Nake Shorts… Part 2many

For some closure on this.

Mr. O’Brien has said he would be willing to call in to an audio conference call, not meet in person. He is concerned about his safety. He cited his outing of a guy from a yahoo board that ended up getting in trouble, along with advice from his attorney that unnamed hedge funds may from time to time undertake a policy of intimidation that he might at some point be subject to as his reason for wanting to remain anonymous.

I’m not one of Charlie’s Angels and he isn’t Bosley. So until he meets face to face, there won’t be a meeting. I want to be able to look him in the eye and call BS if and when I hear it.

Mr. O’Brien has undertaken the strategy of responding to every comment with a response that primarily consists of, “Yes, but there is naked shorting going on, and these specific laws are being broken. If laws are being broken and there is no enforcement, how can we trust anything we know?” He then gives examples of where naked shorting was not punished.

Good for him. I hope he is able to catch some naked shorters. They are breaking the law. May they show up in a Law& Order episode.

None of this has anything to do with the operational issues of any company being discussed.

I have been asked multiple times in emails why I think NFI is a short. I will givea brief why. Since i can’t borrow it, it’s a moot discussion, but here is the quick and dirty

I think its wrong to raise money in a 2ndary to pay a dividend. Either you have money to pay the div or you don’t. 2ndaries dilute ownership and create a bigger obligation for future dividends. That’s a slippery slope, IMHO

Missing your numbers because of rising short term interest rates when it’s pretty obvious that short term rates were going to go up. Suggests there is a failure to communicate between them and the analysts.

Not asking NFI-info.net to shut down or rename itself as a way to distance itself. No action is an action in this case

There you have it.

Remember this,

Naked Shorts don’t kill good companies, good companies kill naked shorts…

46 thoughts on “Nake Shorts… Part 2many

  1. Unlike basketball (to which someone here lamely tried to analogize), the stock market is not a contest. It is a marketplace. The predominant goal is to make money betting on whether a security will go up or down. However, like a contest, the “loser” often would rather blame his failure on someone or something other than himself.

    Studies have shown that shortsellers have been blamed for market declines since the inception of the stock market. New theories of how to “cure” this alleged problem surface every few years. Five years ago the cry was to call in your certificates. A couple of years ago it was to abolish the DTC and return to paper certificates. Now, thanks to people like Bob O’Brien, abolishing naked short selling is the medicine of choice.

    Simple, logical analysis shows how misguided the anti naked shorting crowd is. For example, here are a few *myths* exposed:

    1. We Need to Eliminate Naked Short Selling to Level the Playing Field

    The risk of going long is finite in that a stock will only fall to a value of 0, thus limiting your liability to the amount invested. As a stock may rise indefinitely, the money necessary to cover a short is theoretically unlimited. Obviously, the playing field is not just un-level, it is tilted to create a slippery slope for short sellers.

    Furthermore, one can buy a stock whether the price is going up or down. The “Uptick Rule” prevents shorting a stock whose price is on the decline.

    Next time someone tries to soft peddle their opposition to naked short selling as “I just want to make sure both sides play by the same rules,” ask them if they are in favor of capping risk on short selling and abolishing the Uptick Rule.

    2. Naked Short Selling Destroys Innocent Thinly Traded Companies

    According to a study of market manipulation cases brought by the SEC between January 1990 to October 2001, entitled “Stock Market Manipulation – Theory and Evidence”, “84.51% of manipulation cases involve the inflation of stock prices while less than 1% of cases involve the deflation of stock prices. Stabilization accounts for 2%. For about 13% of cases we do not have enough information to classify the type of manipulation.” [1]

    Another study, entitled “The Long and Short of Hedge Funds: Effects of Strategies for Managing Market Risk”, analyzed the performance of companies that complained about excessive shorting of their stock: “Firms don’t like it when someone shorts their stock, and some firms try to impede short selling using legal threats, investigations, lawsuits, and various technical actions. Consistent with the hypothesis that short sale constraints allow stocks to be overpriced, firms taking these anti-shorting actions have in the subsequent year very low abnormal returns of about -24 percent per year. The negative returns continue for up to three years. What appears to be happening is that these companies are overpriced, either because of excessively optimistic investor expectations, faulty products or business plans, or just plain fraud on the part of management.” [2]

    Conclusion

    Given the inherent risk in going short a stock vs. going long, any argument in favor of further constraining short sellers in order to level the playing field is fallacious. It’s precisely this added risk that makes it much more likely a heavily shorted stock indicates a less desirable investment in general. With frauds of massive proportion like Enron, Worldcom, and Tyco — not to mention absurd abuses by mutual funds, investment houses, and even media talking heads — the SEC, and presumably Mark Cuban, should have a much higher agenda than wasting time battling the latest fad excuse for why someone like Bob O’Brien’s pet stock is not making him rich.

    Sources (highly recommended for further reading):
    [1] http://www.sec.gov/rules/proposed/s72303/ger010504.htm
    [2] http://financialservices.house.gov/media/pdf/052203ol.pdf

    For a chronicle of investment chatboard related lawsuits, maintained by the author, see:
    http://www.siliconinvestor.com/subject.aspx?subjectid=28509

    Comment by Jeff Mitchell -

  2. Jim:

    You are not getting the full import of my observations. I am saying that REITs are more vulnerable because of their requirements for secondaries, but that all companies are vulnerable at their core. The SEC recognized that when they made their comments in the Reg SHO invitation for discussion, available at their website at SEC.gov – http://www.sec.gov/rules/proposed/34-48709.htm#II :

    “Although short selling serves useful market purposes, it also may be used to illegally manipulate stock prices.23 One example is the “bear raid” where an equity security is sold short in an effort to drive down the price of the security by creating an imbalance of sell-side interest.24 Further, unrestricted short selling can exacerbate a declining market in a security by increasing pressure from the sell-side, eliminating bids, and causing a further reduction in the price of a security by creating an appearance that the security price is falling for fundamental reasons.

    Short selling was one of the central issues studied by Congress before enacting the Exchange Act, but Congress did not directly prohibit short selling.25 Instead, Congress gave the Commission broad authority to regulate short sales in order to stop short selling abuses.”

    There’s more, but to cut to the chase, the SEC recognizes that unrestricted and illegal naked short selling can destroy a company’s market cap. They get it. And yet they pardoned all the past instances – my hunch is because the fallout is so large it would cripple the Wall Street crony network, and they don’t want to hurt their buddies who were busy raping the system on their watch in the first place.

    Here’s another piece that lifts the corner of the curtain so you can see just how ugly this is – the Elgindy case. It has it all. Saudi arms dealers, bad federal agents, scamming, networks of predatory hedge funds. I can’t make this shit up. And it speaks to why I would want to keep my identity anonymous.

    http://www.faulkingtruth.com/Articles/Investing101/1014.html

    In short (no pun intended) illegal naked shorting is not just a nuisance that a stiff upper lip and a positive attitude will rectify. It is an illegal part of a criminal scheme to harm targeted companies using whatever means are at the predator’s disposal. Just running your company honestly and hoping for the best is not effective – any more than being law abiding is an effective deterrent to bank robbers or rapists or counterfeiters. This has to be viewed as uniquely different than legal short selling, which I don’t have a problem with. Folks that try to blur the distinction are in my opinion either badly mistaken or deliberately disingenuous.

    Comment by Bob O'Brien -

  3. Pardon my ignorance regarding REITs:

    It seems that Bob agrees in principal that a company with strong fundamentals will not be hurt by a short selling. They’ll sell their widgets, and the people will continue to buy them.

    He excludes REITs from this due to their need for constant capitalization. There is an interesting implication here that the health of REITs are directly, not indirectly or marginally, but directly related to how well they are able to maintain their stock price.

    Here’s the problem: Knowing this, why wouldn’t everyone short REITs since this would create a cycle of depressing the stock price, making the company less healthy, depressing the stock price further, making the stock even more unhealthy, etc. etc. What Bob is really saying, unless I’m missing something, is that REITs are extremely vulnerable to short selling, legal or otherwise.

    This isn’t exactly an endorsement of the entire REIT business model.

    Comment by Jim Kerr -

  4. Ms. Boni, in her Nov., 2004, survey, found there were about 100 million shares with failed to deliver status that were over 13 days old, and 50 million shares that were more than 30 days old. That’s roughly 1 share in every 2,500 registered securities that have long standing fails that have existed for more than 30 days. But, the statistic is ‘lumpy’; some securities have more and some have less. For securities on the SEC regulation SHO list, those companies have a number that is at least 0.5% of their total authorized shares that are in the failure to deliver category. For them that’s an additional 5,000 shares in holders accounts, out of every 1 million shares authorized, which are additional shares above and beyond those shares registered and issued. That’s a lot of ‘counterfeit’ stock. The pessimistic side of me however, with selling short so popular (short sales amounted to 53% of the total selling on the NYSE on Feb. 24, 2005 [Wow! Who would have ever guessed that short selling could be more than ‘real’ selling?]), and so profitable to those that facilitate the trades, it’s hard for me to see how anything will ever be done about it. But, like the ant, I can have high hopes (everybody sing along…anna one, anna two…).

    bovine

    Refs:
    http://www.unm.edu/~boni/Fails_paper_Nov2004.doc
    http://marketrac.nyse.com/ot/ot.html

    Comment by Bovine Poor -

  5. Amazing how that shill Herb Greenberg decided to pick up Mark Cuban’s comments, as biased and uneducated as they are, and publish them to discredit NFI but failed to stay aroound long enough to read the comments that showed how Greenberg himself was proven to write false and misleading stories.

    Greenberg, Cuban, and the rest belong in the same homeless shelter in any city across America. They should be left to understand the stupidity of their responses. Wall Street is in turmoil but only because the leaders of our nations top businesses (Wall Street and Corporate) are too greedy to recognize the impact on our nation as they lie cheat and steal for power and wealth beyod any reasonable means.

    Comment by Dave Patch -

  6. Wow. And to think I once thought you were a pretty savvy individual where Wall Street was concerned, Mark. It’s clear from your most recent blogs that your only DD on MREITs and NovaStar was done by reading Herb Greenberg’s 25 or 30 trash pieces on the company published over the last year or so. Trash pieces written in a clear and obvious effort to manipulate the price downward on behalf of his short-selling close friend and former employer’s largest shareholder — and one who well knows the value of “owning” media columnists.

    NovaStar’s CEO Scott Hartman said it very well when he wrote Greenberg’s current employer last June about one of Greenberg’s deliberately inaccurate and manipulative columns — not that it appears to have done any good. Herb Greenberg appears just as abysmally ignorant today of MREITS in general and NovaStar in particular as he was a year ago — despite the efforts of a number of MREIT experts to explain how they work. One really has to wonder at such continued ignorance…

    Letters to the editor

    CBS MarketWatch
    June 21, 2004

    Re: “NovaStar, peers differ on accounting”

    I write on behalf of NovaStar Financial, Inc., to correct factual inaccuracies and omissions in the latest column by Herb Greenberg.

    This is not the first time that Mr. Greenberg has shown carelessness with factual reporting. For example, in his April 29, 2004, column about NovaStar, Mr. Greenberg initially wrote that PMI (a mortgage insurer) had sued NovaStar when, in fact, it was NovaStar that had filed the lawsuit against PMI. Mr. Greenberg corrected this error immediately when it was pointed out to him, but it struck me as an inexplicable error that could have easily been avoided.

    Unfortunately, carelessness with the facts and an orientation to one-sided negative reporting has been a pattern of Mr. Greenberg’s columns concerning NovaStar. The most recent occurrence was his June 10, 2004, column. Let me offer just two of MANY examples.

    First, Mr. Greenberg writes that NovaStar has “heavy reliance on non-cash gains [on sales] from selling mortgages,” stating that NovaStar depends on these gains to pay its dividends. He is wrong.

    Fact: The accounting treatment for NovaStar’s securitizations has no role in determining the level of NovaStar’s dividends. If NovaStar suddenly shut down its branch and origination operations — and stopped borrowing money or raising capital — NovaStar would continue to receive income from investments and pay dividends out of that income.

    Fact: NovaStar pays dividends from the income derived from the performance of the portfolio — and not from loans sold.

    Fact: About 88% of NovaStar’s net income comes from income from the mortgage-backed securities portfolio.

    Second, Mr. Greenberg criticizes NovaStar for using “gain on sale” or GOS accounting — meaning, booking of the fair value of the residual income up front from its mortgage securitizations. He says it is unusual and implies it is deceptive.

    Fact: The accounting for sales and securitizations of loans is prescribed by Generally Accepted Accounting Principles (GAAP).

    Fact: Structuring loan securitizations to meet “sale treatment” under GAAP is common not only in the mortgage industry but in other lending industries that use securitized portfolios to spread the risk and increase the availability of mortgages to higher risk borrowers.

    Fact: NovaStar’s accounting has been consistently reviewed and approved by its outside auditors and has never been questioned by regulators.

    Fact: In seven years of operation, NovaStar has not experienced any permanent impairments (write downs) in its mortgage-backed securities portfolio.

    Mr. Greenberg does not dispute these facts. In fact, he knew about all of them. They can be found in NovaStar’s public filings and press releases, which he quotes elsewhere in his column. He just chose to omit them and instead relied on an anonymous quote from an admitted competitor of NovaStar — a “veteran executive of another REIT” — to criticize NovaStar’s use of accounting, without explaining why he couldn’t say the same thing on the record.

    We have spent literally dozens of hours responding to Mr. Greenberg’s questions, his follow-up questions, and the follow-up questions to his follow-up questions. Each and every time, we try to give him the facts that can be confirmed as undisputed. But, each and every time, he has ignored most of these facts or distorted them into negative inferences. This is most unfortunate.

    We would appreciate it if, in the future, Mr. Greenberg’s editors reviewed his statements to ensure they are accurate. Furthermore, we plan to give Mr. Greenberg the following blanket statement if he calls us in the future about NovaStar for his columns:

    “We are confident in our business model, past and future performance of profitability, and the accuracy and completeness of our publicly filed financial statements and other press releases and our commitment to transparency. We regret that sometimes we are unable, on a day-by-day, sometimes hour-by-hour basis, to respond to Mr. Greenberg’s multiple and continuing questions. We will continue to do our best to respond to all legitimate questions from any journalist, with our answers available to the general public.”

    Sincerely,

    Scott F. Hartman
    Chief Executive Officer
    NovaStar Financial Inc.

    Comment by Lynetta Keith -

  7. It is funny how all the sub prime and non traditional mortgage originators are being attacked by naked shorts….please! Maybe the weakness in these companies has something to due with mortgage portfolios that are about to implode? Or loan production that is about to slow? Or continually raising money to meet earnings expectations and pay dividends. Or maybe that for the last three years everything went their way and now as with all interest rate bets things might change? And when they change they change quickly.

    Or maybe its just a bunch of naked shorts….lol.

    NFI is a tough borrow but others are still open.

    Mark I sent you an e-mail through the comments section – I hope to hear from you.

    Comment by Paul -

  8. Hello,

    I was a share holder of NFI for about a year and half. I am a young student and I put everything I had saved into NFI stock. Overall thanks to the recent actions of mostly naked shorts I lost money and sold. The market has left a permanent bitter taste in my mouth which I may not get over.

    Mark, this type of illegal shorting while it may benefit you and your associates, hurts the small investors. I mean, but hey, as long as you make money… It’s just not fair, and I like the analogy referenced about making the Mavs play with three guys and the rest of teams with five. Just doesn’t make sense…

    What ever happened to Mamma.com? Standard pump on your blog, then you bought a boat load and of course it went up, what it doubled, no biggie, then you sold all of it and bashed it… Hummm don’t you feel bad about all the small investors who got hammered?

    BTW, we bitch about Naked Shorting about as much as you bitch about Officals…

    Comment by Justin -

  9. You obviously don’t have a clue how NFI, and other REITs, operate. Since, virtually all earnings must be paid out in order to maintain REIT status, secondaries are really the only way that REITs can grow.

    The secondaries are NOT used to pay dividends. They are used to grow the company. Surely you must be smart enough to understand that.

    Comment by Ross Burlemann -

  10. Sounds like Mr. Cuban substituted reading some columns, or maybe some for-hire “research”, especially given the repetition of phrases from a news service columnist who has written no less than 30 negative articles about NFI over the past 27 months, with just a hint of the research by a self-proclaimed “forensic accounting” expert who will write about any company his $40,000 per year subscribers ask him to. Interestingly, that columnist quoted that researcher on February 14th, when the latest in six reports came out of that re-named research-for-hire outfit. Since neither the columnist, Herb Greenberg, nor the researcher, Donn Vickrey, was willing to comment on the errors in that research, I’ll share it with the blog readers, and indirectly with Mark, since he may have seen it and not spotted the mistakes:

    My e-mail to Donn Vickrey —

    Thought you’d like to know that your latest is out on the internet. I suppose you won’t be able to put the toothpaste back in the tube, but at least I would let you know.

    It has a few fundamental flaws in the calculation of GAAP-supported dividends. The most obvious is subtracting $2.25 from each common share as adjustment for preferred dividends paid. There are only 2.99 million preferred shares outstanding, while there are 26 million shares of common (and growing) in your analysis. That overstates the preferred dividend by over $50 million per year. You also used annual new production levels to arrive at the earnings, when the appropriate calculation is to use the outstanding balance of loans in the portfolio. The company had $12.2 billion in loans in its income-producing portfolio as of December 31, which has already grown to $13 billion as of February. The third obvious error is assuming a full year of spread earnings on new loans, when nearly all of them will only earn the spread for a partial year.

    Good luck cleaning up the mess.

    H

    Mark —

    If you want to go one on one regarding NFI, I’ll be glad to do so. I will use my own name and reputation, which you can easily check by asking the head of mortgage or asset-backed securities at any Primary Dealer. Just come prepared to talk about the business. Bloviation isn’t my favorite thing either.

    Comment by Howard Hill -

  11. Larry,

    Do not blame Mark for his “Do as I say Not as I do Attitude”. It comes with the extended credits of a different class most do not have access to.

    Who are violating todays securities laws with naked shorting? Hedge Funds tailored to the Wealthy and now Wall Street Institutions according to the WSJ, and Criminal Elements Offshore as defined by the SEC, FBI, and DOJ.

    Now why would Mark care about this? Mark does not even know if his broker was actually shorting his positions legally or illegally. THEY NEVER TELL YOU. He may be paying the premium on the “borrow” but according to Leslie Boni, the Industry strategically decides not to borrow when it eats up margins. Instead they Fail the settlement. There is no notice of the fail to the intended buyer nor to teh short seller so for all Mark knows he was actually paying a premium his broker pocketed as additional profits.

    Nkaed Shorting is illegal but so many Corporate Officers live off illegal acts they have learned to simply justify it as Natural. It is teh middle and low class that have the laws applied harshly and swiftly. We can’t buy our way around them.

    Comment by Dave Patch -

  12. Mark: You say about O’Brien “Good for him. I hope he is able to catch some naked shorters. They are breaking the law. May they show up in a Law & Order episode.

    None of this has anything to do with the operational issues of any company being discussed.”

    Me: I find it strangely ironic that you can write a whole blog on your indignation about baseketball refs not enforcing the rules properly (see your 2/12 rant) yet be so dismissive about illegal naked shorting WITHOUT KNOWING the size and scope of the problem. What’s up with that??

    Comment by Larry Greco -

  13. Lets try this analogy on for size.

    Lets pretend the NBA moves to a three on three game to increase scoring. The Mavericks follow the rules, while the rest of the NBA continues to play 5 players, and some even play 6 or 7. The league decides to turn a blind eye.

    After a while, the Mavs are going to start losing revenue and season ticket holders are going to complain.

    Mr. Cuban, presumably, as a good owner, would ask the NBA to enforce the rules because he knows that they have a talented bunch that could surely win the new 3 V 3 games.

    That’s all we’re asking here, we want everybody to play by the rules on the books. Whether or not NFI is a good company is irrelavent ( I happen to think it is). All we want is for the rules to be followed, so shareholders can get their fair value, and fools who short it can actually find their shares to short.

    Claude

    Comment by claude mendelson -

  14. Brianna, can I call you Brianna? Please close your pie hole. Are you Marky’s mother? Are you upset that someone said something that wasn’t very nice about Marky? Marky stated the diminutive endearments with his Bobby comments, so Marky had it coming.

    As for one of the greatest lessons in TV recently, yes, his show was indeed a lesson in NOT what to produce. In addition, I see that you’ve took the next step in organ donation and donated your brain.

    Comment by William Vanet -

  15. Mark,

    How does naked shorting not impact a company? If we were to apply naked shorting to any other commercial commodity the value of that commodity would be injured. Can we sell massive “counterfeit seats” to your Mavericks games and not have it impact the value of your seats if EVERYONE that showed up with a ticked could always enter the arena? Simply told, the cost of tickets would be reduced and the quality of teh show ww paid for would be devalued by teh altered view we would all get. As owner, your revenues would be impacted by virtue of the fact that nody will buy the real tickets if the “counterfeit ones” were always cheaper and worked. You then lose your ability to pay players and maintain your business.

    Recently the General Council to Bear Stearns told their members and clients this:

    “To give you that brief introduction in Reg SHO, the history how we got to where we are today. For the past several years we have been hearing from many different regulators regarding their concerns about the increase in the level of fails that they are seeing. They believe, and they have stated on numerous occasions, that one of the primary causes of the high level of fails was that various participants in the short sale process, prime brokers, executing brokers, clients, were not following already established rules.”

    This confirms awareness to laws being broken. This also comes after the SEC published this pertaining to naked shorting:

    Naked short selling can have a number of negative effects on the market, particularly when the fails to deliver persist for an extended period of time and result in a significantly large unfulfilled delivery obligation at the clearing agency where trades are settled. At times, the amount of fails to deliver may be greater than the total public float. In effect the naked short seller unilaterally converts a securities contract (which should settle in three days after the trade date) into an undated futures-type contract, which the buyer might not have agreed to or that would have been priced differently. The seller’s failure to deliver securities may also adversely affect certain rights of the buyer, such as the right to vote. More significantly, naked short sellers enjoy greater leverage than if they were required to borrow securities and deliver within a reasonable time period, and they may use this additional leverage to engage in trading activities that deliberately depress the price of a security.

    The US Securities Markets are supposed to be teh best in the World. They cannot be when they are rigged for the higher tier players to rape the unsuspecting lower tiers through fraud and manipulation.

    Legally short all you want. Level the field on all teh rest.

    Comment by Dave Patch -

  16. Bob – we all agree with the legal issue. done. now, if you think you were wronged and sufferred damages, then sue DTCC for the information. i’ve sued the NYSE and specialists before and surprisingly they respond.

    mark clearly indicates if you have a good company, the chicanery will end and to your benefit. in fact, you have nothing to worry about…let it ride. in the meantime, can and should the SEC do more to detect and prevent illegal naked short-selling? yes.

    so the question now becomes is the DTCC withholding information that will prove your case/NFI’s? sue them and force them to withstand an obstruction charge. obviously the company should be doing this as well if what you suggest really does impair its ability to conduct business. these are far greater implication for the company and a MASSIVE risk to those entertaining such a scheme.

    Comment by Brian -

  17. Jim:

    That’s all well and good, but MREITs that require the ability to go to the well regularly to raise money for investment in their portfolio are materially harmed by an artificially depressed share price. It causes them to have to sell more shares for he same $, so it is more dilutive.

    Additionally, it is illegal to naked short, for a really good reason that James Brigagliano – the assistant director of the SEC’s Division of Market Regulation and the number two enforcement guy at the SEC – articulated pretty capably. His words, not mine:

    “…when market participants enter into naked short sales on a massive scale, they could have an endless supply of shares and could drive down the price in an abusive or manipulative way.”

    Now, is there any part of that you find ambiguous or difficult to comprehend? No? That’s the SEC, not kooky Bob O’Brien, the leader of the nut brigade. Think about it, reread it, and ask yourself one question:

    Why won’t the DTCC just tell the companies what the extent and size of their fail to deliver position is?

    Comment by Bob O'Brien -

  18. Mark – Redirect and let’s talk Charter. It’s obvious the rat isn’t taking the bait…

    And Willie, can I call you Willie? Please close your pie hole. What is your list of accomplishments? If you have nothing better to do than disparage on of the greatest lessons in TV recently, then you seriously consider taking the next step in advancing your career in organ donation.

    Comment by Brian -

  19. What I like about Mark is that he knows how to cut to the chase. His most basic point, which no one has been able to shoot down yet from my perception, is that companies with a rock solid financial position will have very little to worry about in the way of share price manipulation via naked shorts.

    He goes further, rightfully so imho, and states that it is actually GOOD that someone would short a strong company. This provides an opportunity for a company to perhaps buy back its stock at a significant discount (among other benefits). Can you imagine that…the short sellers are providing a company with the ability to RAISE shareholder value?

    I feel like I’m paraphrasing Mark, but it seems like it needs to be reiterated for some people: If a company needs to rely on its stock price to stay in business, it probably isn’t in a very healthy position in the first place.

    Comment by Jim Kerr -

  20. Marky: I’m not one of Charlie’s Angels and he isn’t Bosley. So until he meets face to face, there won’t be a meeting. I want to be able to look him in the eye and call BS if and when I hear it.

    In other words, Marky the Donald Trump wannabe is a coward and he knows he’s outclassed. Way to weasel out Marky. Marky wants to call BS, which is all Marky has: no reasons, no facts, no analysis. He can’t tell a mbs-reit from his own ass. Good luck with that hedge fund for gambling, Marky. One of the stupidest ideas I’ve ever heard.

    And oh by the way, why was your television show canceled? Loser.

    Comment by William Vanet -

  21. Oh, and by the way, I don’t have a problem with meeting face to face. Got no problem at all with that. Got a problem with the camera.

    And the company not asking me to change the name of the site is a reason to want to short it? You realize there are windows-sucks.com, mi-crosoft.com, microsoftsucks.com, and a f*ckmicrosoft.com? Should we all short microsoft as they didn’t have them change their names?

    Seems a little specious. Actually a lot specious. Although it is reassuring that none of the reasons you have given so far are legitimate reasons to short the company.

    No disrespect intended. But they aren’t.

    Comment by Bob O'Brien -

  22. My concern has been the short-term/intra-day naked shorts…those that jam massive amounts of shares down the pipe during the day when they know support (conveniently) simply isn’t there. These guys are ‘good’ and typically get covered during the day or within T+3. Meanwhile, they cause damage to individual investors that get ripped-off during these illegal (naked short) bear raids and no one ever knows. In the end, we hope those that violate the law get caught and punished.

    Overall, short-selling is beneficial to the market; however it’s not without its warts. Certainly more could done in terms of reporting (see previous comments), enforcement, and penalties. I mean, before the mutual fund scandal surfaced whodda thunk there was a problem?

    ps – Charter’s at the river tonight…it’s not too late to break-out the green-eye shade and do some pre-grame analysis…

    Comment by Brian -

  23. From a PDA-Gotta love that Treo…

    Mark: I think its wrong to raise money in a 2ndary to pay a dividend. Either you have money to pay the div or you don’t. 2ndaries dilute ownership and create a bigger obligation for future dividends. That’s a slippery slope, IMHO

    Bob: Every MREIT on the planet does secondaries every few months to raise capital to invest in growing the business. NFI has and always has had the money to pay their dividend – the portfolio earns almost 90% of it. The problem, which again, ALL MREITs have, is that if you are paying out 90 or 100% of the Taxable Income as a dividend, there’s no money left over to invest in growing. That why they ALL do regular secondaries. Alternatively you can believe that all MREITs are some sort of Ponzi scheme. Depends upon your ignorance of accounting and REIT rules, I suppose. The company actually addressed this, as did I in debunking the Gradient Analytics report at the http://www.NFI-Info.net website’s news page under the 2.20 date.

    MARK: Missing your numbers because of rising short term interest rates when it’s pretty obvious that short term rates were going to go up. Suggests there is a failure to communicate between them and the analysts.

    Bob: There is a failure, but it isn’t in the company’s communications. Again, speaks to ignorance of the specifics. The GAAP numbers weren’t “missed” due to short-term rates going up. They took an Impairment due to the forward yield curve spiking – a forecasting mechanism for future rates that spiked in the last few weeks of December. That causes the value of the newer securities they hold to go down in value, and some older securities they hold to go up in value. The problem is that GAAP won’t let you revalue those older securities up or recognize the increase in value of the hedges even though in the real world they did increase in value (I know, I know, that’s not fair, but it’s the way GAAP in its wisdom works), only to write DOWN the newer securities, hence an impairment on the GAAP number – note that there is NO impairment on Taxable Income, which is what the dividend is paid off of.

    So nothing to do with short term rates going up in Q4, everything to do with a change in the forward curve (again, which has nothing whatsoever to do with interest rates in December – rates could have gone down then and if the curve had gone up it still would have caused the same impairment.)

    So the facts actually get you to a different conclusion than Mr. Cuban arrived at, if you dig in deep and look at all the facts.

    Funny, that.

    Although I do like talking specifics. Specifics are your friend. If you are accurately assessing the data. Which I try to do.

    Comment by Bob O'Brien -

  24. NovaStar’s CEO Scott Hartman said it very well when he wrote Greenberg’s current employer last June about one of Greenberg’s deliberately inaccurate and manipulative columns — not that it appears to have done any good.

    Comment by runescape money -

  25. At times, the amount of fails to deliver may be greater than the total public float. In effect the naked short seller unilaterally converts a securities contract (which should settle in three days after the trade date) into an undated futures-type contract, which the buyer might not have agreed to or that would have been priced differently.

    Comment by wow powerleveling -

  26. P.S. Tommy. With posts like the one you made yesterday (below), I can see why you keep your mask your identity.

    ———————————————
    Re: Breaking news…. Easter Bunny unma
    by: tommytoyz 09/19/05 02:36 pm
    Msg: 345551 of 345746

    Actually, the CIA is responsible for counterfeiting, money laundering from foreign sources and investigating money flows to and from possible terrorist organizations.

    Posted as a reply to: Msg 345533 by eyewashereb4u

    Comment by Donn Vickrey -

  27. Tommy,

    It is difficult to respond to an annonymous poster such as yourself. I suspect that your unwillingness to go public with your identity speaks to the invalid nature of your claims.

    DV

    Comment by Donn Vickrey -

  28. To Donn Vickrey:
    You’ve been served papers suing you, alleging that your reports are anything but independent, as you claim, but rather slanted to your clients needs. So you’ll have the opportunity to clear up the allegations against you in this and other threads, in front of the judge.

    And as to you claim about hhill, he has disclosed several times on the NFI Yahoo! board that he was a buyer of NFI MBS bonds – another false statement on your part. When will you stop?

    Comment by tommytoyz -

  29. Howard Hill wrote:

    “with just a hint of the research by a self-proclaimed “forensic accounting” expert who will write about any company his $40,000 per year subscribers ask him to.”

    Howard:

    You are either (1) poorly informed about Gradient’s business model or (2) you were intentionally misleading with your comments above. Either way, the fact remains that you are very, very off base. Further, I am surprised that a Wall Street professional like you would behave so unprofessionally.

    Howard went on to say:

    “Since neither the columnist, Herb Greenberg, nor the researcher, Donn Vickrey, was willing to comment on the errors in that research ”

    Two questions for you Howard.

    1. Are you a client? If not, then what is my obligation to you? Please enlighten me.

    2. If you want to discuss ethical issues, let’s do that. In a prior conversation, you mentioned to me that you purchased Novastar mortgage securities for a MBS or ABS deal you were putting together. During this period, you have also posted hundreds if not thousands of messages over the internet that look to me like bullish stock calls. Yet, never once did you disclose your conflict of interest. Why is that Howard?

    Comment by Donn Vickrey -

  30. “why would you pick one in which company execs spend so much of their time defending themselves in meaningless forums? ”

    What company are you talking about?

    Comment by Bob O'Brien -

  31. The last time I saw someone defend themselves so much on blogs and message boards was when an eBay scammer was busted. Of all the companies to invest in, why would you pick one in which company execs spend so much of their time defending themselves in meaningless forums? And let’s not forget the disrespect of the conference call. Add that to the other red flags, and I’d pay a premium to get my shares out the door. Even if it happened to be a great company, there are plenty of other great companies that can make me money. Can you honestly say those guys are going to do what is in your best interest when things go bad?

    If you buy the stock, fine with me. Empty your pockets for all I care. I hope you make tons of money. I wish no ill will on anyone. Just don’t whine and blame others when you get crushed because you took on more risk than you could handle as many here are doing.

    Comment by Scot Adams -

  32. The “failure to delivers” should stop. The entire “delivery” concept was based on paper certificates bouncing around and, in this electronic age, it is ridiculous on its face. Hedgers take advantage of it to de facto counterfeit shares- i.e. money- and screw investors- most of whom don’t deserve it.
    What moron can possibly defend it?
    Question: If short activity expands the share base by 100%, what happens during a BOD election or a proxy fight? Half of the shareholders will not be owners of record, and have no voting rights.

    Comment by Ryan O'Neal -

  33. add another to the ranks of people who think there are some conflicts of interests and collusion going on in some shortselling quarters who have the ear of certain financial journalists. and this from a guy who runs a hedgefund himself, and presumably does a fair amount of shorting/hedging as well.

    going against the herd and shorting perceived overvaluation, flawed business models and the like is not only a legitimate practice, its a commendable strategy. its what helps make markets. but people who excuse and trivialize a patently illegal practice like naked shorting are probably the types who never question the ethics of “talking their book” to their cozy journalist buddies. oh, but the rules are so stacked against them vs the longs, they are just trying to level the playing field in their own small way…i know, i know…

    some food for thought from tom brown at bankstocks.com and second curve capital:

    “Monday, May 03, 2004
    Thomas K. Brown
    bankstocks.com
    tbrown@secondcurve.com More by This Author…

    TheStreet.com’s Peter Eavis has been so spectacularly, utterly, and completely wrong on Capital One for so long, it’s hard to chalk up his mistakenness to simple incompetence. There must be something more: even know-nothings will eventually come to the conclusion they don’t know what they’re talking about, and move on.

    But not Peter. He keeps blazing away quarter after quarter, year after year, with the same twaddle, even after it’s been shown to be twaddle. And he keeps making stuff up, concocting baseless managements smears—seemingly for the sake of smearing. And the stock just keeps going up!

    Why does he keep at it? My guess—and it’s only a guess—is that he’s under orders from David Rocker, the short seller and major shareholder in The Street.com, to keep bashing the stock to help Rocker’s short position. But we may never know that for sure. The Street.com’s backers refuse to disclose their short positions, and Eavis himself, sanctimonious when it comes to disclosure by others, is quick to exempt himself from his own standards.

    (For the record, by the way, the investment partnership I run has a large position in Capital One, and I have owned the stock personally since the company came public in 1994.)

    In all of his ravings, Eavis fails to include a number of facts that one would think would be relevant to an interested investor. Like, for instance, that Capital One’s earnings have grown at a compound annual rate of 30% since the company came public, and that its stock price has risen at a 31% compound annual rate over that time. Neither has Peter mentioned that Capital One’s performance record over the past decade has ranked among the very elite in corporate America.

    No, all Peter sees is doom, gloom, and imaginary unethical business practices. It’s hard to imagine how he could be more wrong.

    To see just how off base Peter has been on this company, go back and read what he wrote following the company’s first-quarter earnings report a year ago. Capital One, recall, had reported spectacular results, up 62%, to $1.35 from 82 cents the year before—a whopping 32 cents ahead of expectation. But Peter, missing the boat completely, complained that the earnings blowout was “low quality” and accused the company of skimping on reserves and underspending to artificially inflate result. “The company stretched in more directions than one might think humanly possible to make its earnings number,” he wrote, “Most important about these antics is that they can’t be sustained for more than a couple of quarters, which implies the company is trying to project the impression of strong earnings to attract buyers.” Peter added that Cap One was worth no more than $25 in a buyout.

    Yet here we are four quarters later–and Capital One has consistently met or beat the Street’s expectation every quarter! And was the company sold? Not exactly. Instead, the stock, which was trading at $43 a year ago, has since zoomed to $75 recently, before setting back to $65 in the past week or so. A $25 buyout, indeed.

    So what was Peter’s take on Cap One’s first-quarter earnings this year? A rerun of 2003! The company, recall, earned $1.84 in the quarter, up from $1.35 a year ago and 21% ahead of Street expectations. Sure enough, just as in 2003 Peter complained he thought the company artificially under-reserved (which it didn’t), skimped on marketing (it didn’t do that, either), and resorted to other tricks to make its number (wrong, wrong, wrong.)

    Peter was proved clueless about the first-quarter 2003 results, and he’ll shortly be shown to be clueless about the 2004 first quarter as well.

    While Peter was complaining about what he saw as under-reserving at Capital One last year, he neglected to tell his readers that earnings in 2002 were understated because of the huge loan loss reserve additions the company was required to make, thanks to the formulaic reserving approach regulators require. No, back then Peter’s view—or rather, in my opinion, the view that David Rocker instructed Peter to have, —was that the big reserve additions were an ominous sign that the company’s credit quality was deteriorating fast. He turned out to be wrong about that, too.

    This isn’t disinterested reporting analysis, it’s a long-term hatchet job, carried out at the expense of readers solely in an attempt to enrich the owner of Peter’s employer.

    There is no level so low that Peter won’t stoop to it. Last week he accused Capital One’s management of violating SEC disclosure rules by announcing internally the company would reduce headcount at certain of its facilities. That is a slander. Peter (naturally) sees the layoffs as the sign of a ruinous expense squeeze. He’s wrong. Capital One is trimming headcount at certain facilities for several reasons, one of which is outsourcing, a long-time Cap One practice. Beyond that, the layoffs reflect the fact that the company has purposely slowed portfolio growth over the past year. Peter, who’s long complained that Cap One’s rapid growth was unsustainable, can’t possibly complain about that. But he does anyway: the plan, he says, “. . . has the air of panic about it. It reads like the company won’t hit its earnings forecast unless it takes a big ax to its expenses.” Please note the absence of any evidence to back up that assertion.

    Mind you, Capital One has never reported full year earnings growth less than 20%, nor has management ever failed to meet or exceed its annual earnings forecast. For ten years! Peter has predicted several times that it would fall short–and has been wrong every time! Who do you think is a better forecaster?

    In his last two pieces on RealMoney.com, Peter has lost any semblance of tone of disinterested analyst, and has begun to sound like a man with a vendetta. Why? My guess: David Rocker, who is reportedly short Capital One, is leaning on him hard. Peter is bought and paid for by Rocker, I believe, and has apparently made the choice to serve that one man rather than his RealMoney readers. It’s the worst kind of journalistic betrayal; I’m at a loss to understand why his editors put up with it.

    Peter and I often exchange emails after he writes one of his outrageous columns. They’re not always friendly. It’s clear that, for whatever reason, he is bitter, doesn’t know details of the company, and will not be confused by the facts.

    The irony is that I should be thanking Peter, not lambasting him. To the extent he has any influence with readers left (and heaven help them if he does!) he’s giving us a chance to add to our Capital One holdings at a lower price.

    What do you think? Let me know!

    Comment by lance montano -

  34. NASD takes first actions exposing Naked Shorting as the Sale of Unregistered Securities.

    This is Cause 3 of the NASD Case against Hilary Shane in which she sold Compudyne shares short without delivery and without exemption from delivery. Her 975 Transactions for sale failed proper settlement.

    CAUSE THREE
    Shane Unlawfully Distributed Unregistered Securities by Selling Shares of CDCY before Their Registration (Violations of Section 5 of the Securities Act of 1933 and thereby of NASD Conduct Rule 2110)

    52. The preceding paragraphs of this Complaint are realleged here.

    53. From on or about October 9, 2001, through on or about October 29, 2001, Shane sold CDCY for her own account and for the account of Millennium without borrowing shares and while intending to cover the sales with shares from the PIPE.

    54. By engaging in the foregoing conduct, Shane, directly or indirectly, made use of
    the means or instruments of transportation or communication in interstate commerce or of the
    mails to sell securities for which no registration was in effect and to which no exemption applied, in violation of Section 5 of the Securities Act of 1933, thereby violating NASD Conduct Rule 2110.

    How many other PIPE/Hedgies operate in a similar manner and will see similar actions?

    Comment by Dave Patch -

  35. As for Manuel Asensio and his book, EVERYONE should take a moment and read this site: http://www.asensioexposed.com/nasdscandal.htm before accepting everything he says as truth.

    Comment by Guess Your -

  36. It all comes down to this: integrity and character. The laws governing the SEC are in place to provide boundaries. Unfortunately, there will always be those who choose to run afoul of it. It’s our CHARACTER that determines our motivations and actions in how we conduct business.

    Comment by Darin Wood -

  37. Jim,

    You are dilusional. If we all invested as you say we would all be under water today. Buy long and leave it alone? Worked well for those Enron chaps. How about the tech run that exploded – short squeezes caused the techs to go artificially high (drawing in investors) and then the fail simply became that much greater with panic selling (for good cause) and overselling shorts.

    No stock, for any reason or at any time should be embroiled in a game of manipulation. While you may be in your youth and can wait out the manipulation process, others such as retirees need to live off their savings for which part is in the Markets.

    Funny thing is – NONE of this is about normal legal short selling. This is about Naked short selling which has been illegal forever. Those wanting to bet on the down side are free to do so – LEGALLY. Wall Street, and Wall Street Compliance are obligated to settle all trades as defined by our Securities Laws. To date I have not heard a single claim as to why trades should not be forced to settle in a resonable time.

    The Long and Hold investor is gone because teh market became too corrupt for that Investing principle. it became corrupt because Wall street want volatility and trading volumes because it is what creates Revenues off Commissions and the $20+ Million salaries Wall street executives take home. Funny how these companies keep getting into hot water but the crooks at the top are left alone. Can you say Campaign Contributions?

    To Repeat – Normal shorting under legal grounds is NOT the issue – Illegal Naked Short selling is and so far NOBODY can tell me why illegal trading practices should not be strongly enforced. Not even Mark Cuban who initiated this dialogue.

    Comment by Dave Patch -

  38. I read Manuel Asensio and all interested in the ways of wallstreet should do the same

    Comment by Its strange -

  39. Now to your study #1: That proves that the SEC doesn’t prosecute naked shorting much. It doesn’t mean that there isn’t much naked shorting or market manipulation. It means that they don’t really understand it, or that the short side manipulators are more sophisticated. Speaking to friends of mine that are ex-SEC, my take is that they don’t understand it very well – most SEC folks couldn’t even tell you the basic mechanics of a naked short sale, much less be on the alert to prosecute.

    Now to your study #2. That is a popular study that compares companies that complained about being shorted, and then concludes that they were likely overvalued – seems reasonable to me. What does it have to do with naked shorting? Nothing. Jeff, again, intermingles naked short selling, an illegal manipulation tactic, and legitimate short selling, as though they are one and the same. Why this cognitive dissonance? Don’t know. Legal vs. Illegal. Or, again, again, consensual sex vs. forced rape. Pretty easy for me to get the difference. I suppose that the ones that don’t are the ones more likely to be rapists. Dunno. It’s one possible explanation, as I’ve never understood the rape thing, but that doesn’t mean I pretend it doesn’t happen with regularity.

    After making this egregious fallacy of equivocation, he then goes on to conclude that short sellers have enough impositions and rules reigning them in. Again, at no point does he seem to make any distinction between legal and illegal shorting, and further at no point does he recognize that the only way there could be a Reg SHO list is if the rules on the books were not being observed or enforced. He further misses that what is being demanded is not new rules or regulations, but rather simply the enforcement of the rules that have been on the books for 71 years.

    Jeff misses a lot. In fact, the whole point. Now when obviously highly intelligent and capable writers miss by that wide a margin, I have to ask myself whether it is intentional misdirection and intellectual dishonesty, or dimness and a lack of ability to grasp the fundamentals.

    You can be the judge.

    Comment by Bob O'Brien -

  40. Jeff:

    Huh. Another guy who can’t make a distinction between short selling – a legal activity, and naked short selling – an illegal manipulation technique.

    JEFF: 1. We Need to Eliminate Naked Short Selling to Level the Playing Field

    BOB: We need to enforce the law. It’s illegal. Get it? Illegal. Hello?

    It is like confusing consensual sex and forced, violent rape. Most know the difference and are clear on it. Plus, it’s illegal. Did I mention that?

    Now to the more ridiculous “points” in item 1:

    Well, I suppose that if a hedge fund is systematically selling a stock and committing to make an affirmative determination and promising to deliver the shares and then violating all the rules against not doing so, it is inconceivable that they would ignore the no short on uptick rule – why (gasp) that just wouldn’t be right!!! And heavens knows they wouldn’t use the ECN’s to program trade in a flurry so that they could, in the highly unlikely event that they decided THAT was the rule they were going to observe, create a cascade of ever lower asks using the hundreds of thousands of shares in their long accounts and then naked short in between the inevitable upticks. Again, that is unimaginable – unless of course you’ve looked at some of the hedge funds suspected of doing this and seen the long accounts, and watched the program trading off the ECN’s during attacks.

    You don’t get out much. Read the Compudyne NASD complaint if you are arguing that it can’t happen with our system. It does, all the time – 975 different trades selling over a third of their float short without the system making a peep in the Compudyne case. Your argument that nobody could be driving over 55 because there are rules against it is specious.

    JEFF: 2. Naked Short Selling Destroys Innocent Thinly Traded Companies

    BOB: 2. It can and does. Most recognize that the ability to sell an unlimited supply of bogus shares of a company for which there is limited demand will result in precipitous price declines. This isn’t rocket science. Even the SEC recognizes it.

    From their own http://www.sec.gov/rules/proposed/34-48709.htm#II site:

    “Although short selling serves useful market purposes, it also may be used to illegally manipulate stock prices. One example is the “bear raid” where an equity security is sold short in an effort to drive down the price of the security by creating an imbalance of sell-side interest. Further, unrestricted short selling can exacerbate a declining market in a security by increasing pressure from the sell-side, eliminating bids, and causing a further reduction in the price of a security by creating an appearance that the security price is falling for fundamental reasons.”

    And

    “Many issuers and investors have complained about alleged “naked short selling,” especially in thinly-capitalized securities trading over-the-counter. Naked short selling is selling short without borrowing the necessary securities to make delivery, thus potentially resulting in a “fail to deliver” securities to the buyer.
    Naked short selling can have a number of negative effects on the market, particularly when the fails to deliver persist for an extended period of time and result in a significantly large unfulfilled delivery obligation at the clearing agency where trades are settled. At times, the amount of fails to deliver may be greater than the total public float. In effect the naked short seller unilaterally converts a securities contract (which should settle in three days after the trade date) into an undated futures-type contract, which the buyer might not have agreed to or that would have been priced differently. The seller’s failure to deliver securities may also adversely affect certain rights of the buyer, such as the right to vote. More significantly, naked short sellers enjoy greater leverage than if they were required to borrow securities and deliver within a reasonable time period, and they may use this additional leverage to engage in trading activities that deliberately depress the price of a security.“

    Comment by Bob O'Brien -

  41. To the poor sap who invested in NSI and then lost his money getting out when the stock price was down: If you felt the company was strong enough to invest in, you should have just kept your money in and waited out the storm. If you needed the money for some personal reason, then you should never have invested it in the first place. The stock market isn’t a savings account.

    To Bob:
    I’m still not getting you, but I think that it may just come down to a difference in philosophy. I invest in companies via the stock market. I don’t invest in stocks via Wall Street. If my shares languish for a few years while the company is still selling its widgets, making profits, and re-investing those profits in the company, then I don’t much care if my shares sit at 1/3 their true value for a bit (and by bit I mean a year or two or three). In fact, my primary concern would be that the company would be highly appealing to a big investor to buy outright due to the unrealistically lower price, but even that scenario isn’t too likely with well-managed companies.

    I would certainly understand if someone who makes their living speculating on share prices going up and down being very annoyed with someone shorting a company they are invested in, but I don’t think the underlying company is going to find its distributers any less effective or its customers any less happy or its salespeople any less able to sell.

    Jim

    Comment by Jim Kerr -

  42. I am the founder and leader of Asensio & Company, Inc. (“ACO”). I have recieved by email from several subscribers to asensio.com copies of your comments on short selling. I am involved in lobbying efforts to reform securities legislation and short selling regulation.

    ACO was, from early 1996 until it ceased operations in late 2003, the nation’s largest dedicated short selling organization. ACO operated as a member of the NASD and was the first and remains the only SEC/NASD registered brokerage firm that regularly took trading short positions, advised large institutional clients on short positions and established and maintained a free internet web site to publish, distribute and promote reports that advocated short selling shares and opposed the stock promotions of our short selling targets.

    This activity produced an annual compounded return in our managed account of 71.125% from 1996 thru 2003 (the entire period of the operation). This also generated over a billion dollars of potential civil liabilities from first ammendment and securities litigation filed by 7 of the 30 short selling candidates, all of which was dismissed, settled without any payment by us or tried to a jury where we won the verdict. Along the way, the conversaries led to bad press, conflicted regulatory retaliation, the forced resignation of Richard Syron as Chairman of the AMEX after a congressional investigation into a fight between us and the AMEX, fines and sanctions (and bad press) for Dreyfus, Fidelity and Merrill, and even the resignation of Alaska’s Republican Attroney General who we discovered to be invested in the promotion a penny stock scheme doing business in his own state.

    These unquie experiences allow me to understand the cost to society of ineffective and biased short selling regulation. I am involved in lobbying for the complete de-regulation of short selling. This includes the elimination of the down tick and borrowing rules, strict restriction on the ability of managers of public companies ability to use their public funds to sue member of the media and securities analysts who critize their stock promotion partices, and the incorporation of holders of short positions into the protections granted all other investors under SEC rule 10-b. This last reform would eliminate harmful class action suits by plaintiff attroney who add no value to markets and allow short sellers to defend themselves against the worse elements of our society–those that abuse our nation’s free enterprise system and misallocate capital from our markets.

    Comment by Manuel P. Asensio -

  43. Bob, you are a douche.

    Instead of spending all day typing up comments on a blog why don’t you go invest wisely enough to have as much money as Mark so then you will have as much power as him and then you can solve whatever problems your holier than thou ass is trying to solve.

    Oh, because you can’t. You’re like that ass in Good Will Hunting who Will met at the bar. You have every book memorized, but you’re still a douche, who can’t solve problems.

    (Please note my comment is not in defense of Mark, this is an offense of douches).

    Comment by Greg Wilson -

  44. Jeff,

    It appears you are very good at providing spin to illegal activities.

    1. The rsks of long shareholders is finite while the risks to short sellers is infinite – ONLY if the rules are played according to law. In the case of naked shorting, where teh SEC admits that settlement fails can exceed the total O/S of companies, there is no risk to a short seller as they continue to sell what they do not own. Risk only comes when playing by the rules.

    2. SEC enforcement actions have yet to be a benchmark for fraud. Shall we looked at the last 1/2 dozen they missed and were forced into action after being publicly embarassed? The SEC is a joke, unwilling and unqualified to go after the real perpetrators of fraud – The wall street elite and hedge funds. As for teh NASD, they recently sought enforcement against hilary Shane for teh sale of unregistered securities in a “industry standard” illegal short selling scheme. It is the tip of the iceberg for what is yet to come. The timeline of that fraud – 2001 so the NASD is 3.5 – 4 years behind the times.

    Finally, It appears amusing that the ones that are defining naked shorting as a non-issue the most are the writers for thestreet.com past and present. thestreet.com being Hedge fund mecca of the World and Hedge funds most benefitting from naked shorting.

    I will note some of the Hedge fund affiliations are under scrutiny from the regulators. Will you continue to back them when SEC enforcement is handed down?

    The Law clearly requires the prompt settlement of all trades. Why is it you seek alternatives for select few?

    Comment by Dave Patch -

  45. I think there is alot more to this story that we don’t know about. I am still waiting for a reasonable explanantion why all those offices were closed .

    Comment by Its strange -

  46. TO Justin:
    “I was a share holder of NFI for about a year and half. I am a young student and I put everything I had saved into NFI stock. Overall thanks to the recent actions of mostly naked shorts I lost money and sold.”

    1st rule of sharedealing, don’t invest what you can’t afford to lose.

    Comment by Adam -

Comments are closed.