Tuesday, November 27, 2012
Crazy Eddie & The 100 Million
Now that we are entering the Christmas season, just few more days and December is here, the wind rises electric, the snow is about to fall and the temperature is about to drop under.
This season makes me wonder about my intense pursue of the Million euros in less than 5 years, all is set a great season of accomplishments is just waiting, this season also reminds me of the intense shopping spree that we all will be witness, it also reminds me of Con Artist Crazy Eddie he built a family business that grew into a huge chain of electronics stores with rock-bottom prices. It was also a criminal operation driven by lies and phony inventory.
In New York City in the 1980s, you almost couldn’t escape from Crazy Eddie. The discount electronics stores were all over the Northeast; flip on a TV, and you’d inevitably catch an ad. The wild-eyed character in those Crazy Eddie ads, who ranted about the “insaaaaaaane” deals, was hard to ignore. But it wasn’t just aggressive marketing behind the company’s success. From phony inventory to fictitious earnings, nothing about Crazy Eddie was as it appeared.
Eddie Antar opened his first electronics store in 1969 with his father, Sam. From the start, he stocked the shelves of his Brooklyn store with the lowest priced electronics. With those prices, Antar broke the fair trade laws that forced retailers to sell their goods at prices set by the manufacturers. The deals, and the store’s loose atmosphere, attracted consumers. Why shop at a stuffy department store when you could listen to a stereo at top volume and get it for a better price at Crazy Eddie?
By 1973, the store was recording sales of more than $100 million. Beyond that boom, Antar had little tricks for creating profit. He hired nearly every member of his family and paid them off the books. He declined to report cash sales to the IRS and collected insurance claims for fires and floods that never happened. His cousin, Sam Antar, handled the company’s crooked finances; he estimated they skimmed about $1 for every $5 that came in.
As the dollars piled up, the Antars expanded their empire. By 1984, there were 39 Crazy Eddie stores across the Northeast. Even people who didn’t shop for bargain electronics knew about the chain; endless commercials with an actor talking fast and frantic created a memorable brand for Crazy Eddie and carved out its place in the popular culture.
Antar also relied on his shrewd intuition to assess consumer interest in the latest technology. When VCR’s and compact disk players hit the market, he made sure people knew to come to Crazy Eddie for the best deals. Annual sales climbed to $350 million in 1984, but Antar wanted more. He wanted to take Crazy Eddie public.
Before the initial public offering, an auditor came in to take stock of the company. The auditor didn’t realize that many of the boxes of inventory he saw piled to the ceiling were empty – or that the attractive saleswoman who climbed a stepladder to assist in the tally was calling down fictitious numbers. The ploy to overstate the company’s assets worked and, in 1984, Crazy Eddie went public and sold two million shares at $8 apiece.
This wild overstating of inventory became a profitable pattern for the Antars. At the end of 1985, the family nudged the numbers $2 million above what actually existed in their warehouse. Crazy Eddie stock looked terrific and rose to as much as $21 per share.
Antar made about $68 million by selling his stock. Between that windfall, the brisk sales and all that was skimmed off the top, cash poured in quickly and at a tremendous volume. To avoid paying taxes, the Antars took monthly trips to Israel – with huge amounts of cash literally strapped to their bodies. The courier would land in Tel Aviv and deposit the funds into a bank; those funds were then wired to an account in one of a handful of countries where the family had dummy companies. Slowly, the money was pulled out of Panama and deposited – at specific moments timed around an audit – into several Crazy Eddie bank accounts. Of course, those deposits were booked as revenue.
The scam, and the Antar family, came apart in 1987. Antar’s father and his two brothers, who held important positions at the company, were fired or resigned. On top of a bitter family feud, the cash flow necessary to sustain the fraud dried up. As other retail outlets adopted Crazy Eddie’s low prices, the market became saturated with cheap electronics. At the end of the first quarter of 1987, Crazy Eddie profits dropped 93 percent.
Antar sold his stake in the business in 1987. It didn’t take the new owners long to discover that only half the amount of inventory listed on the books actually existed. Within two years, Crazy Eddie declared bankruptcy. When the SEC filed an action against Eddie Antar in late 1989, he fled the country. He hid in Israel for two and a half years before being captured and extradited. While on the lam, his cousin Sam Antar pleaded guilty to fraud and agreed to testify against his family for a more lenient sentence.
During Eddie Antar’s trial, he said he disappeared to avoid his ex-wife's play for alimony. His defense attorney argued that the mastermind of the con was actually Sam Antar – who received house arrest in exchange for his testimony. The jury was not convinced. Eddie Antar was convicted in 1993 of conspiracy, racketeering and securities and mail fraud. He served eight years of his 12 ½ year sentence.
Today, Sam Antar has a website where he maintains a blog, and calendar of speaking engagements. Eddie Antar lives a quiet life in his native Brooklyn.
Labels:
12 Years,
8 years,
Crazy Eddie,
electronic store,
New York,
sales,
Sam Antar,
Scam
Tuesday, October 30, 2012
Superstorm Sandy will cost Millions but USD will go up!
Now that November is just around the corner we can feel the rain all around with the cold breeze of Winter heading with such an Intensity, that makes me feel relieved, once again time goes by and the purpose of the Million Euros in less than 5 years is meant to happen. All over the news we have the wrath of super storm Sandy which killed at least 33 people in seven states and left more than 8 million people without power.
In New York, the U.S. financial markets closed for a second day today, an unprecedented move for the stock exchange. In Lower Manhattan, the home of the financial district, a blowout at a Con Edison substation cut power to thousands of customers.
Today after a brief chat at work I was asked to foresee the direction of the USD and I was prompt to assess that the USD will go up. There is logic behind my perspective which is that after a natural disaster in the immediate term or short term currency will go down but as soon as the damage is quantified more Investment is needed to rebuild and assess the reconstruction so by forces of nature local currencies will go up.
Throughout history, natural disasters have caused depreciation short/immediate term (and even appreciation long term) of currency because of a jolted economy. If you take part in currency investing then it’s imperative that you learn how to leverage your investments in uncertain times.
Usually, currencies weaken right after a natural disaster because of uncertainty about how much economic damage was actually done, according to Barclays Wealth. However, currencies can strengthen again once other countries start funding relief efforts, but the currency can then weaken once internal banks try to alleviate economic hardship (by doing things like lowering the world interest rates).
It all depends on the specific country’s situation, so there are a number of different scenarios. The following examples illustrate what has happened in the last decade.
Japan recently suffered two major blows when it was hit by an 8.9-magnitute earthquake followed by a massive tsunami. According to Businessweek.com, the Japanese currency fell right after the disasters, weakening up to 0.4% against the dollar. However, the Yen generally benefits from the uncertainty natural disasters leave behind, and repatriation (when assets overseas are turned back into Yen) could strengthen the currency.
The Yen did end up faring well and actually strengthened dramatically, and other than repatriation being a possibility, an Investopedia article suggests another reason could be that the Japanese “might have to liquidate part of their large non-Yen denominated investment portfolio to fund relief and reconstruction efforts in Japan.”
Regardless of the reason, in August of 2011, Japan tried to combat the surging strength of its currency that had not weakened much since the disasters in March. According to Reuters, Japan had been warned that the Yen was so appreciated that it could possibly hinder Japan’s recovery efforts. As a result, Japan sold 1 trillion Yen and got the Yen down to 80.20 per US Dollar from 77.10.
Earthquake in Haiti – Gourde
The Haitian Gourde experienced a surge right after Port-Au-Prince was hit with a7.0-magnitude earthquake in January 2010. According to The New York Times, Haiti’s currency strengthened by more than 25%, and for some purchases, the rate would be about 30 Gourds to the Dollar. There are a couple of explanations for this appreciation.
One, which comes from the same New York Times article and suggested by a former governor of the Central Bank, is that the decrease in oil imports was keeping more money in Haiti, thus preventing any drastic appreciation. Another contributing factor was reported by a different New York Times article a couple of months after the disaster, which mentions how an increase in money from abroad helped the Gourde resist depreciation.
Earthquake in New Zealand – New Zealand Dollar
In February 2011, a 6.3-magnitude earthquake impacting New Zealand killed at least 75 people and left the economy struggling. Following the disaster, the New Zealand dollar (nicknamed “the kiwi”) fell about 2% against the U.S. Dollar, according to CNBC. Bloomberg reported that at one point, the kiwi fell to 74.55 U.S. cents, which was its lowest level since late December. As can be seen, New Zealand did not experience an immediate strengthening of the currency that some other countries did after a natural disaster.
In fact, early and mid-March didn't bring much relief, as the country was still lowering its main interest rate to fight the economic problems it was facing. Late March did indicate some better signs for the currency, when it starting gaining due to the possibility of a construction boom. This could point to the potential that circulating more money within a country has for its currency.
Shall we buy USD?
It’s probably safe to say that every natural disaster has an effect not only on a nation’s general economy, but also on its currency making it even stronger. This influence doesn't just impact the specific country’s currency; either — other countries tend to feel the effects, as currencies’ strength is measured against one another. Countries around the world have experienced similar phenomena, therefore It is to my regret to say that the main engine of any economy unfortunately comes from a natural disaster or war, I will test this idea by Investing promptly tomorrow on some newly made USD.
Meanwhile keep positive, keep Investing it is just about to happen…
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