Xethanol changes name, sells a plant

Gulf Alternative Energy Corporation, a Houston based plant traded in the pink sheets under the symbol GAEC, announced recently that it has agreed to purchase an ethanol-production facility formerly owned by Xethanol Biofuels LLC.

The plant, in Blairstown, Iowa, is designed to produce six million gallons of ethanol per year.

I regard the whole ethanol industry as it exists in the US at present as a creature of unwise subsidization, and the whole idea of putting someone else's potential foodstuff in my car and burning it strikes me as ... how shall I say this ... bad Karma. Xethanol itself was founded, though, with the intriguing idea of focusing on cellulosic ethanol -- that kind that does not come from foodstuffs. Wood chips and scrap paper have ethanol, but it is more difficult to use theirs because they also have cellulose. A break-through in this area would be very good news for everybody, but for that very reason it has been a domain for con artists too.

Xethanol, the seller of the plant, has changed its name, amid what I gather is a broadening of focus. It is now the Global Energy Holdings Group.

Still, the reason this struck me as worth sharing in this blog is that the seller of that plant, Xethanol, was the subject of the first target of an experiment in a "new model" for journalism that I have mentioned before here, the Sharesleuth website financied by Mark Cuban, run by Chris Carey.

Sharesleuth still exists, at least as a URL. The items on that website are all rather long in the tooth. I have no idea whether there is any news gathering activity still underway there. But I think any objective student of the situation will deign that, as an experiment, the results of this one are negative. However journalism in the future is to be financed, it will not be financed by finding companies to expose publicly in order to assist in a financier's short sales.

A few words about Mark Cuban

I can't say I've admired Mark Cuban in recent years. His public persona is that of the standard-issue billionaire big-mouth, a real-like Tony Stark without the titanium suit, and the ideas behind Cuban's "Sharesleuth" project seem to me entirely misguided.

Gary Weiss explained the problems with Sharesleuth welll in several items posted on his blog in 2007, when that project (supposedly a new model for finance journalism) was at its peak. I'll just link you to one of those items, thereby taking that task off my own shoulders.

Instead I'll say this: unimpressed though I am with Cuban, I suspect he is in the right in his latest fight. The SEC has chosen him as its newest target for its intermittent anti-insider campaign.

I've never been impressed with the idea that punishing insider trading makes sense. Some deterrent for breaches of fiduciary duty is appropriate of course, but that's rather hard to find here.

So I'm rooting for Cuban. Fight the power, MC!

Joe Nocera’s recent book, Good Guys & Bad Guys, makes a related point. It’s in a reprinting of a story Mr. Nocera wrote for GQ in December 1992, concerning Drexel Burnham and Michael Milken.

For the record, Mr. Nocera occupies a ‘moderate’ position on the spectrum of reactions to Mr. Milken [who was in prison when the story was first written]: Nocera argues that the infamous financier was guilty of some crimes, but not of the worst of those of which he was accused, and that his sentence was excessive.

But that isn't what intrigued me about the article. The passage I have in mind quoed an unnamed associate of Milken's saying: “”When a Drexel salesman heard that the corporate-finance department was buying a stock – for what reason he didn’t know – and then advised a client wanting to sell that same stock that he might be better holding on to it, was that an example of insider trading? Or was it something more innocent?”

Good question. Indeed, it’s a better question than Mr. Nocera (who soon drops the query) may understand. There is nothing extraordinary about such an instance, and since given existing law and prosecutorial practices there is no good answer to that question, then the courts and prosecutors who punish insider trading are in effect telling traders, brokers, bond salesmen, etc. that they have to drive 55 miles per hour or below – and that they can’t use a speedometer, because none are available.

That’s wrong.

Personally, when I use the phrase “free markets,” I don’t mean the word “free” as an adjective. I mean it as a verb. Let’s free markets.