Skip to comments.'Naked Short Selling'
Posted on 05/17/2012 7:00:16 AM PDT by The Working ManEdited on 05/20/2012 3:00:38 PM PDT by Admin Moderator. [history]
It doesnt happen often, but sometimes God smiles on us. Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the banks darker secrets into the hands of the public.
The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time primarily with the retail giant Overstock.com, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks.
Last week, in response to an Overstock.com motion to unseal certain documents, the banks lawyers, apparently accidentally, filed an unredacted version of Overstocks motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material theyve been fighting for years to keep sealed.
**** the compliance area procedures, schmecedures, chirps Peter Melz, former president of Merrill Lynch Professional Clearing Corp. (a.k.a. Merrill Pro), when a subordinate worries about the company failing to comply with the rules governing short sales.
We also find out here how Wall Street professionals manipulated public opinion by buying off and/or intimidating experts in their respective fields. In one email made public in this document, a lobbyist for SIFMA, the Securities Industry and Financial Markets Association, tells a Goldman executive how to engage an expert who otherwise would go work for our more powerful enemies, i.e. would work with Overstock on the companys lawsuit.
Naked Shorts and stock price manipulations by the insiders running the Market.
Have fun reading and if you are so inclined drink your Maalox first.
Get rid of naked shorts AND the dark pools and that would be most of what’s wrong with Wall St fixed overnight
No not really, who do you think he is? I just liked the article since it spoke to my own suspicions and prejudices about Naked Short Selling.
He’s a communist homo.
Interesting, thank you for telling me. But now onto the article; Is what he wrote inaccurate? Should I discount everything he writes?
And the backroom trading networks. All the major players use internetworks to trade between themselves.
If an investor (by your leave there is no sharp line between investor and speculator) wishes to expose his own portfolio to unlimited losses, that is his own business. If a banker or manager decides to expose others' portfolios to unlimited losses, that is an abrogation of fiduciary responsibility and probably should be subject to prosecution.
That’s a bit hard for me to do. I got rid of the idiot box years ago. Just my laptop now for anything like that.
And I wouldn’t watch Rachel Maddow in any case.
Why wouldn't you? You read Taibbi.
My problem with Naked Shorts is that the investor doesn’t OWN them. If he owned them that’s different, but he doesn’t. Naked Shorts can and definitely do lead into major stack manipulation.
In most ways this a moral thing for me. Naked shorts are just like a stranger coming into my yard and borrowing my tools and my lawn mower and using them irresponsibly and then returning them either damaged or broken.
I lost my value and usability of my tools and he got everything out of them with little or no consequences since I didn’t know he was doing it in the first place and now its too late to stop him.
Yup. Been on the receiving end of naked shorting many times over the years...read th “Dendreon Effect”. By Mark Mitchell.
Patrick Byrne is an American hero, so is Angela Merkel ( she stopped shorting in Germany).
I hope Patrick nails them to the wall.
This is NOT our fathers’ stock market...you have to tread carefully.
What is “naked” short selling, exactly, and how is it different from regular short selling? I presume it’s akin to “naked aggression,” or something like that.
“Naked shorts are just like a stranger coming into my yard and borrowing my tools and my lawn mower and using them irresponsibly and then returning them either damaged or broken.”
You’re trying as hard as you can to make it sound like theft, but fall far short. What kind of idiot lends their lawn mower to strangers? It bugs me to no end, this pretence that freely agreed upon exchanges on the free market are somehow supposed to be stealing. For every short seller, there’s a long buyer. For every guy wheeling with other people’s money, there are those other people who let them do it.
If we’re talking about fraud or force, that’s one thing. But then we call it fraud or theft, not “naked blah blah blah.”
Let’s define terms.
Naked shorting is not shorting.
What is shorting? Shorting is where one borrows shares from another to sell but they must be bought back again and returned to the original owner of the shares.
How does one make money by shorting? One makes money by selling borrowed shares and buying them back cheaper.
Paul lends shares —> Peter sells Paul’s shares —> Market
Market sells back shares —> Peter returns shares —> Paul
Peter has ‘shorted’ the market.
All short transactions are ‘cleared’ through clearing houses.
What is ‘Naked’ Shorting?
In the above scenario there is no Paul and there are no shares. Peter just makes up shares out of thin air much like the Federal Reserve creates money out of thin air.
But regulations allow the Federal Reserve and only the Federal Reserve to create money from nothing. Not so with stock market shares, regulations require shares to be real.
So Naked Shorting is a form of counterfeiting and if the big brokers like Goldman Sachs can counterfeit shares to inject into the exhanges, then they can drive a market up and down at will.
Overstock has been after Wall St. and the Naked Shorting issue for a long time because more shares have been shorted against the company’s stock than exist in the first place. In other words certain bankster gangsters on Wall St. have launched short attacks on Overstock.com.
Naked Shorters on Wall St. can launch short attacks on companies and drive them to bankruptcy. Then predatory hedge funds like Romney’s Bain Capital can move in and offer ‘help’ to the victims of the short attack. But ‘help’ means buying assets for pennies on the dollar, lies about assuming debt burdens and taking over cash assets.
It’s a racket for sure and it does involve the mafia who have infiltrated banks and hedge funds. The SEC is bought off. The criminals control the markets and answer only to politicians who tell them to manage the talent pool of High Frequency Traders and to keep the markets spiked for retirement accounts so as not to cause unrest.
See Post #17.
I'll take your word for it. But it doesn't make him wrong about this. Naked Short Selling is not good for the financial markets. No trade should be allowed to fail due to naked short selling. The penalties on such failed trades should be huge.
A naked short sale, contrarily, does NOT involve the borrowing of shares and simply executes a sale. This has many problems.
1) a naked short sale does NOT deliver shares to the purchasor (the person on the other side of the short sale). This is termed a "fail to deliver" and is a violation of securities rules AND, if repeated or done in sufficient quantity, of Federal statutes. There are now billions of shares of "fails" floating around due to the 'wink-wink, nudge-nudge' attitude of many brokerages toward naked short sales.
2) a naked short sale effectively creates stock shares out of thin air, which is impossible in the practical world and unlawful in the legal world.
Example: suppose a company has issued 10,000,000 shares. Suppose also that someone naked shorts 25,000 shares. Someone else buys these shorted shares. The buyer does not have possession of the shares, but they are carried in his account on the brokerage books as an asset. This trade affects in no way the original 10,000,000 shares issued, yet now 10,025,000 shares can be 'lawfully' sold.
Multiply this transaction by, say, 1000 and you end up with more naked short 'shares' than actually exist in the world. Ridiculous, you say -- can't happen? Sorry, this is the exact state of affairs in AT LEAST 209 listed companies' shares in the US, as of May 1, 2012.
And the authorities do nothing whatever about it.
And you see nothing wrong with this? Sheesh. You must be a goobermint accountant whose job also involves fantasy.
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