Allegations of “Naked” Short Selling May Prove to be Naked
The SEC has just announced emergency rules that effectively require all shares to now be “hard” delivered for settlement in T+3 days after a trade has occurred.
http://www.sec.gov/rules/other/2008/34-58572.pdf
I would expect this order to eliminate the vast majority of failures to deliver, which many pundits and even some know-it-alls have pointed to as evidence that “naked” short selling in the stock market has reached an epidemic. I’m mostly in the opposite camp, believing that while such activity does take place from time to time, much of it is due to messy back office operations as opposed to the result of a manipulation by a shady boiler room. Boiler room operations are for the most part involved in the pump-and-dump, a much more serious and dangerous scheme when it comes to the well-being of Joe Average Shareholder. Unfortunately, the new emergency SEC rules provide unintentional support to the pump-and-dump scheme since it can no longer be “busted” by the “naked” shorting scheme. Shareholders beware.
Here is what Patrick Byrne, CEO of Overstock.com, had to say about this:
If the SEC were anything but a hedge fund bootlick . . .
Well, that’s not all he said but I think it is enough to give you an idea of the man’s executive style. Yet despite the pointless protests from Mr. Byrne, it is now past time for the “naked” short selling crusaders to put up or shut up. Those who believe “naked” shorting has been the reason the share prices of companies like Overstock.com, Taser International, junior mining companies, etc. have been ravaged must now show us some real evidence that “naked” shorting exists or existed. To do that, they could point to the rabid short covering that should undoubtedly follow the SEC announcement. Or maybe they can’t, since Overstock was down over $1 and Taser was down around 20 cents yesterday. Or they could reconcile their theories with the sudden disappearance of fails to deliver from the Regulation SHO reports. My guess is they won’t do anything but cry some more about the SEC not doing enough, just as Mr. Byrne did so professionally in his “press release” yesterday.
But…do the same rules apply to the COMEX commodity trades????
No, Kondor, it doesn’t. But not to worry. Tom has assured us that everything is hedged elsewhere somewhere with something, so no problemo. Nothing to see here, just move along….
Tom,
I wanted to write you a commendation, for calling what it would take to turn the PM market. A loss of Fed credibility. That is exactly what has happened.
On the other hand, i can’t believe you are doubting the impact of illegal naked shorting again. The CEO of Morgan Stanley, has gone to the FEd and SEC Chairman Cox, and told them they will have blood on their hands, if they didn’t stop the naked shorts from putting his company out of business. This was reported by Charlie Gasparino this morning.
I have told you more than once, when you defend and deny the existence and effect of naked shorting, you are being a tool for the manipulators. The lid is finally coming off of the crime of the century. The public is finally becoming aware, after years of losses to thieves, and you go and write an article like this.
I said it before, and I’ll say it again, no wonder Ted Butler would rather stick a pencil in his eye, than try and reason with you. You can really be exasperating.
if the shorts aren’t naked then :
1) they have covered it with long positions on opaque OTC counters.
2)they have the required silver
Condition 1) is not an adequate cover during times as this when counter-party risk rules.Question is whether they have the silver?
why does Tom think they have the same? limits on delivery by Comex virtually guarantees that the players would streak & very often. The exchange virtually would blow the whistle and change the rules in case of a legitimate corner. This introduces moral hazard in the paper silver market. Why wouldn’t profit seeking Comex participants not take advantage of this situation? Tom assumes that only lambs would enter a hall that is guarded by wolves.
Tom……what do you think of these markets today…..I watched gold open higher then trade down to below $10.00 then all the way up to $45 and back down again…..the volatility in these markets are unbelieveable. DOW down 445 yesterday up so far 350 today.
How in the HELL do you trade in these markets??
The criminals are trying to dump gold again!!!
12.70 @3PM.
11.70 @3:40 PM
Coincidentally this late day jack brought the price below the technically significant 12.20 that was created when they last jacked silver, when the market was closed.
I say coincidentally in deference to you Tom, because you wouldn’t realize you were getting robbed, unless you got a thank you card in the mail saying ” I’m enjoying the money I stole from you”.
i have watched the markets all day.silver spiked above 13 usd lows around 11.5.amazing action the last two days.gold has been particularly volatile.upto 920 usd and back as far as 839 within 90 mins.the key action period around 1.00pm new york both days. .ide be very careful .the hedge fund reptiles are still prowling. i hope this is not a dead cat bounce.my instinct says its not.
I think the US dollar just scored a 10 in the dead cat bounce competition. A national debt approaching 100 Trillion dollars(in a nation of only 300 million people) and unprecedented, blatant, government sponsered lawlessness has ruined us. The crooks only way out is to hyperinflate the debt away. Look for disasterous unintended consequences to continue to grow.
If you’ve got gold and silver, don’t worry; be happy
Lets not all get too excited here, yes PM’s might stage a huge rally but they might not. The dollar may not collapse and in 2 weeks time we may all be feeling depressed again. Silver has alot of work to do technically so I personally will not be screen watching all day until we can at least take back the 30 day average for a few sessions.
Just noticed this in an article on FT.com
“The Fed also suspended rules that prohibit banks from using deposits to fund their investment banking subsidiaries.”
Does this mean that trading account balances are able to be taken as colateral by the brokerage house??? This happened in Australia about 3-4 months ago. One dude lost all of the proceeds of his house. He parked the money in a brokerage account and had a small leveraged trade (about 10% of the total amount he had). Because of, all of his money was pledged against the company and was lost when the company folded.
What effect would this have on the markets if people started getting gunshy?
(full link to article http://www.ft.com/cms/s/0/f8834910-82aa-11dd-a019-000077b07658,dwp_uuid=11f94e6e-7e94-11dd-b1af-000077b07658.html)
That puts everyone’s 401k accounts in danger as well, no?
Michael Berry in his Morning Notes for Friday, Sept. 19:
The innovation of cash settled futures sits atop this pile of capital market tailings. I heard a respected industry expert discuss why silver was not manipulated. He ended by noting that of course these contracts were settled in cash and not the underlying asset.