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Jul
21
Written by:
bobo
7/21/2008 3:29 AM
UPDATE 7/25: OSTK Press release. Pretty much sums it all up in a way that even the most dim should be able to undersand. Let's see if any of the NY press corps can figure it out and cover it. My bet is, not...
UPDATE 7/22. Over the last few days, the hedge fund apologist media choagies have been in full roar. Nobody is discussing the massive fails that the FTD data shows to be fact, nor are they discussing the SEC's new data showing that the market maker exemption is largely responsible for many of the fails, i.e. it is being abused to manipulate, not hedge or make markets.
No, instead we have been treated to endless proclamations about how good shorts are for the market, how vital they are, and basically unlimited air and print time trying to confound legal short selling (where the seller borrows the stock ahead of selling it), and illegal market manipulation using delivery failures, where the sell order is placed with no borrow, and no intention of delivering.
This should surprise nobody who's been a regular reader of this blog.
I've gotten a lot of emails from people who are unclear on why I'm so disgusted with the market maker exemption from the SEC's emergency measure. Let me explain. The large prime brokers on Wall Street have facilitated and profited hugely from naked short selling. It couldn't take place without them acting as a cartel and cooperating with each others' fictional stock sales. They are a huge part of the problem. But now, they not only are protected by this emergency order from the very crime they perfected, they have gotten an exemption so they, and they alone, can continue to naked short. That's what the exemption means. Nobody can do it to us, but we need to do it to everyone else.
Now, consider some other wrinkles. DMA, for instance. What is that? A rave drug? No, I'm talking about Direct Market Access. That is a privilege afforded to large hedge funds by prime brokers, where they allow the hedge fund to have direct access to the executing broker, bypassing the checks and balances of the prime broker, but appearing to the executing broker as though the trade is coming directly from the prime. That effectively means that the largest hedge funds can behave as though they are the prime - including enjoying the exemptions the prime has. You see, there is nobody in the chain to question whether it is really the prime placing the massive sell orders, or whether it is some wealthy hedge fund with no desire nor intent to deliver anything. It looks the same to the executing broker with DMA. Yet another way to sidestep regulation.
Basically, the market makers have taken a measure that could have actually stopped some of the madness, and bullied or bribed the SEC into giving them the umpteenth hall pass, but with complete protection from everyone but themselves. I heard one rumor that one uber powerful Wall Street honcho told Cox that unless he granted an exemption, the markets wouldn't function for the 30 days of the rule's temporary duration - effectively causing a meltdown and depression. A guy in a position to stop the markets, no BS. That's called extortion, if true. Someone should pull the phone logs and see if that discussion happened. DOJ? But guess what, it won't ever take place. They get away with it again. This is just a rumor, but I have heard it from multiple sources now, and it has the ring of truth. Nothing would surprise me.
So consider the below document in light of this double standard, and in light of the fight going on to prevent the SEC from applying this measure to the broad market. Admittedly with the exemption it is 50% gutted, but it still has some teeth. So no way can the powers that be allow, say, an OSTK to be protected like a Goldman is. No, OSTK can be naked shorted into the ground, yet again, after coming off the SHO list (I've noticed that the bad guys flush all the fails into ex-clearing to reset the 5 day clock on unlimited NSS they can get away with if the stock is off the list - and sure enough, OSTK drops off the list, and then a massive bear raid takes place, complete with massive put option sales from the protected market makers), because they don't matter. They aren't part of the club. You see, there are the few banks that matter, because they run everything, and then there is everyone else. We are the food. They are the predators. It's just formal now, and obvious. Double standard? You bet. Basis in law for it? None. Allowing an exemption when the SEC KNOWS FOR A FACT the exemption is being abused? Absolutely. Can't stop the gravy train. Or they will stop the game of musical chairs, and the whole thing collapses.
And meanwhile, the NY media, CNBC, the WSJ, the usual pack of hedge fund apologists ignore the meltdown and hypocrisy, and continue to repeat the mantra that bad companies go down, shorts are good for bones and teeth, and some bubble-head on CNBC knows better than the head of the SEC how the markets work, and what endangers them.
This doesn't end well.
_____________________________
Normally, I don't publish whole letters on this blog. This time, however, I think it's appropriate. As tired and sickened as I am by the speed with which the SEC backtracked and created an exemption for market makers in its emergency order, and by its selection of the banks that have been the prime offenders and facilitators in the naked short selling game as those too important to NOT have special protection from the practice, I'm still amazed by the arrogance of the hedge funds, and their position that violating delivery requirements is a God-given right for them.
Here's the letter. My comments are in blue.
July 21, 2008
CPIC and MFA URGE SEC CHAIRMAN COX NOT TO EXTEND EMERGENCY ORDER ON SHORT SELLING
Associations Say Fundamentals Caused Difficult Markets - Not Short Selling
WASHINGTON, D.C., July 21, 2008 -- The Coalition of Private Investment
Companies (CPIC) and Managed Funds Association (MFA) today sent a letter to SEC Chairman Christopher Cox urging the Commission to not extend the emergency order on short selling beyond the announced expiration date of 11:59 pm on July 29, 2008, or beyond the current list of designated
securities.
James S. Chanos, CPIC Chairman said, "We respectfully urge the Commission not to extend this Order in duration or scope. Such action would severely burden short selling activity, which the SEC itself repeatedly has acknowledged plays a vital role in the stability of securities markets.
No, Jim, sweetie, it actually wouldn't burden legitimate short selling where the seller borrowed the stock, as common sense and the rules require. It only places a burden on illegal naked short selling, where the seller has no intention of delivering the stock sold, thus any locate gotten is specious and designed to skirt timely delivery requirements.
And as to this oft-repeated claim that short selling plays a vital role in the stability of the securities market, where's the proof to support that claim? I mean, I know it behooves your short selling buddies to drive that claim home every chance you get, but where's the data showing that the markets can't exist without them? Others do. They function just fine, as the NCANS comment letter to the Reg SHO amendments from a year ago documents handily. So that claim is really nothing more than propaganda, designed to advance the interests of short sellers, isn't it? If not, prove it. Trot out the studies that prove the claim, or stop making it. Bet you can't. Because you can't explain away the markets where it isn't allowed, and where they function just fine. Bummer, that, huh? Oh, I know, just ignore that niggling detail, shall we? As to the SEC's repetition, that means less than nothing, as they repeated that SHO was working repeatedly, and that was shown to be a complete fabrication. Once a liar, always a liar, and the burden of proof shifts to the liar at that point. So prove it.
And why, precisely, will legal, legitimate short selling be burdened unfairly by the seller having to borrow the shares before he sells? Doesn't the buyer of those shares have to have the money at the time he buys? Or should we do the inverse for longs, and create phantom buying, where the buyer doesn't have to have any cash when he buys, but just has to claim his uncle Jim told him he could probably get the money to lend him? That's the equivalent. Fair is fair. Why should short sellers get that right, and not buyers?
"Restrictions on short sales distort the fundamentals that drive market prices and are, in the long run, counter-productive because they remove liquidity and healthy skepticism from the marketplace."
Again, prove it. And how does placing a borrow requirement on short sales remove healthy skepticism from the marketplace? Isn't it true that all it removes is the ability of arrogant super-rich criminal parasites to defraud the system by counterfeiting shares in a virtually unrestricted manner? Isn't the "liquidity" that is bandied about in this sense only the liquidity that is produced by the counterfeiting presses running 24/7? Why is that sort of liquidity good? Why is creating multiples of the legitimately-authorized and registered number of shares a good sort of liquidity, other than for brokers who make money off each trade, and criminal predators who use this ability to defraud and dilute, destroying the fair market for issues?
Richard H. Baker, MFA President and CEO, said, "While we recognize that the financial sector is undergoing an extraordinarily difficult period, we believe that these difficulties are the result of poor fundamental conditions and not a mysterious conspiracy or, more to the point, the inadequacy of current rules related to short selling.
Riiiiight. But that is your belief, not any sort of actual theory based upon evidence, right? And that belief is mainly based upon the input of many guys who are strongly suspected of being the largest criminal abusers and market manipulators, correct? So the "blame the victim" rap you use every time this cartel takes down a victim really is just an excuse, not an explanation, right? Just as, "I don't know how that crack got in my pocket" or "I was just holding it for a friend" is an excuse used by drug dealers, but shouldn't be confused with anything supported by data?
As to mysterious conspiracies, no mystery about it. The prime brokers have allowed hedge funds like your members to sell stock they don't own and haven't borrowed, in order to destroy companies. They do it for profit. See? No mystery at all. None. Money drives the behavior, and they like making hundreds of billions per year, rather than having to compete fairly, and be lucky to generate 12% returns. The current rules are a sham, created and castrated by attorneys at the SEC who all wind up working for Wall Street lawfirms who pay them gazillions for their supplicant behavior while at the SEC. Again, no mystery, money drives it.
Isn't it just another replay of the Pecora hearings, where the then chairman of the NYSE warned that ANY regulation would destroy the "perfect" system then in place? You know, Dick Whitney, who shortly thereafter was convicted of fraud and embezzlement, and did five to ten in Sing Sing? Aren't cries against sensible regulation here exactly the same sort of self-serving drivel? What has changed in 70+ years? Exactly, what has changed? Enormously wealthy scumbags will do anything for more money, and while pretending to be honorable, will break every law and rule imaginable if allowed. The Pecora hearings proved that. It isn't theory. So what's changed about human nature in those few generations? Would "nothing" be a pretty good descriptor?
The Commission's action here stands in stark contrast to its actions to protect retail investors from abusive short selling practices through the adoption of Regulation SHO, which was subject to extensive notice and comment. Short selling is a legitimate and valuable trading strategy as well as a vital component of providing price discovery and promoting efficient markets."
Yeah, Reg SHO, with its mountain of loopholes carefully crafted by your members, and included as part of that offensive and impotent rule, is certainly your kind of regulation, no? It doesn't work. There are more fails than ever, in dollars and in numbers. Why cite a rule that didn't work as an example of what you want the SEC to do? I mean, ignore for a moment that the problem is now bigger than ever before, and threatens to collapse the entire system. You stance is, "Why can't we just keep using the tool that doesn't work, rather than something that stands a chance?" Pardon me if I'm not awed at your powers of reasoning. You're both either incredibly dim, or incredibly crooked. Choose whichever shoe best fits, in your view.
Basically, the SEC repeated over and over again that naked short selling isn't a big problem, and really is just an issue at the margins. A fringe issue, a technical thing hardly worth worrying about. So if that's true, why do you care? If everyone is basically behaving, and borrowing and delivering, why is any such rule a threat? Why will it impact the market so profoundly? Why do market makers need an exception to the rule if it's such a trivial issue? The answer is that it isn't small. That was also a falsehood. It is now much of the market. Your parasitic membership has managed to create a multi-trillion dollar industry, in many cases by draining that money from the market, and leaving nothing to show for it - no delivered shares, nothing.
Every other business on the planet, it's called fraud. Here, the fraudsters write comment letters and sway legislation, and run the regulators and elected officials. "Greed is good" has become "Fraud is good." And now, because the contra-parties to the millions and millions and millions of fraudulently created markers floating in the system couldn't deliver on their commitment if they wanted to, we face the equivalent of financial nuclear winter. But you want everyone to just let the band play on.
Because having to deliver what you sold would crimp a really good business model - counterfeiting, theft and fraud.
The prospect of actually having to do what good short sellers, or rather legal ones, actually do, which is borrow the shares and then deliver them, terrifies you, because your members have gotten wildly rich by not complying with any fair market rules. And now, having to deliver on just these 17 stocks is going to cost them a fortune. If you actually extend it to the whole market, which absolutely must happen to avoid financial Armageddon, they will have a much more difficult time making a fortune. It's way easier if you can just steal the money. Having to work for it sucks.
The CPIC and MFA letter is posted on MFA's web site at www.managedfunds.org
<http://www.managedfunds.org/> .
CPIC is a coalition of private investment companies whose members and
associates are diverse in both size and investment strategies managing or
advising an aggregate of over $100 billion in assets."
=============
The real question now is whether these arrogant parasites are going to be allowed to confuse illegal naked short selling, i.e. failing to deliver the share sold at T+3, with legal short selling, which is where borrowed shares are delivered. This letter isn't an appeal for legal short selling, it is an appeal for confusing illegal delivery failure as a trading strategy, with legitimate short selling. The question is whether there is anyone these days who is so stupid that they don't know the difference. Obviously, Chanos and Baker believe we are all idiots, and that we can't make the distinction. This is particularly unctuous now, as even the mainstream understands it. For crying out loud, even Cramer has seen the writing on the wall and is pretending that he has been part of Patrick's movement for years.
Best of luck with that, guys. Party's over. Or if not, it will be for good shortly after you are all allowed to continue what has brought us to the edge of the precipice.
Copyright ©2008 Bob O'Brien
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54 comment(s) so far...
Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."t's not a big problem," but by the same token....
Love your comments, right on!
By tommytoyz on
7/21/2008 4:41 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
As usual, super commentary. Odd that your doomsday scenario makes me feel better. What's up with that?
By particleswaves on
7/21/2008 4:45 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
We missed you. Your voice has been the clearest through out this nightmare. You called all of this right, and there isn't enough reward I can think of for how you put it all on the line and warned everyone that would listen. All I can say is thank you. And keep writing, they cant bury the truth. It's all in your blogs for everyone to go back and read. There was plenty of warnings.
By Angelino on
7/21/2008 5:02 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Thanks bob.
theTurtle
By theTurtle on
7/21/2008 5:34 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
You might want to send a copy of the interview that the "Money Honey" Bartiromo had with Paulson on Mon , July 21st. where Old Hank said in one sentence" There is no legitimate excuse for naked short selling and it is fraud" I sure wish old Hank would call up Chris and explain how the system works legally and that is what he is supposed to be doing, policing the system legally. If Chanos were to be gamed the way he screws his victims he would be plotting something much worse than a letter.
By rtway on
7/21/2008 5:45 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Rtway: Yeah, I'm sure that Hank is up in arms about this, especially when the firm he ran was one of the biggest offenders while he was running it.
What a complete load of crap. Again, when the real professional crooks start being motivated by fear, rather than greed, you have to wonder just how big and bad what is scaring them actually is. Cramer is suddenly trying to claim he was leading the charge against it? WTF? Paulson is condemning it? Could it be that they see a financial cataclysm on the horizon, and are desperately jockeying for a position that allows them to claim that they tried to stop it?
I don't know what is scarier. The crooks against you, or the crooks on your side.
By bobo on
7/21/2008 8:24 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Good news is .... both Henry Paulson and Jim Cramer are now speaking out against naked short selling. Now, I am not a fan of Cramer and I wonder why he is really doing this.. now! Regardless of his motives, he is an extremely high profile celebrity who is being very vocal in his agitation to both bring back the uptick rule and to make naked shorting illegal. He even had a congressman on his show tonight to discuss this. Paulson did not waffle on this issue when he was being grilled by Maria B. He said flat out that short sellers should have the borrow lined up before they are allowed to short a stock. He even briefly eluded to the fact that he suspected that there might be a coordinated effort between several large short sellers to drive down the stocks of some companies like FNM and FRE. As the former head of Goldman Sachs, his has access to information about this which is available to few other people. More and more WS insiders are now publicly taking a stance against this. Several months ago I heard Mario Gabelli on TV calling for an end to naked shorting and requesting the return of the uptick rule. Because I don't believe Cox has the character or courage to do this without a lot of support, I believe that insider support for an end to these two insane practices is very important. I also hope that more companies file lawsuits like those filed by Patrick Byrnes, whom I believe to be a very couragious man!!!!!
By beegdawg on
7/21/2008 8:41 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
This interview with Alexis Glick and Robert Shapiro and another gentleman was one of the best I have ever seen. And the ever invisible DTCC is called out!!! It is a MUST WATCH!!!!
http://glickreport.blogs.foxbusiness.com/2008/07/21/the-secs-battle/
By Sean on
7/21/2008 8:44 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Beeg: Agreed that the enemy of my enemy is my friend. However, I always ask, why this, why now? The answer I keep coming up with scares the hell out of me.
Let's all hope that this time I'm wrong.
As an aside, getting a firm locate is also pure bullshit. If you want to fix this, require a borrow. Pretty simple. You want to sell something? Go get it. Then sell it. I can't buy stock having "located" funds. I need to deposit them in my account, then I can buy. Why allow some scumbag to "locate" stock that 30 other guys shorting also "located", only to find out it isn't available when it comes time to deliver? That's stupid, and is doomed to fail. It's a scam, a lawyerly trick of language.
You either want to fix it, or you don't. Anyone using the word locate rather than borrow doesn't want to fix anything.
By bobo on
7/21/2008 9:36 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
So if Company A has a market cap of $100 with all of its 100 shares selling at $1 is it true that under current SEC rules a Hedge fund can sell short more than 100 shares like a MILLION shares? You can't sell something and promise to buy back what does not exist. That means you are a liar from the get go.
AM I understanding correctly?
By matty on
7/22/2008 1:04 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
What happened to the appearance of the site the last few days? Blue with no word wrap? ugly.
By visitor on
7/22/2008 3:33 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Matty: You are correct. That is exactly what it is like. The way the system is set up it rewards insitutional counterfeiting, plain and simple.
By bobo on
7/22/2008 6:49 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
http://www.hedgefund.net/publicnews/default.aspx?story=9053
By hedgie on
7/22/2008 8:36 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Gosh, Hedgie, thanks for posting yet another link to the letter I printed and linked in the article. Do you even read these blogs, or just spam them with pro-hedge fund propaganda?
We know and understand that the hedge funds NEVER EVER EVER admit that the mountain of fails are there, and ALWAYS ALWAYS ALWAYS blame the victim company. We get that. It is SOP. "She was asking for it" as a defense for the rape. Got it. Thanks for the contribution.
Perhaps you should take out a few minutes and actually read the blog, then you will be saved from posting duplicates of what is already linked.
By bobo on
7/22/2008 9:33 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Don't assume every hedge fund is a naked short.
Some good resources.
http://www.hedgefund-index.com/news.asp
http://www.hedgeworld.com/
http://www.hedgeweek.com
By hedgie on
7/22/2008 4:28 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
http://blogs.wsj.com/marketbeat/2008/07/22/two-short-lists/
By kevin on
7/22/2008 4:29 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
A few interesting articles. Check trouble in hegistan.
http://www.cfoss.com/
By kevin on
7/22/2008 4:29 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
I could not figure out why Wachovia was left off the list of protected securities--that were in the end not REALLY protected after the SEC capitulated on the market maker exemption--but now I know. From the AP June 22, 2008: "Wachovia loses $8.9B, cuts 6,350 workers, dividend. Wachovia slashes dividend, jobs, to shut mortgage unit after $8.86B loss in second quarter."
The SEC just couldn't let this news hit the tape without letting its hedge fund masters make a few million more. Watch for Wachovia to be added, now, along with WAMU.
BobO, great post on Alexis Glick's blog. I would hope that all who post here (coherently) will weigh in on her blog about this topic as soon as possible. We must give her logic that the whores can't refute. Should not be difficult.
By Jeremiah 9:24 on
7/22/2008 4:30 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Hedgie: I don't assume any such nonsense. I believe that there are probably three to four dozen primary bad guys in this, up from maybe two dozen 5 years ago. Then there is a constellation of also ran wannabe bad guys. I do believe that the prime brokers have behaved exactly as RICO defines a criminal cartel, and that once all facts are know via some lawsuits, it will be clear that I'm correct. This couldn't happen without their active participation, including trading alongside the bad guys to fatten their trading desks.
So not all hedge funds are bad. The overwhelming majority aren't bad. But some are. Very, very bad. In the sense that they don't care what the law says, or what is and isn't fraud, they only care about what they can get away with. Exactly as the pool operators functioned in the late twenties, right before the country was plunged into a depression, and the Pecora hearings revealed that Wall Street was far, far worse than anything anyone had ever imagined.
Bet you a dollar once all facts are known, that nothing has changed in almost 80 years. Hope I'm wrong, as otherwise we are in for a systemic meltdown, or a government bailout of Wall Street wherein all naked shorts are forgiven in some manner - basically allowing trillions to be looted and kept by the looters, and everyone else loses.
That's how I see it going down. Which is why I don't hold out a ton of hope for a better tomorrow for our markets, or our country.
By bobo on
7/22/2008 4:36 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Bob, I think you'll like this:
James Howard Kunstler, from Kunstler.com, Sunday July 20
The comprehensive bankruptcy of the United States, at every level, in all corners, atop each hill and mole-hill, and down not a few rat-holes, is preceding like some kind of hideous multi-media, inter-dimensional cosmic grand opera as produced and directed by the Devil. Every week, some bizarre new subplot is introduced by the stage managers, each turn and twist geared to produce maximum pain and carnage in the US economy, as if to foreclose any possibility of redemption on the way down. Well, the absence of hope is, after all, the essential nature of Hell (setting aside, for the moment, J.P. Sartre's quaint notion that Hell is other people).
Among the many developments in the story last week was the solidifying consensus that the nation is in really serious trouble, and the noticeable slippage of legitimacy among those pretending to run financial affairs. The howler of the week was the Securities and Exchange Commission's edict that Wall Street sportsters would be prohibited from trafficking in so-called "naked short" sales against a cherry-picked bunch of 19 banks and financial companies for the next two weeks. A cute trick, naked shorting is done by pretending to borrow a bunch of stocks, pretending to sell them high just before the share-price falls, pretending to buy them back at a lower price when the share price has fallen, and then pretending to return exactly the same number of lower-priced shares to the lender, pocketing the difference. Real shorting is cute enough, and involves "clearing" the sales -- i.e. proving that real stocks were really lent and really returned. Shorting is helped along by generating rumors that a given company is in trouble, thus nudging share prices down. This works really well when a company already is known to be struggling, as many now are. In fact, it usually works best when a struggle turns into a feeding-frenzy -- as when a bleeding mullet attracts the swarming sharks. When this scam is run using odd-lots of millions and tens-of-millions of shares sharked up at many dollars each, the profits to be made in this sport is obviously huge.
With naked shorting, however, the stocks being shorted are basically non-existent, imaginary, made-up, fictional, registered only as pixels in a program. It's a racket, pure and simple, run by both the supposed borrower of the stocks and the supposed lender and, more to the point, was wholly and absolutely against the law before the SEC declared a selective holiday from it last week. So, what the SEC action really demonstrates is the utter lawlessness reigning on Wall Street, and the SEC's singular unfitness as an enforcer of the laws, not to mention the criminal irresponsibility of the clearing authorities who only pretend to go through the motions of certifying the sales. What's more, the companies cherry-picked for immunity against shorting were some of the very companies believed to be most active in profiting off naked short sales against other companies.
Thus, the credibility of all the authorities in American finance, including the Secretary of the Treasury, Mr. Paulson, the head of the Federal Reserve, Mr. Bernanke, the director of the SEC, Mr. Cox, takes on the aroma of week-old dead carp, while the affairs of American banking and business as a general proposition look to the rest of the world like a simple looting operation, reflecting poorly on the paper certificates that we use as "money" in the land of the free. The odor of blood and desperation around these activities must be sending a strong signal to those offshore who hold American dollars in some form or other. It must make them rather itchy to dump them while the dumping is good -- before some clever American B-School Boyz figure out a way to short their own country (if they haven't already done that). Finally, Mr. Bush presides at a remove from all this, sitting just offstage in his own special velveteen loge of Hell, watching this opera-to-end-all-operas, and waiting for his reputation to be sealed as the historical equivalent of something found in a colostomy bag.
The sub-plot of Fannie Mae and Freddie Mac just lends a romantic edge to the show. You could spin it off as a sitcom called "The Fucked and the Feckless." This would include all the poor shlubs who signed $XXX-K mortgage contracts, for houses now worth $XXX-K-minus-XX-K (and still sinking), as well as the shareholders, who saw their share prices approach penny stock range (especially the pensioners whose fund managers gorged on Fannie and Freddie paper) and not least the sovereign wealth funds of China and Russia. Those responsible for fucking everybody, the investment bankers who engineered the tranches of securitized bundled non-performing mortgages, and pocketed huge fees for doing so, are now conniving to off-load the liability of all this worthless paper on the taxpayers, led by chief conniver, Secretary Paulson.
Meanwhile, the runs on the banks are just beginning with Indymac last week and Whachovia warming up to catch the baton this week, with more banks waiting to enter the relay race to insolvency. It's becoming obvious that the Federal Deposit Insurance Corporation will choke and croak on this wad of losses, and its liabilities will also be fobbed onto the taxpayers. In the meantime, though, it will be obvious that the full faith backing of the United States is an empty promise. That may be the near-term endgame for all this pretending. When American depositors get screwed out of their deposits and the deposit insurance doesn't come through, the full force of the fiasco will drag the dollar underwater like the legendary Kraken of old preying on a babe thrown overboard.
Then the forces of darkness will really be loosed.
Things may get so chaotic that Mr. Bush and his circle may actually be removed from the scene before his term in office expires. He could go out of office much the way he came in: by means unconventional. Mrs. Pelosi will keep the seat in the oval office warm for a few months. Then the prosecutions will begin.
By Take a Bite out of NSS on
7/22/2008 9:58 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
It's just a matter of time now. The DOJ is going after their offshore, tax-evading "undeclared" accounts where these trillions of dollars are stashed. George Bush got secretly videotaped saying that Wall Street got "drunk" and will have to "sober up" (http://www.youtube.com/watch?v=z_FDRjluLJQ). We are approaching critical mass that is why some criminals are choosing to be on the good side. When they raided Bear Stearns that was the beginning of the end. It just goes to show you how arrogant Chanos is that he is still pushing for the old "rules" which are no rules. Wasn't it "pride before the fall"?
By Trigger on
7/23/2008 7:29 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
I would like to see a rule from a Consumer Protection Agency that would require that the Buyer of a Naked Short share or Counterfit share be notified if there was a failure to deliver T3 by their Broker. The Buyer would then be able to "BREAK" the trade.
If I bought a car and the Seller failed to deliver the car to me I would get my money back. Why is Stock any different?
I think I will call Senator Dodd and a few others with this idea. Also, will call about the Market Maker and Option Writer exception. Why should the Main Broker Dealers be allowed to Print Stock Shares for profit?
By waterfallsparkles on
7/23/2008 7:31 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
There is the assumption that forcing the naked shorts to buy would "ruin the market". Wouldn't it cause the market to go UP? Perhaps it should be stated that "the wrong people would lose money if forced to buy in on their fail to delivers". Keep getting the message out there.
By SJ Bennett on
7/23/2008 7:33 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Called Senator Dodd and suggested that he write Legislation that would require my Broker to notify me if the share of stock I purchased was not delivered in 3 days. I then as a Consumer would have the RIGHT to break the trade and get my money back.
Also, suggested that they eliminate the Market Maker and Option writer exclusion. Do not see why they are allowed to break the Law and sell me fake shares and have my Broker put an IOU in my account. With the above suggestion I can get my money back.
By waterfallsparkles on
7/23/2008 3:40 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
SJ Bennet, I've been saying that for a while. The money doesn't leave the system. In a squeeze, the money goes from the bad guys' pockets to ours. Even if their system goes under and there's a fire sale, us newly rich would be able to buy their assets at pennies on the dollar.
It's never been about ruining the market. It's been about the wrong people losing money.
By ted on
7/23/2008 3:41 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
http://www.michaeljournal.org/myth.htm
“Taking into consideration everyone on the island as a whole,” he mused, “are we capable of meeting our obligations? Oliver turned out a total of $1000. He's asking in return $1080. But even if we bring him every dollar bill on the island, we'll still be $80 short. Nobody made the extra $80. We turn out produce, not dollar bills. So Oliver can take over the entire island, since all the inhabitants together can't pay him back the total amount of the capital and the interest.
By davidn on
7/23/2008 3:42 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Waterfall sprinkles, one issue with your idea is how they actually do trading. All the buying the various customers in your brokerage do in MSFT through the day gets added together into one big buy of MSFT. All the selling they do through the day gets added into one big sell. Then it get netted to become one big buy or sell. Let's say there's 1.1 million shares of buying and 1 million shares of selling. That nets to 100,000 of buying.
The net buy or sell is against the NSCC with them being the other side of the trade.
The effect of this is that the trades all get muddled, so you can't tell if it is your share that wasn't delivered and even if it wasn't delivered, you don't know who the seller was as their trades were also muddled with the NSCC sticking itself in the middle of the trades for the day.
A simpler solution would be to look at custody instead of trading. Any entity that has less shares than they are supposed to have should be required to buy in under penalty of jail time. Then they can give the bill for the buy in to the NSCC to muddle with.
In other words, the problem is not with the trading. The problem is that they let entities own less shares than they are supposed to.
They shouldn't be able to net obligations. If they say they have a million shares of MSFT, then there should be 1 million shares in their account at the DTC.
By davidn on
7/24/2008 7:19 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
I've been wondering why all the melodrama about the "emergency order"? I mean, we all know that the Rules the SEC are allowing into the clearing and settlement system violate the SEC Act of 1934 which calls for the prompt clearing (taking the money) and settlement (delivering of shares) of all trades. Section 15C-3.
So why all the play acting?
Finally figured it out. Bear-Stearns is why.
Some very knowledgeable people there were wiped out. Why make it any easier for them to sue the SEC for promulgating a system that violates the law? If they pretend it's an emergency order and not just enforcement of the Law of the land since 1934, then they're only guilty of closing the barn door after the horse got out. If they enforce something that's been there all along, then they're guilty of criminal negligence. And Bear-Stearns employees and investors lost hundreds of millions of dollars when the Fed orchestrated JP Morgan takeover went through which makes for some pretty damaging claims.
By aldigit01 on
7/23/2008 4:10 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
If you’re trying to talk yourself into believing that there’s nothing to see here, do you remember Waiting for Clarity on the Brink of Oblivion? If not, you may want to review that one now, as we learn that, in the midst of a banking crisis, the forth largest U.S. bank, which also happens to be distressed, is distributing counterfeit money…
http://cryptogon.com/
By kevin on
7/24/2008 7:21 AM
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This has RICO act violation written all over it
The naked short selling activity your describing really sounds like it violates the RICO act as it is nothing short of organized crime. If i would counterfeit stock and place it on the market with the help of others it be no different than me counterfeiting money under an organized crime ring...I really fear this a national crisis that has yet to be fully exposed; it needs to stopped as the entire market is becoming a place where you don't know what is counterfeit and what is real, and, even if real, there is nothing to stop what you have from being devalued by the counterfeit stock. Its is no different than the government saying to someone that it is OK to print your own money because we are going to keep the counterfeit money on the market.
By Derick Sharp on
7/24/2008 7:22 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Hey, hedgie.
Could you post links to any articles that show how those benevolent hedge funds are pushing for reinstatement of the uptick rule along with requiring that there is an automatic buyback when the locate fails? Also, links to articles where hedge funds call for greater transparency at DTCC would be appreciated.
By sj on
7/24/2008 7:23 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
All must read the following. IT IS A MUST READ!!
Msg. 745080 of 745107
Jump to msg. #
If You Were Not Aware
of It before, You are Now!!
Charles Ponzi would be proud of the "Pimps and Parasites" in Pinstripes whom hail from Broad and Wall, as well as the Beltway!!
The Greatest "Scam; Ponzi Scheme In Recorded History"!!!!
*********************************************************************
Mike Shedlock
You Know The Banking System Is Unsound When...
1. Paulson appears on Face The Nation and says "Our banking system is a safe and a sound one." If the banking system was safe and sound, everyone would know it (or at least think it). There would be no need to say it.
2. Paulson says the list of troubled banks "is a very manageable situation". The reality is there are 90 banks on the list of problem banks. Indymac was not one of them until a month before it collapsed. How many other banks will magically appear on the list a month before they collapse?
3. In a Northern Rock moment, depositors at Indymac pull out their cash. Police had to be called in to ensure order.
4. Washington Mutual (WM), another troubled bank, refused to honor Indymac cashier's checks. The irony is it makes no sense for customers to pull insured deposits out of Indymac after it went into receivership. The second irony is the last place one would want to put those funds would be Washington Mutual. Eventually Washington Mutual decided it would take those checks but with an 8 week hold. Will Washington Mutual even be around 8 weeks from now?
5. Paulson asked for "Congressional authority to buy unlimited stakes in and lend to Fannie Mae (FNM) and Freddie Mac (FRE)" just days after he said "Financial Institutions Must Be Allowed To Fail". Obviously Paulson is reporting from the 5th dimension. In some alternate universe, his statements just might make sense.
6. Former Fed Governor William Poole says "Fannie Mae, Freddie Losses Makes Them Insolvent".
7. Paulson says Fannie Mae and Freddie Mac are "essential" because they represent the only "functioning" part of the home loan market. The firms own or guarantee about half of the $12 trillion in U.S. mortgages. Is it possible to have a sound banking system when the only "functioning" part of the mortgage market is insolvent?
8. Bernanke testified before Congress on monetary policy but did not comment on either money supply or interest rates. The word "money" did not appear at all in his testimony. The only time "interest rate" appeared in his testimony was in relation to consumer credit card rates. How can you have any reasonable economic policy when the Fed chairman is scared half to death to discuss interest rates and money supply?
9. The SEC issued a protective order to protect those most responsible for naked short selling. As long as the investment banks and brokers were making money engaging in naked shorting of stocks, there was no problem. However, when the bears began using the tactic against the big financials, it became time to selectively enforce the existing regulation.
10. The Fed takes emergency actions twice during options expirations week in regards to the discount window and rate cuts.
11. The SEC takes emergency action during options expirations week regarding short sales.
12. The Fed has implemented an alphabet soup of pawn shop lending facilities whereby the Fed accepts garbage as collateral in exchange for treasuries. Those new Fed lending facilities are called the Term Auction Facility (TAF), the Term Security Lending Facility (TSLF), and the Primary Dealer Credit Facility (PDCF).
13. Citigroup (C), Lehman (LEH), Morgan Stanley(MS), Goldman Sachs (GS) and Merrill Lynch (MER) all have a huge percentage of level 3 assets. Level 3 assets are commonly known as "marked to fantasy" assets. In other words, the value of those assets is significantly if not ridiculously overvalued in comparison to what those assets would fetch on the open market. It is debatable if any of the above firms survive in their present form. Some may not survive in any form.
14. Bernanke openly solicits private equity firms to invest in banks. Is this even close to a remotely normal action for Fed chairman to take?
15. Bear Stearns was taken over by JPMorgan (JPM) days after insuring investors it had plenty of capital. Fears are high that Lehman will suffer the same fate. Worse yet, the Fed had to guarantee the shotgun marriage between Bear Stearns and JP Morgan by providing as much as $30 billion in capital. JPMorgan is responsible for only the first 1/2 billion. Taxpayers are on the hook for all the rest. Was this a legal action for the Fed to take? Does the Fed care?
16. Citigroup needed a cash injection from Abu Dhabi and a second one elsewhere. Then after announcing it would not need more capital is raising still more. The latest news is Citigroup will sell $500 billion in assets. To who? At what price?
17. Merrill Lynch raised $6.6 billion in capital from Kuwait Mizuho, announced it did not need to raise more capital, then raised more capital a few week later.
18. Morgan Stanley sold a 9.9% equity stake to China International Corp. CEO John Mack compensated by not taking his bonus. How generous. Morgan Stanley fell from $72 to $37. Did CEO John Mack deserve a paycheck at all?
19. Bank of America (BAC) agreed to take over Countywide Financial (CFC) and twice announced Countrywide will add profits to B of A. Inquiring minds were asking "How the hell can Countrywide add to Bank of America earnings?" Here's how. Bank of America just announced it will not guarantee $38.1 billion in Countrywide debt. Questions over "Fraudulent Conveyance" are now surfacing.
20. Washington Mutual agreed to a death spiral cash infusion of $7 billion accepting an offer at $8.75 when the stock was over $13 at the time. Washington Mutual has since fallen in waterfall fashion from $40 and is now trading near $5.00 after a huge rally.
21. Shares of Ambac (ABK) fell from $90 to $2.50. Shares of MBIA (MBI) fell from $70 to $5. Sadly, the top three rating agencies kept their rating on the pair at AAA nearly all the way down. No one can believe anything the government sponsored rating agencies say.
22. In a panic set of moves, the Fed slashed interest rates from 5.25% to 2%. This was the fastest, steepest drop on record. Ironically, the Fed chairman spoke of inflation concerns the entire drop down. Bernanke clearly cannot tell the truth. He does not have to. Actions speak louder than words.
23. FDIC Chairman Sheila Bair said the FDIC is looking for ways to shore up its depleted deposit fund, including charging higher premiums on riskier brokered deposits.
24. There is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured. There is only $53 billion in FDIC insurance to cover $6.84 Trillion in bank deposits. Indymac will eat up roughly $8 billion of that.
25. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion. Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back.
What cannot be paid back will be defaulted on. If you did not know it before, you do now. The entire US banking system is insolvent.
*********************************************************************
More Failures and "Runs" to follow.
It's Only Just Begun!!
We remain mired in the 4th Inning of the "Great Global Derivative Unwind".
Has One protected Their A$$ET$??
Protect and Govern Thyself!!
Got Gold/$ilver/Hard A$$et$
By Sean on
7/24/2008 7:27 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Another country heard from...this is too funny and, not so incidentally, spot on.
http://www.sec.gov/comments/s7-08-08/s70808-459.htm
Subject: File No. S7-08-08
From: Mugabe Abu, Esquire
Affiliation: International EntrepeneurMay 20, 2008
sub.: Permit for selling self printed stock shares of different companies.
Dear SEC authority,
My Name is Mugabe Abu. I am Nigerian investor and I am very interested for getting the permit for selling self printed shares of different, on the Wall Street noticed, companies.
Since this practice to sell something what you do not have is legal in US I would like also to participate in this program.
We Nigerians know very well this practice of selling something what we do not have, but we did not make it with the securities, so far.
Since printing of US dollars is illegal, I will be really interested for printing and selling fake securities as many make it in US. You call it very nice naked (fake) shorts. Your explanation of this procedure is very nice and I appreciate it very much and I am your admirer.
I see that some people who get permit from you have printed so many fake securities that such company like CALM has even over 100% shorts. Others like DNDN, CORS, CCRT (only few samples) are also extremely diluted. I would like to help you to make it even more. I see still big opportunity to print more fake shares of big companies.
It is almost so easy business like printing fake US dollars but I see, in opposite to printing fake dollar, this business is full legal and you can sell these fake securities for anybody in the world and you do not need to ask the applicable company, to print their shares
It is excellent business
I always believed on your ideas of collecting money from all the world and I would be happy to participate in this huge idea of printing fake shares.
Therefore, please send me the application form for this permit and also needed information how I can start this easy business.
Please inform me if I will need to contribute any amount to get this permit and whom shall I forward this money.
I can also promise you that I will donate some earned money for your agency.
Yours truly,
Mugabe Abu
By particleswaves on
7/24/2008 7:51 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Government uncovers oil price manipulation
The Commodity Futures Trading Commission charged Optiver Holding, two of its subsidiaries, and three employees, with manipulation and attempted manipulation of crude oil, heating oil and gasoline futures on the New York Mercantile Exchange.
http://biz.yahoo.com/cnnm/080724/072408_cftc.html
By no kiss F__! turn me over. on
7/24/2008 10:11 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Chris Cox says,
http://tinyurl.com/5t2qnl
By kevin on
7/24/2008 10:27 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Hard to believe, but Jim Cramer may now be our new "best friend". Just listen to this rant. He is saying all that we have been saying for years.... Talk about strange bedfellows...........
http://www.truveo.com/Cramer-on-Cox/id/697577983
By beegdawg on
7/24/2008 10:28 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Cox wants circuit breaker.
http://tinyurl.com/6kogog
By kevin on
7/24/2008 2:10 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
http://www.sec.gov/news/testimony/2008/ts072408cc.htm
One thing that has worked exceptionally well is the regulatory concept of an agency chartered to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. Each of these elements of the SEC's mission is integrally important and mutually reinforcing of the others. An important reason the SEC has been able to accomplish so much is the expertise gained in each of its complementary roles.
By kevin on
7/24/2008 2:11 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Ex-Refco CEO Bennett Asks Court For Mercy
Portfolio Media, New York (June 13, 2008)--Former Refco Chief Executive Phillip R. Bennett's attorneys told the judge who will sentence him on July 3 that putting the 60-year-old away for the rest of his life would be barbaric and urged the judge to offer him a lighter sentence than what the advisory guidelines recommend.
http://www.thesanitycheck.com/Default.aspx?EntryID=77&tabid=99
She said the securities the customers had deposited in their accounts were not available to execute the trade because "I believe they were loaned out."
The other former Refco employee, Weis, said in his deposition that VR Global executives, including President Richard Deitz, knew some trades were failing. He said they may not have understood Refco was loaning out their securities for its own benefit.
By refco on
7/24/2008 2:12 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Do you have your share certificates?
http://www.usagold.com/gildedopinion/rocketschool/20051023.html
In the Refco situation clients no longer have the ability to access their accounts via an instruction to the executer of the trade -- and will not have that ability for some time.
Investors need to remember that custody is key, and without it one can do little to redeem ones asset, if needed.
Custodians, those that hold assets on behalf of other entities, either individual or corporate, take many different forms, including banks, stockbrokers, mutual funds and commodity traders to name a few.
Custodial risk along with its cousin, counter party risk, is unfortunately something that we are going to hear more about as the monetary debacle unfolds. Refco should be seen as a wake up call for those who have been paying attention to the unfolding. It's time to take very good look at what one calls an asset, or what some investment advisors call assets, in particular those that have been touting via various publications, 'safe' harbors, havens, cash and liquidity. One may wish to conquer the crash, but what crash, what form will it take and how will it unfold? Once again Refco provides an early clue by highlighting the potentially serious issue of custodial risk.
By refco on
7/24/2008 2:14 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Cramer has a b ig reason to get righteous. . . The I.R.S.
They can audit back 7 years when fraud is suspected.
Just because there was no formal closing of the short transaction does not mean there was no taxable liability.
Furthermore, an IRS and FASB pronouncement/guidance ruling would exert immense pressure to all abusers,ie. Hedge funds. After all this IS a massive contingent liability!!!
All 10K's should require such disclosures by existing statutes. hwh
By hwh on
7/24/2008 5:04 PM
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Short Sale Restrictions To Cover Entire Market
WASHINGTON -(Dow Jones)- Securities and Exchange Commission Chairman Christopher Cox said U.S. regulators intend to extend restrictions on short- sales to the entire market.
"That's our intent," Cox said in response to questions at a House Financial Services Committee hearing on Thursday.
The SEC issued an emergency order last week, which took effect Monday, to tighten requirements for short sales in Fannie Mae (FNM) and Freddie Mac (FRE), the federally sponsored housing-finance giants, and 17 primary dealers in U.S. Treasury debt, chiefly big Wall Street firms such as Goldman Sachs & Co. (GS), Lehman Brothers (LEH) and Merrill Lynch & Co. (MER). The order is set to run through Tuesday, but could be extended to mid-August.
Rep. Gary Ackerman, D-N.Y., questioned why the new restrictions apply only to 19 stocks rather than the entire market.
"Who are we protecting if we're not protecting everybody?" asked Ackerman.
Cox said the 19 stocks were targeted because they are now eligible to borrow from the Federal Reserve, something that had previously been limited to commercial banks. But he said the SEC aims to extend "operational protections" marketwide.
The SEC also is revisiting price tests for short sales other than the so- called "tick test" which it abolished last year, Cox added.
Ackerman has introduced legislation to reinstate the uptick rule, which allowed short sales only when stock prices are ticking higher, saying it seemed to work very well when it was in place.
Cox said a thorough study of stocks in the Russell 3000 index found the tick test was ineffective in markets that use decimal pricing, reducing price changes to pennies. He said the SEC is looking at alternative price tests, based on five or 10-cent price moves.
Short sellers sell borrowed shares which they hope to replace later at lower prices, profiting from stock price declines. The practice is legal, but has long been controversial. The SEC has put restrictions in place in recent years to curb abusive "naked" short sales, in which stocks are not borrowed before short sales. That effort was extended with the emergency order, which calls for borrowing or arranging to borrow shares in advance of short sales in the 19 targeted stocks.
- By Judith Burns, Dow Jones Newswires
By CMElec on
7/24/2008 9:49 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Everyone should read this, by Mark Mitchell. The latest in an erudite and informed commentary on the sad farce that is financial journalism in the US, and the liar's club that constitutes the hedge fund spokes-group that is agin' anything that would rein in illegal naked short selling.
http://www.deepcapture.com/short-sellers-spin-themselves-silly-sec-sounds-strong/
By bobo on
7/24/2008 9:56 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
I can see no sense at all in encouraging the practice of seeking to profit from failure. I want any enterprise or organization that produces products or services of value to succeed. But if it does fail, only market forces, not market manipulation, should cause the failure.
By ginger on
7/25/2008 7:10 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Hedge funds are to the stock market as to what a computer virus is to your hard drive.
http://tinyurl.com/5g27mm
By kevin on
7/25/2008 8:18 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
We know there was a huge overhang of unsettled trades in Bear Stearns stock when it was forced to sell to Morgan. What happened to all those unsettled positions?
By Fred on
7/25/2008 5:33 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
During that same congressional testimony the corruption and rot within the regulatory agencies was on full display as one top regulator placed a BAN on activity which has been ILLEGAL since the great depression. A tacit admission that the firms it regulates are and HAVE BEEN above the law. No sooner did the announced ban on NAKED short selling in 17 financial and banking firms was given to CONGRESS, it was then IMMEDIATELY delayed until Monday, July 21 st in order to provide an exit for the CULPRITS of this nefarious, illegal and predatory practice.
http://www.marketoracle.co.uk/Article5590.html
By kevin on
7/25/2008 5:32 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Fred: Everyone who was short all the way from $50 got to pay $10 and keep the rest. It's a good gig, stealing. Beats working. Nobody but Wall Street and politicians ever get that kind of a deal.
By bobo on
7/25/2008 5:43 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Patrick was just on Fox, and it is a great interview. Spread it around. He will also be on with Alexis Glick on Monday morning.
http://www.foxbusiness.com/video/index.html?playerId=videolandingpage&streamingFormat=FLASH&referralObject=2629930&referralPlaylistId=1292d14d0e3afdcf0b31500afefb92724c08f046
By bobo on
7/25/2008 5:46 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
http://www.marketoracle.co.uk/Article5605.html
The financial system will collapse before "zero-hour" actually occurs. I think we are seeing signs of it in the desperate measures being employed to nationalize companies which trade on market exchanges as private enterprises. There is simply no way to defend the SEC's decision to selectively enforce the prohibition of naked short selling for 17 ‘fragile' financial companies and to not enforce it for the over 5000 other companies which trade on US stock market exchanges. And plans to rescue Fannie Mae and Freddie Mac breathe of a sort of corporate nationalism. Over time this will deal a massive psychological blow to financial markets. They are currently rallying on the sense of relief that the efforts to prevent Fannie and Freddie from dragging US financial markets into the abyss have succeeded and the inevitable day of reckoning has been postponed once again.
By kevin on
7/25/2008 10:05 PM
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i will help your cause at minimum wage
i know your cause is good....i do have experience in this; i just want to help...and i am not normal as far as my approach to so such stuff...but i can tell your not either which is what makes me want to do something with you.
derick sharp
By derick sharp on
7/25/2008 10:23 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
Anyone whoever believed a word that Bobo, Patrick Byrne, Dave Patch, Bud Burrell has written or statd about Market manipulation, Naked Shorting and Captured regulators PLEASE..PLEASE watch this video of Jim Cramer from today.
http://www.cnbc.com/id/15840232?video=806417851&play=1
By Sean on
7/28/2008 7:10 PM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
The most damning article to date against these crooks, anybody want to call Bobo, Patrick, Bud or Dave Patchie anymore names?LOL!!
Read em and weep boys, just a matter of time. JUST A MATTER OF TIME!!Tic Toc!!
Recs: 5 Illegal Short Sellers May Face RICO Indictments
Illegal Short Sellers May Face RICO Indictments
by: R.J. Chopin posted on: July 29, 2008
Racketeering Influenced Corruption Organizations Act, the law Rudy Guiliani used to bring down Michael Milken, and other Wall Street crooks, could be revisited in the SEC's struggle to clean up Wall Street's growing threat to the financial markets.
The SEC's crackdown against illegal naked short selling and rumor-mongering resulted in more than 50 hedge funds being slapped with subpoenas last week, according to the Wall Street Journal. Conspiracy theorist and CEO of Overstock.com (OSTK), Patrick Byrne, has embarked on a crusade to expose the nefarious hedge funds that practice illegal short selling. Byrne's web site, Deep Capture.com, has compiled a plethora of facts documenting, names, dates, times and videos of the players and their schemes.
Mark Mitchell, of DeepCapture.com, believes there exists a "hedge fund-orchestrated campaign to cover-up the crime of naked short selling." Depending on how deep the SEC probes, and what insidious facts they discover, we could see hedge fund managers, traders, and other employees facing scandalous, unprecedented charges under the infamous racketeering law, RICO. There is growing pressure for whistle-blowers to sound off or risk becoming the next scapegoat.
Clusterstock.com, reported, "the SEC is demanding both trading records and email correspondences" from subpoenaed firms. The inclusion of cell phone and text messaging records will undoubtedly be scrutinized. Concurrently, the NYSE Regulation Inc. is also investigating how some of its largest firms comply with false and misleading rumors that could undermine a stock's price. This is going to intensify.
Motley Fool, published an article on March 24, 2008, titled "The Naked Truth on Illegal Shorting," in which 100% of a company's shares were purchased by one individual, and were not available for shorting. Nevertheless, 60 million phantom shares were traded, according to owner. Subsequently, he filed a SEC 13-D compliant form.
Dick Fuld, CEO of Lehman Brothers (LEH), told market regulators that he has information that short-selling hedge funds colluded to bring down Bear Sterns (BSC). If Fulds's "information" is of evidentiary value, these hedge fund managers, and their cast of cohorts, could find themselves behind bars.
If the SEC diligently investigates the facts, we could see RICO indictments against illegal short sellers as early as Labor Day. Anyone charged under the RICO statue, even if they are found "not guilty," will become permanently damaged.
After observing the demise of Fannie Mae (FNM), and Freddie Mac (FRE) last week, it is expedient that the SEC move quickly to abolish the practice of naked short selling for all stocks. Short selling should only be allowed after the short seller has successfully borrowed the shares. The practice of selling shares that cannot be borrowed is a crime!
http://seekingalpha.com/article/87653-illegal-short-sellers-may-face-rico-indictments
By Sean on
7/29/2008 7:51 AM
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Re: The hedge fund industry howls with outrage over the new SEC temporary rule..."It's not a big problem"...is now...it could ruin the markets if curtailed...hmmm
2 videos here, from FOX Business/Glick Report.
One is with Paul Atkins, one of the commissioners of the SEC .... the other is Patrick.
http://glickreport.blogs.foxbusiness.com/2008/07/29/the-sec-and-naked-shorting/
By zinkley on
7/29/2008 9:28 AM
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