The following are selected paragraphs from a front page story in today`s Wall Street Journal:

``Unbeknownst to most PSS World Medical shareholders, the unsettling stock activity stemmed from a financing the company had put together with its bankers at Goldman Sachs Group Inc. Struggling to repair its balance sheet, the company had jumped at the opportunity to issue $150 million in low-interest bonds, which can be converted into stock at a preset price. The catch, Goldman explained, was that most investors interested in such bonds are hedge funds. They would have little interest in the company`s long-term prospects. Instead, they would try to rapidly trade the stock following the convertible bond offering in an effort to profit on small price gyrations.``

``When PSS structured its offering with Goldman, it wound up in a particularly hot corner of the hedge fund industry: those that specialize in convertible bonds. Convertible bonds are favorites of hedge funds. They typically purchase a company`s bonds in tandem with a short sale of its stock, because the prospect of pairing the transactions create a juicy opportunity for playing the shifts in price of one off the other.``

``But for companies such as PSS, convertible-bond offerings sometimes turn into mixed blessings. On one hand, they are a convenient source of low-interest financing. But all the trading did little for average shareholders.... Meanwhile, hedge funds made healthy profits on the tiny shifts in the company`s stocks.

``The unpredictable stock action can make the company less attractive to ordinary investors and managers of more traditional investment vehicles. That`s true even when, as in the case of PSS World Medical, the gyrations taper off as speculators move on to their next target.

```We can`t have volatility like this in our stock - it drives away long-term shareholders,` said the company`s chief executive, David Smith, in June as the company`s stock was being battered by fast-action traders.

``Just what is at the heart of the feverish trading is almost impossible to ferret out, especially for average stockholders. It stems from a bet the hedge fund make when they by the ``converts`` as the bonds are known on Wall Street. Typically the price of the bonds and a company`s stock move in the same direction. To protect their investment in the bonds in the event that the price drops, the funds frequently short the company`s stock, betting in effect that the price will go down. In a short sale, investors sell borrowed shares, hoping to profit by buying shares at a cheaper price to repay the loan. The funds then creat complex computer models to help them balance their bond and stock holdings. That means that hedge funds are constantly buying and selling stock as the stock price fluctuates.

``The rapid trading not only produces potential profits in the stock, but in some cases also increases the value of the bond. That`s because an increase in volatility increases the likelihood that the bond will hit the preset price at which bondholders can convert their bonds into stock.

``Such trading has attracted the attention of the Securities and Exchange Commission, which recently sent out requests for documents to 22 securities brokers and other firms that in private transactions sell convertible bonds and other securities to hedge funds.....``

``The SEC also has begun looking into whether hedge funds have engaged in manipulative trading in the shares of companies that have issued convertible bonds, according to people familiar with the inquiry. The question is whether they are buying and selling in concert so as to either push the price up or down. That would trigger even more short selling or buying - and profit opportunities. What has sparked the agency`s interest is similar trading patterns by multiple hedge-fund managers and individuals. Such patterns showed up in the trading of PSS shares after the bond offering. The SEC`s look into potential collusion - that is, whether the funds actually conspired to manipulate the market - has not turned into a formal investigation into which subpoenas are issued.``

``The Goldman bankers also explained that trading in the stock would be high for six months after the bond offering but would decline after that, falling off dramatically after the one year mark when the hot money tended to move on.``

``... He spent many days scrambling to answer their questions about the big increase in the stock`s trading. `Every penny we gained we lost,` he said after a day when the stock bounced around only to land back where it had begun at the opening bell.

``On May 11, PSS shares were again trading heavily and J.B. Taylor, a portfolio manager at Wasatch Advisors, a mutual-fund company in Salt Lake City, was among those who called to ask Mr. Weiner for an explanation. `Neither of us could point to anything that would bring about the higher volume,` says Mr. Weiner says. Mr. Taylor didn`t return phone calls.``

``What management at PSS World Medical didn`t know, wat that at least 10 hedge funds were rapidly trading PSS shares on May 10 and May 11. Among funds who owned the bonds and were trading the stock were SAC and DKR according to a person who has seen the trading records. DBAG London was doing the same, this person says.``

``The action hadn`t done much for ordinary shareholders. Just before the bonds were issued, PSS shares stood at about $12. Despite a brief rise to around $13 a share and a dip down to $8, PSS shares returned to roughly where they had started. On May 10 and May 11, they were trading in the middle of that range. On May 10, the shares closed at $10.65 and May 11 they closed at $11.07 a share.``

``Samir Sikkar, portfolio manager at Trust Company of the West, sold his holdings of PSS. He made the decision in part because he had bought the stock at $3 a share and made a profit. But he says his discomfort with the price volatility also contributed to his decision. `If you`re on the other end of the table` when hedge funds are rapidly trading a stock `you suffer,` says Mr. Sikka. `When a stock is no longer behaving in line with the fundamentals of a business, it`s frustrating.``

Does any of this sound familiar to anyone other than me. I think we have seen some of this multiple times... And, it may not just be the hedge funds who are profiting. In any event, I think it is fair to say that the ``ordinay investors`` in Nanopierce are the really big losers in this whole game.

Comments (from other longs, in particular) are welcome.

Jeff