# Just How Crazy is Overstock's Patrick Byrne?

Now that the credit crunch is beginning to spill into tech, it’s worth wondering just how ugly this is going to get. Two notable perspectives on the situation appeared in recent days, one from a battle-scarred regulator and another from a tech CEO.

The first came from former Fed Chairman Paul Volcker, who was asked four different ways by the Wall Street Journal how bad the fallout will be, and who found four different ways to say “We don’t know yet.”

The second came from Patrick Byrne, CEO of Overstock (OSTK). When writing about Byrne, it’s customary to use the understated adjective “controversial,” so let’s get that out of the way. Byrne was on Fox News, echoing an economic forecast that he had just made on CNBC — an appearance, by the way, that would send his stock spiraling downward (more on that later).

Byrne was asked by Fox News’ Terry Keenan whether the mortgage turmoil was hurting Overstock’s sales of home items. After noting that furniture sales were going great guns, he suddenly shifted gears:

BYRNE: I do think that we are in — I have been saying for about two years we’re looking at a 1929 kind of event. I think that we are really in trouble in this country. And what you have seen in the last four months is just the beginning of it.

KEENAN: Wow.

BYRNE: The government has been keeping the economy afloat with flooding us with cheap money. And those days are over. The dollar is cracking. Eventually, they are either going to they have to defend it by raising interest rates or something. But we’re looking at a very bad economic situation.

Wow, indeed. Byrne is no Volcker, but I have a sinking feeling that behind all of Volcker’s anodyne we don’t know’s lurked a scenario as bleak, if not as dramatic, as the one Byrne laid out.

And this is why Patrick Byrne is one of my favorite CEOs. I don’t say that as a shareholder or as a business partner — I am neither — but as a journalist. In an era in which news has become just another form of entertainment, Byrne is as entertaining as they come. I wish there were more CEOs like him.

But for better or worse, there is only one. A story I once wrote once elicited from him an email that was signed “Patrick ‘Frothing at the Mouth’ Byrne,” which made me wonder if Byrne is as crazy as some have suggested. If you know you’re crazy, if you can even joke about it, how crazy are you, really?

Byrne reminds me of one of those maverick, intriguing characters like Anton Chigurh or Omar Little. Not, of course, because he’s some kind of serial killer, but because he stubbornly holds to a code of behavior that very few understand. He tirelessly champions causes that draw few followers: the “jihad” against naked short selling, the private-school voucher initiative in Utah, the deep-discounting at Overstock that leads to losses year after year.

So when Byrne appeared on CNBC on Monday and warned that gross margins would fall during the busiest quarter of the year — despite a 10 percent rise in gross bookings — the stock slid 21 percent. Six weeks ago, Overstock shares were trading for as much as $39.39, their highest level in nearly two years. But after Monday’s slide, the stock is now up only 19 percent this year. One more Byrne interview could wipe that out. Why would Overstock choose to deepen discounts and beef up promotions during a quarter when it had been otherwise assured of a tidy profit? CIBC, which had been forecasting a$4.2 million profit for the company this quarter, revised that downward on Monday, to a loss of \$2 million. That red ink is so much blood in the water for short sellers.

A clue may lie in something else Byrne told Fox:

If anything, we are counter-cyclical. In good times, it is — we have — it’s toughest to get overstock. In bad times is when, suddenly, everybody is calling us to unload product.

In light of that, Byrne must be hoping to build market share. By slashing prices, Bezos-like, during a holiday season in which consumers are counting each penny, he’s doubling down — betting he’ll wind up with an even larger share. If so, maybe his recent TV appearances aren’t so crazy after all. Risky? Very. But crazy? We’ll see.