latest twist in the dumbest financial debacle initiated by the world’s richest man.

Elon says he’s done selling shares. But he also said that before, in April. So…

— The “Groundhog Day” of the Space Biz

Virgin Galactic now says its first tourism flights to the edge of space are being pushed back until the second quarter of next year.

Much like Elon’s timelines, Richard Branson’s space company has been blowing through deadlines for over a decade. Here’s a story from 2007 when Virgin predicted the first flights would happen in 2009.

NEW CATEGORY: The “Entremanure”

I love words, so when someone I know — who’d been drinking a little (a lot) — meant to say “entrepreneur,” it came out “entremanure.” A new word!

An entremanure is hereby declared a person who tries to build something that turns to sh*t.

My first Entremanure Award goes to SoftBank CEO Masayoshi Son.

Masayoshi Son at a news conference in Tokyo, Feb. 2020/Nurphoto/Getty Images

Wanna know how to have a net worth of $21 billion? Start out with $45 billion. That’s what happened to Son’s fortune over the last year.

The man who famously lost money on WeWork reported this month that SoftBank lost a record $23 billion in the last quarter, which of course impacted his personal net worth... like, a lot. Softbank’s fire hose of funding to startups during the market’s peak went up in flames, and now Son is forced to sell part of its “crown jewel” to compensate.

“When we were turning out big prof­its, I be­came some­what delirious,” Son said in a news conference, “and look­ing back at my­self now, I am quite em­bar­rassed and remorse­ful.”

Dumbest — Alex Jones

The nearly $50 million in judgments against Alex Jones for falsely claiming the Sandy Hook massacre was a hoax is an interesting test of free speech. I will watch to see how it plays out through the inevitable appeals process.

Jones faces at least two more such trials on damages in other cases. But his company has filed for bankruptcy protection, and it’s not clear how much plaintiffs will be able to collect, or whether they can touch any personal wealth Jones may have squirreled away.

Alex Jones at the Trump rally outside the Capitol on Jan. 6, 2021/Jon Cherry/Getty Images

“I never intentionally tried to hurt you,” Jones said in court to the parents of murdered six-year-old Jesse Lewis. “I never even said your name until this case came to court. I didn’t know who you were until this came up.”

Wow.

Whether or not the award is overturned or reduced based on Texas law or free speech grounds, that’s not the issue. To me, anyone who thinks he can knowingly lie for years and believes there won’t be a price to pay — causing grieving parents to suffer while profiting from an audience looking for crazy conspiracy theories — well (inhale), “dumb” isn’t the right word. I’ll let you supply your own.

Karma’s a… you know… and Jones may end up losing it all, but no one is beyond redemption. Here’s hoping that someday, somehow, Alex Jones uses his powerful voice as a force for good.

Something Wonderful — The Resilience of Curiosity

Sometimes after writing D&D, I look up in the sky and think, “Mars doesn’t sound so bad.”

Ten years ago this month, the Curiosity Rover landed on the Red Planet, and it’s still working. The $2.5 billion rover continues to send back information suggesting Mars once had the ability to support life, and it proves that humans are capable of achieving great things. Not a bad return on investment for seven billion Earthlings… IMHO.

Curiosity Takes a Selfie/NASA

Thoughts? I know you have a few. Join the discussion and leave a comment, and remember, you can always email me at jane@janewells.com. Keep reaching out to me on social media — Twitter, Facebook, Instagram, and LinkedIn.