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#DDAmanda Picks: $BABL, $AGSO, $GVDI ....
z
Best Article on Naked Short Selling EVER: https://theintercept.com/series/penny-stock-chronicles/
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DDAmanda Review by Clay Trader:
Thanks!......Yeah...lotta people don't want you to know what really goes on.......and when you post stuff like this they freak out.....lmaoooooooo
z
Realy great info about DTCC! Especially helpful to understand. Thx Zardiw!
Billions of Counterfeit Shares in the Market:
Continuous Net Settlement — The third tier of counterfeiting occurs at the DTC level. The Depository Trust and Clearing Corporation (DTCC) is a holding company owned by the major broker dealers, and has four subsidiaries. The subsidiaries that are of interest are the Depository Trust Company (DTC) and the National Securities Clearing Corporation (NSCC). The DTC has an account for each broker dealer, which is further broken down to each customer of that broker dealer. These accounts are electronic entries. Ninety seven percent of the actual stock certificates are in the vault at the DTC with the DTC nominee's name on them. The NSCC processes transactions, provides the broker dealers with a central clearing source, and operates the stock borrow program.
When a broker dealer processes the sale of a short share, the broker dealer has three days to deliver a borrowed share to the purchaser and the purchaser has three days to deliver the money. In the old days, if the buyer did not receive his shares by settlement day, three days after the trade, he took his money back and undid the transaction. When the stock borrow program and electronic transfers were put in place in 1981, this all changed. At that point the NSCC guaranteed the performance of the buyers and sellers and would settle the transaction even though the seller was now a fail–to–deliver on the shares he sold. The buyer has a counterfeit share in his account, but the NSCC transacts it as if it were real.
At the end of each day, if a broker dealer has sold more shares of a given stock than he has in his account with the DTC, he borrows shares from the NSCC, who borrows them from the broker dealers who have a surplus of shares. So far it sounds like the whole system is in balance, and for any given stock the net number of shares in the DTC is equal to the number of shares issued by the company.
The short seller who has sold naked – he had no borrowed shares – can cure his fail–to–deliver position and avoid the required forced buy–in by borrowing the share through the NSCC stock borrow program.
Here is the hocus pocus that creates millions of counterfeit shares.
When a broker dealer has a net surplus of shares of any given company in his account with the DTC, only the net amount is deducted from his surplus position and put in the stock borrow program. However the broker dealer does not take a like number of shares from his customer's individual accounts. The net surplus position is loaned to a second broker dealer to cover his net deficit position.
Let's say a customer at the second broker dealer purchased shares from a naked short seller — counterfeit shares. His broker dealer “delivers” those shares to his account from the shares borrowed from the DTC. The lending broker dealer did not take the shares from any specific customers' account, but the borrowing broker dealer put the borrowed shares in specific customer's accounts. Now the customer at the second prime broker has “real” shares in his account. The problem is it's the same “real” shares that are in the customer's account at the first prime broker.
The customer account at the second prime broker now has a “real” share, which the prime broker can lend to a short who makes a short sale and delivers that share to a third party. Now there are three investors with the same counterfeit shares in their accounts.
Because the DTC stock borrow program, and the debits and credits that go back and forth between the broker dealers, only deals with the net difference, it never gets reconciled to the actual number of shares issued by the company. As long as the broker dealers don't repay the total stock borrowed and only settle their net differences, they can “grow” a company's issued stock.
This process is called Continuous Net Settlement (CNS) and it hides billions of counterfeit shares that never make it to the Reg. SHO radar screen, as the shares “borrowed” from the DTC are treated as a legitimate borrowed shares.
For companies that are under attack, the counterfeit shares that are created by the CNS program are thought to be ten or twenty times the disclosed fails–to–deliver, and the true CNS totals are only obtained by successfully serving the DTC with a subpoena. The SEC doesn't even get this information. The actual process is more complex and arcane than this, but the end result is accurately depicted.
Ex–clearing and CNS counterfeiting are used to create an enormous reserve of counterfeit shares. The industry refers to these as “strategic fails–to–deliver.” Most people would refer to these as a stockpile of counterfeit shares that can be used for market manipulation. One emerging company for which we have been able to get or make reasonable estimates of the total short interest, the disclosed short interest, the available stock lend and the fails–to–deliver, has fifty “buried” counterfeit shares for every fail–to–deliver share, which is the only thing that the SEC tracks, consequently the SEC has not acted on shareholder complaints that the stock is being manipulated.
z
How Law Firms RAT PACK on a Good Company:
Re: CDRB
Pay CLOSE ATTENTION to the wording on all those 'law firms' press releases:
Here's what they do. First ONE firm files a suit.
Then a bunch of OTHERS SAY that there is a suit filed......BUT...NOTICE they do not say that THEY are filing one. They just rat pack on board with a misleading press release....that's ALL it is..lol
Read their PRs. Carefully. See how they say they're 'investigating'.. (code for sitting in their chairs with their feet up on the table filing their nails).
Others just reference the ORIGINAL suit.....lol
It's all very misleading and part of the plan to totally discredit and destroy a GOOD company.........
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How to Handle Naked Shorting (Link):
http://www.hawkassociates.com/ir/white/shorts.cfm
z
How to Handle Naked Shorting. Great Article:
EAT MY SHORTS!
A naked shorting primer for CEO
The drama surrounding naked shorting has all the elements of a John Grisham novel. Sly, blue blood institutions conspire with shadowy hedge fund cowboys to unmercifully assault a well-meaning but outgunned CEO in his quest for shareholder value. Offshore accounts and corrupt foreign officials veil the crimes for decades until finally being thrust into the open through the hyper-caffeinated efforts of hundreds of message board denizens throughout cyberspace.
As with most Grisham novels, however, liberties may have to be taken with the original story to romanticize an otherwise bland topic. After all, it's hard to make CUSIP numbers and stock certificates sound sexy, but that's really the heart of the naked shorting controversy.
Due largely to concerns raised by microcap CEOs and their shareholders, naked shorting is a hot topic on message boards. Opinions range widely on how common it is. Those claiming it pervades the markets and foreshadows a systemic meltdown are met with equally fervent arguments calling it an over-hyped, isolated problem that is becoming the grassy knoll conspiracy theory of Wall Street.
Everyone agrees, however, that risks of naked shorting are heightened in the microcap world. The sheer number of small public companies, combined with high volatility and an almost inevitable need for financing, make detecting this hard-to-prove crime that much more difficult for the microcap CEO. Although the odds seem small that a particular company will be victimized, there is no authoritative data indicating how many microcaps are being naked shorted.
Keeping those odds in perspective, then, this primer is for microcap CEOs curious about the naked shorting fuss. On the off chance that a company attracts naked shorts, CEOs should recognize that there is despairingly little that can be done to stop it from occurring. Due to the nature of the crime, legal expertise may not help.
Although there seem to be few bulletproof ways to stop naked shorts, there are a handful of things a proactive CEO can do to reduce the odds of being blindsided by this notorious lot. This primer includes a rough sketch of how naked shorting works and a brief familiarization with the main players. A worst-case scenario of what it means to be targeted by naked shorts is presented, as are suggestions for wary CEOs. The final section contains a list of links with more about the intriguing world of naked shorting.
What is naked shorting and why should a CEO care?
In its simplest terms, naked shorting involves selling shares of stock that don't exist. It's performed routinely by market-makers to keep an orderly market, but it is illegal when done to manipulate a company's stock price. Only when someone intends to drive down the stock price is naked shorting breaking the law. Throughout the rest of this overview, any reference to naked shorting will refer to the illegal variety.
It's also worth noting the important distinction between shorting and naked shorting. The former is perfectly legal and occurs extensively as either a way for an investor to mitigate risk or as a bet that a company's share price will decrease (i.e. the short-seller or "short" believes the company is overvalued). Despite the wary glances often cast upon them, shorts are an essential part of a robust market and are often the first to discover financial fraud, as in the case of Enron.
A short will sell borrowed shares as a bet against a company because he believes the price will eventually drop. These borrowed shares come from his broker, which loans the short a certain number of shares (not dollars). As soon as the short receives the borrowed shares in his account, he sells them immediately for cash, which goes to his brokerage account. The short still has that pesky loan to pay back, though, and does so by waiting for the price of the stock to drop. Then he buys some cheaper shares using money from the same pool of cash he received after the original sale, gives the broker his shares back, and keeps whatever cash is left in his account.
Naked shorts, in contrast, are much more manipulative – they sell short shares that don't exist and then attempt to actively lower the company's share price through constant short-selling pressure. By using pretend shares, of which there is an unlimited supply, naked shorts can effectively control the share price through this constant pressure, eventually driving the price of a company's shares into the basement.
Where do these fake shares come from? Naked shorts can create them out of thin air, depending on your point of view, due to either (a) glaring inefficiencies in the back-office world of certificate transfers, or (b) institutionalized fraud on a massive scale. Either way, the effects can be disastrous for companies who are victimized.
Who is involved?
Naked shorting is typically done by hedge funds with arm's length support from several other parties. The extent of active assistance provided to the fund by related groups is unclear but hotly debated. One player is the Depository Trust & Clearing Corp. (DTCC), which tracks the stock certificates of traded shares between brokerages. When a fund sells short a share of stock, the fund's brokerage (another prominent player) has a settlement period of three days to deliver those shares to the buyer's broker. If the transfer doesn't occur, the DTCC notifies the fund's broker that it has "FTD" (Failed to Deliver). The DTCC is required by the SEC to enforce delivery of missing shares. While waiting to account for shares, the DTCC may charge the brokerage to borrow similar shares from its own inventory.
The obvious conflict of interest here is that DTCC is policing its own customers - the brokerages. In response to complaints, the SEC required all exchanges to comply with Regulation SHO in January of 2005. Reg SHO establishes several requirements aimed at broker-dealers, but it does not specifically address the manipulative aspects of naked shorting, which fall under existing securities law.
Regulation SHO specifically requires the major exchanges to provide a daily list of Threshold Securities, defined as those that (1) have an aggregate fail to deliver position of over 10,000 shares (2) equal to 0.5% of the issuer's total shares outstanding for (3) greater than five days. Reg SHO also requires a broker-dealer to close out any "open fail" position once it has been included on an exchange's Threshold Security list for 13 consecutive days. The ironic effect of this policy, as noted by its detractors, is that it effectively requires shorts to cover (buy back shares) after they've had two weeks to drive the price down - meaning they profit from the trade. Needless to say, the effectiveness of such a regulation is often called into question among the cyberspace crowd.
Links to the Threshold Security list for each primary exchange are included at the conclusion of this article. It's important to remember that seeing a company included on the Threshold Securities list does not mean that company is being naked shorted, nor that its share price is artificially depressed. It means shares in that company are failing to deliver on time for what may be legitimate reasons, including simple human error. Even shares bought long could FTD and show up on the Threshold list. A daily presence on the Threshold list for more than 13 days at a time, however, might signal the need for deeper digging.
How does naked shorting actually work?
Based on the accounts of CEOs who believe they have been the target of naked shorts, here is how the worst-case scenario might play out using an ill-intentioned hedge fund ("Fund Malicious") as an example.
Fund Malicious first identifies a target in the microcap world for naked shorting, most likely an obscure company in the development stage or having otherwise questionable fundamentals. The hedge fund gets that firm listed on a foreign exchange in, say, Berlin, via a request funneled through a complicit broker or official in that country. Malicious then sells short shares it doesn't have (naked shorts them), waits three days for the DTCC to call and ask for the shares, and then replies either, "I borrowed them on the Berlin exchange, and they'll take some time to get here," or "I'm a market-maker for that company's shares in Berlin and naked shorting rules don't apply there." The DTCC then loans the fund shares from its inventory and charges the broker a fee until the stock loan is repaid. Malicious, in the meantime, continues to drive the price of the target's shares down as long and as aggressively as possible. In the event the fund does cover to pay off the stock loan, it doesn't take much effort to begin the naked shorting cycle again.
Other theories exist as to how the hedge fund might skirt additional rules. To prevent "piling on," exchange rules mandate that a stock cannot be shorted on a downtick or decrease in stock price. In other words, Malicious must wait for the stock price to increase briefly before shorting the company. Rather than wait passively for an uptick, though, Fund Malicious can create an uptick in the stock itself by purchasing a few shares through a small offshore account. The hedge fund is then free to short (or naked short) the company with both barrels at home.
Malicious may get additional leverage out of the original naked short by choosing to target an ugly, obscure microcap company. By driving the price down, the fund hopes to scare existing shareholders into selling their shares, too, out of fear that something is going on that they don't know about (i.e. the fund can "paint the tape"). This, of course, drives the price even lower while further obscuring the role of Fund Malicious.
There is plenty of room for additional mischief in the above scenario. According to the most vocal critics of naked shorting, funds like Malicious have relationships with reporters and/or message board regulars who are compensated to distribute negative news about the company in order to exaggerate the selling. There is also plenty of irony possible, in that a CEO can be her shareholders' worst enemy by merely uttering the words "naked shorting." Investors may panic, the stock might dive further and legitimate short-sellers could begin to circle.
Keeping things in perspective
Given the mysterious nature of hedge funds and the convoluted nature of this crime, it's easy to get carried away with paranoid scenarios regarding naked shorting. The skeptics, however, have some unanswered questions of their own. For instance:
What's in it for the brokerages? Are they supposed to take all the risk just to get a few more commissions or under-the-table money? Since when have they been that desperate?
Has anyone ever been found guilty of naked shorting?
Where is the proof? Are there other pieces of evidence that would suggest a crime is being committed?
Why aren't more companies making noise about it? Where are the whistleblowers?
Wouldn't the unintentional buyers of naked-shorted shares voice their concerns when they did not receive proxy votes?
Why is there no outrage from legitimate funds and brokerages?
How much regulatory burden should the SEC and other publicly traded companies have to bear to resolve the questionable problems of a few companies?
Both camps raise legitimate issues that simply cannot be addressed definitively yet. Reg SHO is not the deterrent the problem seems to demand. There have been numerous calls on the SEC to increase the scope of data provided in the daily Threshold Securities lists, which may help better gauge the seriousness of this problem. Until those issues are resolved, the SEC continues to consider the surveillance and enforcement of trading activity as being the primary responsibility of the markets and exchanges. The DTCC considers its role to be reporting the FTDs. Brokerages are doing all they can to win commissions from hedge funds. Detection is difficult, accusations are nearly impossible to prove, and nobody has figured out a foolproof way to stop this crime.
So what's all that mean for the microcap CEO? When it comes to naked shorting, you are your own best watchdog.
What to do if you think you may be targeted.
Above all else, be discrete with your public accusations. A well-intentioned CEO can fulfill his own prophecy by going public with accusations of naked shorting. Investors may flee the stock, further lowering the share price. Meanwhile, other funds may hover, waiting for an uptick to begin shorting your company themselves.
Watch your trading volume. If you're seeing four or five times your company's float trade hands in an otherwise ordinary day, and you have no large share overhangs, pay attention. Start documenting those patterns.
Keep your focus on operations. Your stock price is not declining exclusively due to naked shorting. Weakness in the business, industry, model, communications or management team exists well before naked shorting begins and allows it to continue. In most cases, the best deterrent for shorts of any kind is consistent execution and credible communications with your shareholders.
Always surprise on the upside. By maintaining absolute secrecy before good news, you give yourself the best chance to catch the shorts of guard and maybe even squeeze them. Be conscious of unintended signals you may send when in public appearances, conference calls and analyst meetings before a particularly good quarter or other surprising good news. Keep your cards close to your chest and save those glowing press releases for the middle of the trading day.
Maintain a steady stream of news. By communicating with your investors as often as possible, you remove some of the mystery surrounding a company that a naked shorter typically targets. In the absence of news, a continuously dropping stock price is the only communication your investors are hearing. Sales of stock by legitimate owners are sure to follow.
Put floors on your convertibles. A floorless convertible bond (also known as a "convertible death spiral") is an open invitation for its owners to short the stock as aggressively as possible. A constant decline in share price means the convertible owners will get more shares because the initial rate of conversion will change. While the original shareholders may very well lose their entire stake in the company, the convertible owners can continue to short the stock until they can effectively cover the original short with new shares created by a new rate. Should those convertibles be held offshore where naked shorting is not illegal, the potential for price depression becomes even greater. Ensuring you have a floor on those converts will prevent the worst case scenario.
Monitor small international exchanges. If your firm unexpectedly turns up on the Berlin-Bremen stock exchange and you, the CEO, did not request a listing there, that might be a sign of a problem. Request the removal of your company from that exchange immediately, and keep asking until it's done.
Realize your choice of financing vehicle may attract naked shorting interest. In addition to floorless convertibles, PIPEs may also attract undue attention from potential funders. Since shares in a PIPE are sold for below market price, the provider could short the stock down to that level with no risk of capital loss on his part. When issuing warrants with the deal, you're also effectively pushing the price lower through increased dilution of existing shareholders. While it's true that sometimes beggars can't be choosers when it comes to raising funds, go into those negotiations with your eyes wide open.
Check the Threshold Security lists. Links to the lists at each exchange are below. Keep in mind that inclusion on that list does not mean naked shorting or any other improper activity is occurring, just that some shares meet the three requirements mentioned above. An extended presence on the Threshold list, however, in combination with some other signals mentioned above may be an important sign.
Don't read the message boards. You'll drive yourself nuts, waste a ton of time and eventually convince yourself you're a victim of someone's ill wishes, naked shorts or otherwise. If you're that compelled to monitor the boards, ask your IR team to send you weekly summaries of any cogent posts.
Know your IR company. Consider your choice of an investor relations firm as your first line of defense. Does the company have expertise in dealing with naked shorting? Does the price of your stock mysteriously rise or fall between the time you send your draft press releases and when they hit the wires? Do they have long-term clients willing to vouch for their integrity? And do they have processes in place to handle sensitive information?
Know your transfer agent. Given that the process of naked shorting begins at the brokerage level, there's not much your company's transfer agent can do with regards to those shares. The responsibility for tracking them lies with the brokerage. It is theoretically possible, however, for a corrupt transfer agent to conceal the true float and otherwise manipulate the shares themselves.
Both your transfer agent and IR firm should be able to advise you on the effectiveness of combating naked shorts by changing CUSIP numbers, reverse mergers, and/or reverse splits. Although the long-term effectiveness of these strategies is questionable, it may be useful as part of a larger strategy to deter naked shorting. After changing your company's CUSIP number, for instance, all existing stock certificates must be exchanged for new ones. All issued and outstanding certificates from old shares will no longer represent an interest in the company until exchanged. This may be more trouble than it's worth, however. Once the new shares are in circulation, there's nothing to stop a new round of naked shorting by determined parties. Such tactics may represent a small part of an overall strategy to reduce naked shorting interest in your company.
About Hawk Associates
At Hawk Associates, we understand the complexities of Wall Street expectations. We provide clients with sophisticated, leading-edge investor relations programs to create visibility and brand identity. We provide a full range of functionality and services including day-to-day IR counseling, financial public relations, media programs, roadshow planning and execution and specific project work. We help build the company's credibility, provide guidance for full disclosure in setting expectations, generate excitement about the company's products and assist CEOs in realizing the full potential of the company's stock.
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z
Yeah......How crooks rip us off and make money......and in the process destroy lives, dreams and companies........and they don't give a shit.......z
Interesting thing I read.
Another Great Article on Naked Shorting.
https://smithonstocks.com/illegal-naked-short-selling-appears-to-lie-at-the-heart-of-an-extensive-stock-manipulation-scheme/
Expert Financial Analysis and Reporting
Illegal Naked Short Selling Appears to Lie at the Heart of an Extensive Stock Manipulation Scheme
Posted by Larry Smith on Jun 16, 2015 • (14)
Investment Consequences of Naked Shorting
Only a motivated enforcement agency with subpoena power and an accompanying powerful enforcement infrastructure can prove that naked shorting is at the heart of an extensive stock manipulation scheme. However, I believe that the observational evidence is overwhelming that naked shorting practices are widely used to manipulate the stock prices of emerging biotechnology companies as well as many other small and large companies. Unfortunately, naked shorting is an investment variable that investors must understand if they are going to make investments in the emerging biotechnology space in particular and the equity markets in general.
Investors may decide that they just won’t invest in companies that are most subject to naked shorting, but this would eliminate many small emerging growth stocks with exciting potential. For those like me who are attracted by potentially breakthrough technologies, you will inevitably get caught up in a manipulation that leads to a suddenly plunging stock price of a company in which you are invested. Invariably the scheme starts with and is perpetuated by a flurry of blogs, tweets and message board comments which proclaim that the technology is worthless; management is a band of liars and thieves; and people with a positive view on the Company are being paid by the Company. Then come the lawsuits against the Company and management by the usual group of class action law firms. Each year this scenario is played out hundreds of times.
This carefully scripted and long used manipulation scheme by short selling hedge funds is all meant to shake and then break investors’ confidence. The result is usually a painful, steady, day by day erosion of the stock price due to naked shorting practices. Stocks can be cut in half by naked shorting on the basis of little or no change in fundamentals. If you are going to invest in this area, you must decide when this occurs whether you believe strongly in the Company and can ride out the storm or want to cut and run. However, sometimes it happens so rapidly that the latter is not an option. On the positive side, these manipulations can often lead to some excellent investment opportunities if the fundamentals remain intact, investor confidence returns and the shorts are forced to cover.
The Rationale forInvesting in Small Emerging Biotechnology Companies; Is It Worth It?
I worked for many years on Wall Street as an analyst covering large pharmaceutical and biotechnology companies and rarely dealt with small companies which I arbitrarily define as having market capitalizations under $1billion. From my experience with these large companies, I came to believe that they were excellent at drug development and commercialization and sometimes innovation, but depended extensively on small entrepreneurial companies for their pipelines. Many, indeed most, of the paradigm changing technologies are initially pursued by small companies. The big companies generally wait for proof of concept and then swoop in to either license the technology and/or the drugs stemming from it or to purchase the companies outright. This can lead to some incredible homeruns for investors in small companies so much so that one success can offset several failures.
The behavior of the big companies is understandable as the number of intriguing and promising new technology approaches in drug development seems endless. I personally have done some tracking of over 300 biotechnology companies and this is not an exhaustive list. Moreover, exciting new technologies are evolving like lava flowing over the rim of a volcano. Even big companies lack the infrastructure and financial resources needed to aggressively pursue more than a small fraction of drug development opportunities. Once committed, the development costs for a new drug can run into the hundreds of millions and even over $1 billion of costs. And of course, the failure rate in new drugs is astronomically high. I have seen estimates that for drugs that begin human phase 1 trials, perhaps only 1 in 10 will reach phase 3 and in phase 3 a significant percentage will fail. And even of those that succeed only a few become blockbusters.
With this high rate of failure, drug development is not for sissies. Research people at large companies get rewarded for successes and fired for failures. Hence there is a tendency to focus on evolutionary (me too) drug development in which there is less risk and leave the paradigm shifting efforts to entrepreneurs willing to accept the very high risk of failure for the extraordinary rewards in those few cases in which success is reached. What are those odds for success? I have no data to back this up, but the chance for moderate success is less than 1 in 10 and for home runs is in excess of 1 in 25 or 1 in 50. Take these numbers as being representative of the risk as opposed to a well-researched estimate.
Wall Street analysts have risk profiles that aren’t that different from research people at big pharma. They gain fame for being correct on a stock and can lose their jobs if they take a risk on an unproven drug or technology and get “blown up”. As a result, many early stage companies are ignored by analysts or primarily covered by analysts working for investment banks who specialize in bringing such companies public; naturally analysts employed by investment banks are always positive on the stocks their firms underwrite.
As I looked at this situation, about five years ago, I sensed an opportunity to try to bring quality research to some of the companies in this vast universe of poorly followed companies. Obviously, it is not possible to cover all possible companies so I focused on just a few in which I tried to do exhaustive research that could give me an edge. My strategy was primarily although not entirely to focus on stocks that could be homeruns. (Please refer to my earlier comments on the risks involved). Recognizing the high potential for failure, I tried to find as many opportunities as possible and never put all my eggs in one basket. In my own portfolio, I invest in a large number of early stage biotechnology stocks as I fully recognize that I am going to be wrong in a significant percentage of the stocks I deal with. I call my strategy asymmetric investing and this is explained in more depth on my website at this link.
Finding Out About Naked Shorting
I started developing my website and its content about four years ago. As I gained more experience, I was startled to find that there was another very important force at work on these companies that was apart from the fundamentals that I was focused on. One would expect a high level of volatility in the stocks in which I specialize. However, this could not always explain the demoralizing collapse of a meaningful number of stocks that I am involved with following some news event. Suddenly and without a major change in the fundamental outlook, I would see stock prices cut in half in a short period of time. During this time there was invariably a steady day by day price erosion (naked shorting at work) accompanied by an unending stream of contrived negative news flow that was demoralizing to me and other investors.
In order to give more insight into what a naked shorting attack might look like, I have put the predictable elements of a typical attack based on my experience in living through a number of them on separate companies.
Shorts like to target emerging biotechnology stocks that are engaged in high risk drug development and are not widely covered by quality research analysts.
The initial and subsequent attacks are almost always triggered by some news event. Obviously, the shorts seek out negative news or an event that creates uncertainty. However, sometimes an attack can be based on a positive news event which the shorts spin to make it appear negative.
Using the ready platform afforded by the internet and social media, a blogger associated with the shorts goes to work with a negative interpretation of an event. These are usually not sophisticated analyses and are usually limited to one or two pages of text which is invariably one-sided and unbalanced. These are meant to provide “intellectual” reasons and cover for the short attack.
The most prominent of these bloggers usually have no backgrounds in biotechnology analysis or expertise in the science. I believe that in many cases, hedge fund employees actually write the articles which are cut and pasted into the comments of these bloggers.
The heart of the naked shorting scheme involves a group of hedge fund traders conspiring to steadily knock out offers for the stock and to trigger stop loss orders (This is explained later in this report). This is called walking the stock down. The power of these conspiracies is striking and in many cases allows the shorts can largely determine the price that they want the stock to trade at.
The stock weakness gives legitimacy to the contrived negative blogs. The idea is to create fear and uncertainty among investors by making all news events appear to be negatives and to fabricate new issues that the shorts hope will demoralize investors.
The first time I came up against this, my thought was that the blogger was someone who was just more cynical about the chances for success and had an opposite point of view from mine. This is understandable and common in research analysis. I wrote a respectful rebuttal to their argument.
I thought that after their rebuttal to my rebuttal, this would end the discussion. We had expressed our opposite points of view, would respectively disagree and move on. This had mainly been my experience in my Wall Street days as an analyst when I disagreed with another analyst. I was wrong.
The situation quickly escalated. In the rebuttal, the blogger accused me of being stupid, deceitful and being paid by the Company to write positive comments.
In this case, over 20 articles were then written in a period of a year. Usually, they were timed to a press release and regardless of the news and without exception each was interpreted as a major negative. A major strategy was to argue that management was lying to investors and manipulating the stock.
The stock would go down on good news, bad news and uncertain news. One of the pillars of stock manipulation is to make good news appear to be bad.
The blogger was indifferent to truth and actually would make up information that was factually incorrect. When made aware that the information was wrong, he/she would ignore it and even repeat it in later blogs.
There are a number of bloggers who participate in these attacks. Many of these bloggers appear to work together and coordinate their negative attacks. It is striking that many of these people have connections to one another. Many of them were trained at a well-known blogging site that was founded by hedge fund people.
Sophisticated use is made of the Internet and social media. Twitter is used to signal that an attack has begun.
Shorts are well connected to mainstream media and are adept at getting them to unwittingly participate in the scheme.
Vicious attacks are launched on writers who might have an opposite but hopefully more well-reasoned and balanced view. The usual line is that they are being paid by management to write positive articles.
Seeking Alpha has become very friendly to articles supporting short selling and is used extensively by the hedge funds. The site actually promotes as one of its favorite authors a person who writes only negative attack article on companies in which he claims that managements are lying and paying authors who have a positive view on the Company. In his disclosure, he states that he shorts stocks, then publishes a negative article on Seeking Alpha and states that he may cover immediately after the article is published. This seems to meet the definition of a pump and dump scheme. He also acknowledges that he is collaborating with other short sellers. I think they contribute the information for most of his articles
Seeking Alpha allows articles to be published by anonymous authors. These articles are often extremely bearish and are almost certainly written by people at hedge funds.
Hedge fund create pseudonyms and publish on a daily basis negative comments on message boards like Yahoo and Ihub.
Law suits appear after articles and allege misconduct on the part of managements and urge investors to participate in a class action lawsuit.
Initially, I attributed these actions to people who were just more cynical than me and honestly came to their bearish views. I am also very cognizant that there is not an insignificant amount of stock manipulation that warrants shorting some stocks. There are some bad actors who pump stocks up and then dump them and this is every bit as egregious as naked shorting attacks. Interestingly, I believe that the hedge funds who short can be enthusiastic participants in these manipulation schemes as well. I also understand that managements can and usually are over enthusiastic in presenting the outlook for their companies. They have so much personal wealth and intellectual effort invested in a Company that objectivity can be difficult. I also have to admit that I have a bias toward optimism largely stemming from the belief that we are in a scientific renaissance in biotechnology that will lead to a meaningful number of breakthrough drugs and accompanying home run stocks. I recognize this personal bias and try to adjust for it, but I am only human.
The above paragraph shows that not all of the investment land mines can be attributed to naked shorting. However, it seems to me that many are. Initially I thought that what I now believe to be naked shorting stock manipulation was attributable to market forces. The catalyst for my changing my view was coming across a shocking You Tube commentary by Jim Cramer of CNBC fame. He explained in detail how as a hedge fund manager, he participated in schemes to manipulate stocks. If you haven’t seen this it is a must watch.
This was a wakeup call for me and for the last few years, I have been doing a great deal of work on naked shorting. As I talked to companies, I heard the same stories over and over about techniques used to drive down their stock prices and I came to believe that there was manipulation going on and that it was extensive. The names of hedge funds leading the attack kept coming up in situation after situation. It has been my intent to write an article on naked shorting, but this is an enormous project and while I think I understand the effect that naked shorting can have on stocks, I lack the understanding of the trading techniques used to implement what is essentially an illegal stock manipulations scheme.
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The Destruction of GOOD Companies using Naked Shorting:
http://counterfeitingstock.com/CounterfeitingStock.html
Counterfeiting Stock
Illegal naked shorting and stock manipulation are two of Wall Street's deep, dark secrets. These practices have been around for decades and have resulted in trillions of dollars being fleeced from the American public by Wall Street. In the process, many emerging companies have been put out of business. This report will explain the magnitude of this problem, how it happens, why it has been covered up and how short sellers attack a company. It will also show how all of the participants; the short hedge funds, the prime brokers and the Depository Trust Clearing Corp. (DTCC) — make unconscionable profits while the fleecing of the small American investor continues unabated.
Why is This Important? This problem affects the investing public. Whether invested directly in the stock market or in mutual funds, IRAs, retirement or pension plans that hold stock — it touches the majority of Americans.
The participants in this fraud, which, when fully exposed, will make Enron look like child's play, have been very successful in maintaining a veil of secrecy and impenetrability. Congress and the SEC have unknowingly (?) helped keep the closet door closed. The public rarely knows when its pocket is being picked as unexplained drops in stock price get chalked up to “market forces” when they are often market manipulations.
The stocks most frequently targeted are those of emerging companies who went to the stock market to raise start–up capital. Small business brings the vast majority of innovative new ideas and products to market and creates the majority of new jobs in the United States. Over 1000 of these emerging companies have been put into bankruptcy or had their stock driven to pennies by predatory short sellers.
It is important to understand that selling a stock short is not an investment in American enterprise. A short seller makes money when the stock price goes down and that money comes solely from investors who have purchased the company's stock. A successful short manipulation takes money from investment in American enterprise and diverts it to feed Wall Street's insatiable greed — the company that was attacked is worse off and the investing public has lost money. Frequently this profit is diverted to off–shore tax havens and no taxes are paid. This national disgrace is a parasite on the greatest capital market in the world.
A Glossary of Illogical Terms — The securities industry has its own jargon, laws and practices that may require explaining. Most of these concepts are the creation of the industry, and, while they are promoted as practices that ensure an orderly market, they are also exploited as manipulative tools. This glossary is limited to naked short abuse, or counterfeiting stock as it is more correctly referred to.
Broker Dealer or Prime Broker — The big stockbrokers who clear their own transactions, which is to say they move transacted shares between their customers directly, or with the DTC. Small brokers will clear through a clearing house — also known as a broker's broker.
Hedge Funds — Hedge funds are really unregulated investment pools for rich investors. They have grown exponentially in the past decade and now number over 10,000 and manage over one trillion dollars. They don't register with the SEC, are virtually unregulated and frequently foreign domiciled, yet they are allowed to be market makers with access to all of the naked shorting loopholes. Frequently they operate secretively and collusively. The prime brokers cater to the hedge funds and allegedly receive eight to ten billion dollars annually in fees and charges relating to stock lend to the short hedge funds.
Market Maker — A broker, broker dealer or hedge fund who makes a market in a stock. In order to be a market maker, they must always have shares available to buy and sell. Market makers get certain sweeping exemptions from SEC rules involving naked shorting.
Short Seller — An individual, hedge fund, broker or institution who sells stock short. The group of short sellers is referred to as “the shorts.”
The Securities and Exchange Commission — The SEC is the federal enforcement agency that oversees the securities markets. The top–level management is a five–person Board of Governors who are Presidential appointees. Three of the governors are usually from the securities industry, including the chairman. The SEC adopted Regulation SHO in January 2005 in an attempt to curb naked short abuse.
Depository Trust Clearing Corp — Usually known as the DTCC, this privately held company is owned by the prime brokers and it clears, transacts and holds most stock in this country. It has four subsidiaries, which include the DTC and the NCSS. The operation of this company is described in detail later.
Short Sale — Selling a stock short is a way to make a profit while the stock price declines. For example: If investor S wishes to sell short, he borrows a share from the account of investor L. Investor S immediately sells that share on the open market, so investor S now has the cash from the sale in his account, and investor L has an IOU for the share from investor S. When the stock price drops, investor S takes some of the money from his account and buys a share, called “covering”, which he returns to investor L's account. Investor S books a profit and investor L has his share back.
This relatively simple process is perfectly legal – so far. The investor lending the share most likely doesn't even know the share left his account, since it is all electronic and occurs at the prime broker or DTC level. If shares are in a margin account, they may be loaned to a short without the consent or knowledge of the account owner. If the shares are in a cash account, IRA account or are restricted shares they are not supposed to be borrowed unless there is express consent by the account owner.
Disclosed Short — When the share has been borrowed or a suitable share has been located that can be borrowed, it is a disclosed short. Shorts are either naked or disclosed, but, in reality, some disclosed shorts are really naked shorts as a result of fraudulent stock borrowing.
Naked Short — This is an invention of the securities industry that is a license to create counterfeit shares. In the context of this document, a share created that has the effect of increasing the number of shares that are in the market place beyond the number issued by the company, is considered counterfeit. This is not a legal conclusion, since some shares we consider counterfeit are legal based upon today's rules. The alleged justification for naked shorting is to insure an orderly and smooth market, but all too often it is used to create a virtually unlimited supply of counterfeit shares, which leads to widespread stock manipulation – the lynchpin of this massive fraud.
Returning to our example, everything is the same except the part about borrowing the share from someone else's account: There is no borrowed share — instead a new one is created by either the broker dealer or the DTC. Without a borrowed share behind the short sale, a naked short is really a counterfeit share.
Fails–to–Deliver — The process of creating shares via naked shorting creates an obvious imbalance in the market as the sell side is artificially increased with naked short shares or more accurately, counterfeit shares. Time limits are imposed that dictate how long the sold share can be naked. For a stock market investor or trader, that time limit is three days. According to SEC rules, if the broker dealer has not located a share to borrow, they are supposed to take cash in the short account and purchase a share in the open market. This is called a “buy–in,” and it is supposed to maintain the total number of shares in the market place equal to the number of shares the company has issued.
Market makers have special exemptions from the rules: they are allowed to carry a naked short for up to twenty–one trading days before they have to borrow a share. When the share is not borrowed in the allotted time and a buy–in does not occur, and they rarely do, the naked short becomes a fail–to–deliver (of the borrowed share).
Options — The stock market also has separate, but related markets that sell options to purchase shares (a “call”) and options to sell shares (a “put”). This report is only going to deal with calls; they are an integral part of short manipulations. A call works as follows: Assume investor L has a share in his account that is worth $25. He may sell an option to purchase that share to a third party. That option will be at a specific price, say $30, and expires at a specific future date. Investor L will get some cash from selling this option. If at the expiration date, the market value of the stock is below $30 (the “strike price”), the option expires as worthless and investor L keeps the option payment. This is called “out of the money.” If the market value of the stock is above the strike price, then the buyer of the option “calls” the stock. Assume the stock has risen to $40. The option buyer tenders $30 to investor L and demands delivery of the share, which he may keep or immediately sell for a $10 profit.
Naked call — The same as above except that investor L, who sells the call, has no shares in his account. In other words, he is selling an option on something he does not own. The SEC allows this. SEC rules also allow the seller of a naked short to treat the purchase of a naked call as a borrowed share, thereby keeping their naked short off the SEC's fails–to–deliver list.
How The System Transacts Stocks — This explanation has been greatly simplified in the interest of brevity.
Customers — These can be individuals, institutions, hedge funds and prime broker's house accounts.
Prime Brokers — They both transact and clear stocks for their customers. Examples of prime brokers include Goldman Sachs; Merrill Lynch; Citigroup; Morgan Stanley; Bear Stearns, etc.
The DTCC — This is the holding company that owns four companies that clear and keep track of all stock transactions. This is where brokerage accounts are actually lodged. The DTC division clears over a billion shares daily. The DTCC is owned by the prime brokers, and, as a closely held private enterprise, it is impenetrable. It actively and aggressively fights all efforts to obtain information regarding naked shorting, with or without a subpoena.
Stocks clear as follows:
If customer A–1 purchases ten shares of XYZ Corp and Customer A–2 sells ten shares, then the shares are transferred electronically, all within prime broker A. Record of the transaction is sent to the DTC. Likewise, if Investor A–1 shorts ten shares of XYZ Corp and Investor A–2 has ten shares in a margin account, prime broker A borrows the shares from account A–2 and for a fee lends them to A–1.
If Customer A–1 sells shares to Customer B–2, in order to get the shares to B–2 and the money to A–1, the transaction gets completed in the DTC. The same occurs for shares that are borrowed on a short sale between prime brokers.
As a practical matter, what happens is prime broker A, at the end of the day, totals all of his shares of XYZ owned and all of the XYZ shares bought and sold, and clears the difference through the DTC. In theory, at the end of each day when all of the prime brokers have put their net positions in XYZ stock through the system, they should all cancel out and the number of shares in the DTC should equal the number of shares that XYZ has sold into the market. This almost never happens, because of the DTC stock borrow program which is discussed later.
Who are the Participants in the Fraud? The participants subscribe to the theory that it is much easier to make money tearing companies down than making money building them up, and they fall into two general categories: 1) They participate in the process of producing the counterfeit shares that are the currency of the fraud and/or 2) they actively short and tear companies down.
The counterfeiting of shares is done by participating prime brokers or the DTC, which is owned by the prime brokers. A number of lawsuits that involve naked shorting have named about ten of the prime brokers as defendants, including Goldman Sachs, Bear Stearns, Citigroup, Merrill Lynch; UBS; Morgan Stanley and others. The DTCC has also been named in a number of lawsuits that allege stock counterfeiting.
The identity of the shorts is somewhat elusive as the shorts obscure their true identity by hiding behind the prime brokers and/or hiding behind layers of offshore domiciled shell corporations. Frequently the money is laundered through banks in a number of tax haven countries before it finally reaches its ultimate beneficiary in New York, New Jersey, San Francisco, etc. Some of the hedge fund managers who are notorious shorters, such as David Rocker and Marc Cohodes, are very public about their shorting, although they frequently utilize offshore holding companies to avoid taxes and scrutiny.
Most of the prime brokers have multiple offshore subsidiaries or captive companies that actively participate in shorting. The prime brokers also front the shorting of some pretty notorious investors. According to court documents or sworn testimony, if one follows one of the short money trails at Solomon, Smith Barney, it leads to an account owned by the Gambino crime family in New York. A similar exercise with other prime brokers, who cannot be named at this time, leads to the Russian mafia, the Cali drug cartel, other New York crime families and the Hell's Angels.
One short hedge fund that was particularly destructive was a shell company domiciled in Bermuda. Subpoenas revealed the Bermuda company was wholly owned by another shell company that was domiciled in another tax haven country. This process was five layers deep, and at the end of the subterfuge was a very well known American insurance company that cannot be disclosed because of court–ordered sealing of testimony.
Most of the large securities firms, insurance companies and multi–national companies have layers of offshore captives that avoid taxes, engage in activities that the company would not want to be publicly associated with, like stock manipulation; avoid U.S. regulatory and legal scrutiny; and become the closet for deals gone sour, like Enron.
The Creation of Counterfeit Shares — There are a variety of names that the securities industry has dreamed up that are euphemisms for counterfeit shares. Don't be fooled : Unless the short seller has actually borrowed a real share from the account of a long investor, the short sale is counterfeit. It doesn't matter what you call it and it may become non–counterfeit if a share is later borrowed, but until then, there are more shares in the system than the company has sold.
The magnitude of the counterfeiting is hundreds of millions of shares every day, and it may be in the billions. The real answer is locked within the prime brokers and the DTC. Incidentally, counterfeiting of securities is as illegal as counterfeiting currency, but because it is all done electronically, has other identifiers and industry rules and practices, i.e. naked shorts, fails–to–deliver, SHO exempt, etc. the industry and the regulators pretend it isn't counterfeiting. Also, because of the regulations that govern the securities, certain counterfeiting falls within the letter of the rules. The rules, by design, are fraught with loopholes and decidedly short on allowing companies and investors access to information about manipulations of their stock.
The creation of counterfeit shares falls into three general categories. Each category has a plethora of devices that are used to create counterfeit shares.
Fails–to–Deliver — If a short seller cannot borrow a share and deliver that share to the person who purchased the (short) share within the three days allowed for settlement of the trade, it becomes a fail–to–deliver and hence a counterfeit share; however the share is transacted by the exchanges and the DTC as if it were real. Regulation SHO, implemented in January 2005 by the SEC, was supposed to end wholesale fails–to–deliver, but all it really did was cause the industry to exploit other loopholes, of which there are plenty (see 2 and 3 below).
Since forced buy–ins rarely occur, the other consequences of having a fail–to–deliver are inconsequential, so it is frequently ignored. Enough fails–to–deliver in a given stock will get that stock on the SHO list, (the SEC's list of stocks that have excessive fails–to–deliver) – which should (but rarely does) see increased enforcement. Penalties amount to a slap on the wrist, so large fails–to–deliver positions for victim companies have remained for months and years.
A major loophole that was intentionally left in Reg SHO was the grandfathering in of all pre–SHO naked shorting. This rule is akin to telling bank robbers, “If you make it to the front door of the bank before the cops arrive, the theft is okay.”
Only the DTC knows for certain how many short shares are perpetual fails–to–deliver, but it is most likely in the billions. In 1998, REFCO, a large short hedge fund, filed bankruptcy and was unable to meet margin calls on their naked short shares. Under this scenario, the broker dealers are the next line of financial responsibility. The number of shares that allegedly should have been bought in was 400,000,000, but that probably never happened. The DTC — owned by the broker dealers — just buried 400,000,000 counterfeit shares in their system, where they allegedly remain — grandfathered into “legitimacy” by the SEC. Because they are grandfathered into “legitimacy”, the SEC, DTC and prime brokers pretend they are no longer fails–to–deliver, even though the victim companies have permanently suffered a 400 million share dilution in their stock.
Three months prior to SHO, the aggregate fails–to–deliver on the NASDAQ and the NYSE averaged about 150 million shares a day. Three months after SHO it dropped by about 20 million, as counterfeit shares found new hiding places (see 2 and 3 below). It is noteworthy that aggregate fails–to–deliver are the only indices of counterfeit shares that the DTC and the prime brokers report to the SEC. The bulk of the counterfeiting remains undisclosed, so don't be deceived when the SEC and the industry minimize the fails–to–deliver information. It is akin to the lookout on the Titanic reporting an ice cube ahead.
Ex–clearing counterfeiting — The second tier of counterfeiting occurs at the broker dealer level. This is called ex–clearing. Multiple tricks are utilized for the purpose of disguising naked shorts that are fails–to–deliver as disclosed shorts, which means that a share has been borrowed. They also make naked shorts “invisible” to the system so they don't become fails–to–deliver, which is the only thing the SEC tracks.
Some of the tricks are as follows:
Stock sales are either a long sale or a short sale. When a stock is transacted the broker checks the appropriate box. By mismarking the trading ticket –checking the long box when it is actually a short sale the short never shows up, unless they get caught, which doesn't happen often. The position usually gets reconciled when the short covers.
Settlement of stock transactions is supposed to occur within three days, at which time a naked short should become a fail–to–deliver, however the SEC routinely and automatically grants a number of extensions before the naked short gets reported as a fail–to–deliver. Most of the short hedge funds and broker dealers have multiple entities, many offshore, so they sell large naked short positions from entity to entity. Position rolls, as they are called, are frequently done broker to broker, or hedge fund to hedge fund, in block trades that never appear on an exchange. Each movement resets the time clock for the naked position becoming a fail–to–deliver and is a means of quickly getting a company off of the SHO threshold list.
The prime brokers may do a buy–in of a naked short position. If they tell the short hedge fund that we are going to buy–in at 3:59 EST on Friday, the hedge fund naked shorts into their own buy–in (or has a co–conspirator do it) and rolls their position, hence circumventing Reg SHO.
Most of the large broker dealers operate internationally, so when regulators come in (they almost always “call ahead”) or compliance people come in (ditto), large naked positions are moved out of the country and returned at a later date.
The stock lend is enormously profitable for the broker dealers who charge the short sellers large fees for the “borrowed” shares, whether they are real or counterfeit. When shares are loaned to a short, they are supposed to remain with the short until he covers his position by purchasing real shares. The broker dealers do one–day lends, which enables the short to identify to the SEC the account that shares were borrowed from. As soon as the report is sent in, the shares are returned to the broker dealer to be loaned to the next short. This allows eight to ten shorts to borrow the same shares, resetting the SHO–fail–to–deliver clock each time, which makes all of the counterfeit shares look like legitimate shares. The broker dealers charge each short for the stock lend.
Margin account buyers, because of loopholes in the rules, inadvertently aid the shorts. If short A sells a naked short he has three days to deliver a borrowed share. If the counterfeit share is purchased in a margin account, it is immediately put into the stock lend and, for a fee, is available as a borrowed share to the short who counterfeited it in the first place. This process is perpetually fluid with multiple parties, but it serves to create more counterfeit shares and is an example of how a counterfeit share gets “laundered” into a legitimate borrowed share.
Margin account agreements give the broker dealers the right to lend those shares without notifying the account owner. Shares held in cash accounts, IRA accounts and any restricted shares are not supposed to be loaned without express consent from the account owner. Broker dealers have been known to change cash accounts to margin accounts without telling the owner, take shares from IRA accounts, take shares from cash accounts and lend restricted shares. One of the prime brokers recently took a million shares from cash accounts of the company's founding investors without telling the owners or the stockbroker who represented ownership. The shares were put into the stock lend, which got the company off the SHO threshold list, and opened the door for more manipulative shorting.
This is a sample of tactics used. For a company that is under attack, the counterfeit shares that exist at this ex–clearing tier can be ten or twenty times the number of fails–to–deliver, which is the only category tracked and policed by the SEC.
Continuous Net Settlement — The third tier of counterfeiting occurs at the DTC level. The Depository Trust and Clearing Corporation (DTCC) is a holding company owned by the major broker dealers, and has four subsidiaries. The subsidiaries that are of interest are the Depository Trust Company (DTC) and the National Securities Clearing Corporation (NSCC). The DTC has an account for each broker dealer, which is further broken down to each customer of that broker dealer. These accounts are electronic entries. Ninety seven percent of the actual stock certificates are in the vault at the DTC with the DTC nominee's name on them. The NSCC processes transactions, provides the broker dealers with a central clearing source, and operates the stock borrow program.
When a broker dealer processes the sale of a short share, the broker dealer has three days to deliver a borrowed share to the purchaser and the purchaser has three days to deliver the money. In the old days, if the buyer did not receive his shares by settlement day, three days after the trade, he took his money back and undid the transaction. When the stock borrow program and electronic transfers were put in place in 1981, this all changed. At that point the NSCC guaranteed the performance of the buyers and sellers and would settle the transaction even though the seller was now a fail–to–deliver on the shares he sold. The buyer has a counterfeit share in his account, but the NSCC transacts it as if it were real.
At the end of each day, if a broker dealer has sold more shares of a given stock than he has in his account with the DTC, he borrows shares from the NSCC, who borrows them from the broker dealers who have a surplus of shares. So far it sounds like the whole system is in balance, and for any given stock the net number of shares in the DTC is equal to the number of shares issued by the company.
The short seller who has sold naked – he had no borrowed shares – can cure his fail–to–deliver position and avoid the required forced buy–in by borrowing the share through the NSCC stock borrow program.
Here is the hocus pocus that creates millions of counterfeit shares.
When a broker dealer has a net surplus of shares of any given company in his account with the DTC, only the net amount is deducted from his surplus position and put in the stock borrow program. However the broker dealer does not take a like number of shares from his customer's individual accounts. The net surplus position is loaned to a second broker dealer to cover his net deficit position.
Let's say a customer at the second broker dealer purchased shares from a naked short seller — counterfeit shares. His broker dealer “delivers” those shares to his account from the shares borrowed from the DTC. The lending broker dealer did not take the shares from any specific customers' account, but the borrowing broker dealer put the borrowed shares in specific customer's accounts. Now the customer at the second prime broker has “real” shares in his account. The problem is it's the same “real” shares that are in the customer's account at the first prime broker.
The customer account at the second prime broker now has a “real” share, which the prime broker can lend to a short who makes a short sale and delivers that share to a third party. Now there are three investors with the same counterfeit shares in their accounts.
Because the DTC stock borrow program, and the debits and credits that go back and forth between the broker dealers, only deals with the net difference, it never gets reconciled to the actual number of shares issued by the company. As long as the broker dealers don't repay the total stock borrowed and only settle their net differences, they can “grow” a company's issued stock.
This process is called Continuous Net Settlement (CNS) and it hides billions of counterfeit shares that never make it to the Reg. SHO radar screen, as the shares “borrowed” from the DTC are treated as a legitimate borrowed shares.
For companies that are under attack, the counterfeit shares that are created by the CNS program are thought to be ten or twenty times the disclosed fails–to–deliver, and the true CNS totals are only obtained by successfully serving the DTC with a subpoena. The SEC doesn't even get this information. The actual process is more complex and arcane than this, but the end result is accurately depicted.
Ex–clearing and CNS counterfeiting are used to create an enormous reserve of counterfeit shares. The industry refers to these as “strategic fails–to–deliver.” Most people would refer to these as a stockpile of counterfeit shares that can be used for market manipulation. One emerging company for which we have been able to get or make reasonable estimates of the total short interest, the disclosed short interest, the available stock lend and the fails–to–deliver, has fifty “buried” counterfeit shares for every fail–to–deliver share, which is the only thing that the SEC tracks, consequently the SEC has not acted on shareholder complaints that the stock is being manipulated.
The Anatomy of a Short Attack — Abusive shorting are not random acts of a renegade hedge funds, but rather a coordinated business plan that is carried out by a collusive consortium of hedge funds and prime brokers, with help from their friends at the DTC and major clearinghouses. Potential target companies are identified, analyzed and prioritized. The attack is planned to its most minute detail.
The plan consists of taking a large short position, then crushing the stock price, and, if possible, putting the company into bankruptcy. Bankrupting the company is a short homerun because they never have to buy real shares to cover and they don't pay taxes on the ill-gotten gain.
When it is time to drive the stock price down, a blitzkrieg is unleashed against the company by a cabal of short hedge funds and prime brokers. The playbook is very similar from attack to attack, and the participating prime brokers and lead shorts are fairly consistent as well.
Typical tactics include the following:
Flooding the offer side of the board — Ultimately the price of a stock is found at the balance point where supply (offer) and demand (bid) for the shares find equilibrium. This equation happens every day for every stock traded. On days when more people want to buy than want to sell, the price goes up, and, conversely, when shares offered for sale exceed the demand, the price goes down.
The shorts manipulate the laws of supply and demand by flooding the offer side with counterfeit shares. They will do what has been called a short down ladder. It works as follows: Short A will sell a counterfeit share at $10. Short B will purchase that counterfeit share covering a previously open position. Short B will then offer a short (counterfeit) share at $9. Short A will hit that offer, or short B will come down and hit Short A's $9 bid. Short A buys the share for $9, covering his open $10 short and booking a $1 profit.
By repeating this process the shorts can put the stock price in a downward spiral. If there happens to be significant long buying, then the shorts draw from their reserve of “strategic fails-to-deliver” and flood the market with an avalanche of counterfeit shares that overwhelm the buy side demand. Attack days routinely see eighty percent or more of the shares offered for sale as counterfeit. Company news days are frequently attack days since the news will “mask” the extraordinary high volume. It doesn't matter whether it is good news or bad news.
Flooding the market with shares requires foot soldiers to swamp the market with counterfeit shares. An off-shore hedge fund devised a remarkably effective incentive program to motivate the traders at certain broker dealers. Each trader was given a debit card to a bank account that only he could access. The trader's performance was tallied, and, based upon the number of shares moved and the other “success” parameters, the hedge fund would wire money into the bank account daily. At the end of each day, the traders went to an ATM and drew out their bribe. Instant gratification.
Global Links Corporation is an example of how wholesale counterfeiting of shares will decimate a company's stock price. Global Links is a company that provides computer services to the real estate industry. By early 2005, their stock price had dropped to a fraction of a cent. At that point, an investor, Robert Simpson, purchased 100%+ of Global Links' 1,158,064 issued and outstanding shares. He immediately took delivery of his shares and filed the appropriate forms with the SEC, disclosing he owned all of the company's stock. His total investment was $5205. The share price was $.00434. The day after he acquired all of the company's shares, the volume on the over-the-counter market was 37 million shares. The following day saw 22 million shares change hands — all without Simpson trading a single share. It is possible that the SEC has been conducting a secret investigation, but that would be difficult without the company's involvement. It is more likely the SEC has not done anything about this fraud.
Massive counterfeiting can drive the stock price down in a matter of hours on extremely high volume. This is called “crashing” the stock and a successful “crash” is a one-day drop of twenty-percent or a thirty-five percent drop in a week. In order to make the crash “stick” or make it more effective, it is done concurrently with all or most of the following:
Media assault — The shorts, in order to realize their profit, must ultimately purchase real shares at a price much cheaper than what they shorted at. These real shares come from the investing public who panics and sells into the manipulation. Panic is induced with assistance from the financial media.
The shorts have “friendly” reporters with the Dow Jones News Agency, the Wall Street Journal, Barrons, the New York Times, Gannett Publications (USA Today and the Arizona Republic), CNBC and others. The common thread: A number of the “friendly” reporters worked for The Street.com, an Internet advisory service that hedge-fund managers David Rocker and Jim Cramer owned. This alumni association supported the short attack by producing slanted, libelous, innuendo laden stories that disparaged the company, as it was being crashed.
One of the more outrageous stories was a front-page story in USA Today during a short crash of TASER's stock price in June 2005. The story was almost a full page and the reporter concluded that TASER's electrical jolt was the same as an electric chair — proof positive that TASERs did indeed kill innocent people. To reach that conclusion the reporter over estimated the TASER's amperage by a factor of one million times. This “mistake” was made despite a detailed technical briefing by TASER to seven USA Today editors two weeks prior to the story. The explanation “Due to a mathematical error” appeared three days later — after the damage was done to the stock price.
Jim Cramer, in a video-taped interview with The Street.com, best described the media function:
When (shorting) ... The hedge fund mode is to not do anything remotely truthful, because the truth is so against your view, (so the hedge funds) create a new 'truth' that is development of the fiction… you hit the brokerage houses with a series of orders (a short down ladder that pushes the price down), then we go to the press. You have a vicious cycle down — it's a pretty good game.
This interview, which is more like a confession, was never supposed to get on the air, however, it somehow ended up on YouTube. Cramer and The Street.com have made repeated efforts, with some success, to get it taken off of YouTube.
Analyst Reports — Some alleged independent analysts were actually paid by the shorts to write slanted negative ratings reports. The reports, which were represented as being independent, were ghost written by the shorts and disseminated to coincide with a short attack. There is congressional testimony in the matter of Gradiant Analytic and Rocker Partners that expands upon this. These libelous reports would then become a story in the aforementioned “friendly” media. All were designed to panic small investors into selling their stock into the manipulation.
Planting moles in target companies — The shorts plant “moles” inside target companies. The moles can be as high as directors or as low as janitors. They steal confidential information, which is fed to the shorts who may feed it to the friendly media. The information may not be true, may be out of context, or the stolen documents may be altered. Things that are supposed to be confidential, like SEC preliminary inquiries, end up as front-page news with the short-friendly media.
Frivolous SEC investigations — The shorts “leak” tips to the SEC about “corporate malfeasance” by the target company. The SEC, which can take months processing Freedom of Information Act requests, swoops in as the supposed “confidential inquiry” is leaked to the short media.
The plethora of corporate rules means the SEC may ultimately find minor transgressions or there may be no findings. Occasionally they do uncover an Enron, but the initial leak can be counted on to drive the stock price down by twenty-five percent. The announcement of no or little findings comes months later, but by then the damage that has been done to the stock price is irreversible. The San Francisco office of the SEC appears to be particularly close to the short community.
Class Action lawsuits — Based upon leaked stories of SEC investigations or other media exposes, a handful of law firms immediately file class-action shareholder suits. Milberg Weiss, before they were disbanded as a result of a Justice Department investigation, could be counted on to file a class-action suit against a company that was under short attack. Allegations of accounting improprieties that were made in the complaint would be reported as being the truth by the short friendly media, again causing panic among small investors.
Interfering with target company's customers, financings, etc. — If the shorts became aware of clients, customers or financings that the target company was working on, they would call and tell lies or otherwise attempt to persuade the customer to abandon the transaction. Allegedly the shorts have gone so far as to bribe public officials to dissuade them from using a company's product.
Pulling margin from long customers — The clearinghouses and broker dealers who finance margin accounts will suddenly pull all long margin availability, citing very transparent reasons for the abrupt change in lending policy. This causes a flood of margin selling, which further drives the stock price down and gets the shorts the cheap long shares that they need to cover.
Paid bashers — The shorts will hire paid bashers who “invade” the message boards of the company. The bashers disguise themselves as legitimate investors and try to persuade or panic small investors into selling into the manipulation.
This is not every dirty trick that the shorts use when they are crashing the stock. Almost every victim company experiences most or all of these tactics.
How Pervasive Is This? — At any given point in time more than 100 emerging companies are under attack as described above. This is not to be confused with the day-to-day shorting that occurs in virtually every stock, which is purportedly about thirty percent of the daily volume.
The success rate for short attacks is over ninety percent - a success being defined as putting the company into bankruptcy or driving the stock price to pennies. It is estimated that 1000 small companies have been put out of business by the shorts. Admittedly, not every small company deserves to succeed, but they do deserve a level playing field.
The secrecy that surrounds the shorts, the prime brokers, the DTC and the regulatory agencies makes it impossible to accurately estimate how much money has been stolen from the investing public by these predators, but the total is measured in billions of dollars. The problem is also international in scope.
Who Profits from this Illicit Activity? — The short answer is everyone who participates. Specifically:
The shorts — They win over ninety percent of the time. Their return on investment is enormous because they don't put any capital up when they sell short — they get cash from the sale delivered to their account. As long as the stock price remains under their short sale price, it is all profit on no investment.
The prime brokers — The shorts need the prime brokers to aid in counterfeiting shares, which is the cornerstone of the fraud. Not only do the prime brokers get sales commissions and interest on margin accounts, they charge the shorts “interest” on borrowed shares. This can be as high as five percent per week. The prime brokers allegedly make eight to ten billion dollars a year from their short stock lend program. The prime brokers also actively short the victim companies, making large trading profits.
The DTC — A significant amount of the counterfeiting occurs at the DTC level. They charge the shorts “interest” on borrowed shares, whether it is a legitimate stock borrow or counterfeit shares, as is the case in a vast majority of shares of a company under attack. The amount of profit that the DTC receives is unknown because it is a private company owned by the prime brokers
The Cover Up — The securities industry, certain “respected” members of corporate America who like the profits from illegal shorting, certain criminal elements and our federal government do not want the public to become aware of this problem.
The reason for the cover up is money.
Everyone, including our elected officials, gets lots of money. Consequently there is an active campaign to keep a lid on information. The denial about these illegal practices comes from the industry, the DTC, the SEC and certain members of Congress. They are always delivered in blanket generalities. If indeed there is no problem, as they claim, then why don't they show us the evidence instead of actively and aggressively fighting or deflecting every attempt at obtaining information that is easily accessible for them and impossible for companies and investors? Accusers are counter attacked as being sour-grapes losers, lunatics or opportunistic lawyers trying to unjustly enrich themselves. Death threats are not an unheard of occurrence, although it doesn't appear that anyone has been “whacked” so far.
The securities industry counters with a campaign of misinformation. For example, they proudly pointed out that only one percent of the dollar volume of listed shares are fails-to-deliver. What they don't mention:
that the fails-to-deliver are concentrated in companies being attacked
for companies under attack, for every disclosed fail-to-deliver there maybe ten to forty times that number of undisclosed counterfeit shares
companies under attack have seen their stock price depressed to a small fraction of the price of an average share, therefore the fails-to-deliver as a percentage of number of shares is considerably higher than as a percentage of dollar volume
the examples cited are limited to listed companies, but much of the abuse occurs in the over the counter market, regional exchanges and on unregulated foreign exchanges that allow naked shorting of American companies, who are not even aware they are traded on the foreign exchanges.
Why does this continue to happen? It is no accident that the most pervasive financial fraud in the history of this country continues unabated. The securities industry advances its agenda on multiple fronts:
The truth about counterfeiting remains locked away with the perpetrators of the fraud. The prime brokers, hedge funds, the SEC and the DTC are shrouded in secrecy. They actively and aggressively resist requests for the truth, be it with a subpoena or otherwise. Congressional subpoenas are treated with almost as much disdain as civil subpoenas.
The body of securities law at the federal level is so stacked in favor of the industry that it is almost impossible to successfully sue for securities fraud in federal court.
For example, in a normal fraud case, a complaint can be filed based upon “information and belief” that a fraud has been committed. The court then allows the plaintiff to subpoena evidence and depose witnesses, including the defendants. From this discovery, the plaintiff then attempts to prove his case.
Federal securities fraud cases can't be filed based upon “information and belief”; you must have evidence first in order to not have the complaint immediately dismissed for failure to state a cause of action. This information is not available from the defendants (see above) without subpoenas, but you can't issue a subpoena because the case gets dismissed before discovery is opened.
This is only one example of the terrible inequities that exist in federal securities law.
The SEC is supposed to protect the investing public from Wall Street predators. While the vast majority of SEC staffers are underpaid, overworked, honest civil servants, the top echelons of the SEC frequently end up in high-paying Wall Street jobs. The five-person Board of Governors, who oversee the SEC, is dominated by the industry. The governors are presidential appointees and the industry usually fills three slots, frequently including the chairmanship.
For those rare occasions when the SEC prosecutes an industry insider, the cases almost never go to a judgment or a criminal conviction. The securities company settles for a fine and no finding of guilt. The fine, which may seem like a large sum, is insignificant in the context of an industry that earned 35 billion dollars in 2006. Fines, settlements and legal expenses are just a cost of doing business for Wall Street.
The root cause of the impossibly skewed federal laws and the ineffectiveness of the SEC and other regulatory bodies rests squarely with our elected officials. The securities industry contributes heavily to both parties at the presidential and congressional levels. As long as the public is passive about securities reform, our elected officials are happy to take the money, which at the federal level was 65 million dollars in 2006.
The Democrats swept into power with a promise of ethics reform. Their majority in congress allowed Christopher Dodd (D-CT) to ascend to the chairmanship of the Senate Banking Committee, which regulates the securities industry. His largest single contributor ($175,400) in the first quarter of 2007 was (employees of) SAC Capital, a very aggressive short hedge fund. Are we surprised that Dodd has opposed additional regulation of hedge funds. They are virtually unregulated.
Some states have their own securities laws and their own enforcement arm. Certain states including Connecticut, Illinois, Utah, Louisiana and others, have begun active enforcement of their own laws. The state laws are not nearly as pro industry as federal laws and plaintiffs are having success.
To thwart this, the industry with the support of the SEC, is attempting to have the federal court system and federal agencies, be the sole venue for securities matters. The SEC is working hand in hand with the industry to advance this theory of federal preemption, which would put all securities matters under federal law, all litigation in federal courts, and all enforcement with the SEC.
The following are recent examples of how the SEC is advancing the industry agenda:
The San Francisco office of the SEC issued subpoenas to various short friendly media outlets after congressional hearings about David Rocker and Gradient Analytic. This investigation into the media involvement with the shorts was ended by the chairman of the SEC, Christopher Cox, who withdrew the subpoenas, apparently concluding that the First Amendment right to free speech protected participants in an alleged stock manipulation. Jim Cramer ripped up his subpoena on his television show, thumbing his nose at the SEC.
In early 2007, the SEC completely exonerated Gradient, citing Gradient's First Amendment rights.
The Nevada Supreme court heard a case captioned Nanopierce vs. DTCC. Nanopierce is an emerging company that was attacked by the shorts and subjected to massive counterfeiting of their stock by the DTCC. This state court case is close to opening discovery against the DTCC, so the industry is attempting to kill the lawsuit by arguing it should be in federal court — where it will be DOA. The SEC showed up as a friend of the defendant DTCC, and filed a brief in support of the DTCC efforts to remove the case to the federal court system.
Both houses of the Utah legislature passed a bill that required daily disclosure of fails-to-deliver, including identifying specific companies and the specific broker dealer positions in that company. The bill also outlawed naked shorting of companies domiciled in Utah. The industry threatened litigation based upon federal preemption and backed the state down. The bill was not signed into law.
A bill was introduced to the Arizona legislature that required disclosure similar to the Utah bill, but without the illegal naked shorting provision. This is the same information that the DTC confidentially provides to the SEC. Certain prime broker's lobbying effort allegedly managed to get the bill killed in committee. The industries efforts to curtail state authority, is an effort to draw all securities matters under the federal umbrella, where small investors don't have a chance of obtaining justice.
In February 2007 the SEC determined that the hedge fund industry did not require any additional regulation — they are virtually unregulated. This may be the height of arrogance.
Sources — Information used was obtained from public records; the SEC; the Leslie Boni Report to the SEC on shorting; evidence and testimony in court proceedings; conversations with attorneys who are involved in securities litigation; former SEC employees; conversations with management of victim companies; and first hand experience as investors in companies that have suffered short attacks. This web site is sponsored by Citizens for Securities Reform.
What to Do? — Many of our elected officials at the federal and state level do not understand most of what is contained in this paper. They must come to understand this fraud, and, more importantly, understand that their constituents are angry.
Pass this information to everyone you know — put it in the public conscience. Then the citizenry needs to engage in a massive letter-writing campaign. Feel free to attach this report. Make sure your elected officials, at the federal level and state level know how you feel. Ultimately, votes in the home district will trump money from the outside.
z
Make a stock run Part 2
Tripletail Tuesday, 05/03/16 02:48:27 PM
Re: TonyTiger post# 12383
Post # of 12764
Who is pointing fingers? Tony, it doesn't matter how much you know or don't know today. Because tomorrow the market makers, pinkie CEO's, their attorneys and the lenders will come up with new and creative ways to take your money.
There is only one way now to get a run and that is for retail to buy heavily and with conviction when the market makers are vulnerable during the run. The market makers have to take a short position to maintain the box and make the market. Retail blew it the other day when they stopped buying in the middle of the run.
Now the CEO has several options available to help the lenders sell the other umpteen billion shares:
1. Reverse split
2. More PAR share valuation manipulation.
3. Sideways pump to bleed out the rest of the shares over the coming months
4. All of the above and in combination.
z
TBS Tip: 10Qs
Tripletail Wednesday, 04/27/16 02:49:48 PM
Re: sandman44 post# 12178
Post # of 12764
It is all quite legal and the legal work is done by a handful of OTC savvy attorneys who trade in clean and dirty shells.
If you read the financials very closely on these OTC stocks you see the big picture. The whole 10Q is basically a big disclaimer.
In between the disclaimers lies the fluff. Everyone focuses on the fluff and never the disclaimers.
If you look at a 10Q, look immediately at the line item called "accumulated deficit". That tells the whole story. Big accumulated deficits over several years means that they company habitually borrows money as its only source of income. This money is in exchange for convertible shares that have a conversion date.
Because this is all vetted by attorneys AND it is a sub-penny, the SEC rarely does much more than a slap on the wrist.
The SEC is now changing all this. These companies are dying out.
The changes started in 2014 and it is ramping up.
z
TBS Tip on Market Makers:
Tripletail Wednesday, 04/27/16 02:39:06 PM
Re: None
Post # of 12764
Resistance 3 is Vandham with 19 mill
Resistance 4 is BMA Securities with 18.5 mill
Buckman is at .10 so I don't think he has anything
VNDM and BMAK are probably sitting on giant icebergs so what they are showing is probably meaningless. When it gets to trips1 they usually don't do the 10,000 show because they are trying to get retail to buy the trips1 and want retail to think that is all they have left. They know someone on a message board will say " hey look, only 19 mill left...let's take it out..."
Citadel can be a dilutor and they are very successful because they don't have the reputation of bmak, vndm, bkrt, vfin, etc...so CDEL may have a big berg they are hiding also.
z
How to make a stock run:
This is regards to DCAC.
Tripletail Wednesday, 04/27/16 01:59:59 PM
Re: None
Post # of 12764
Theoretically, there seems to be only one way to make something happen on this stock. The A/S is 6 billion. Close to 2 million in circulation.
Therefore a run MIGHT happen if about 4 billion shares are bought. Anyone have a calculator? I think that is about $400k.
At that point the market makers freak out because there are no shares left and if that amount of volume goes through them they will be looking to get shares.
The price will start to creep up well before that though because it will trigger a feeding frenzy. Speculation says that at about 2 billion volume the SEC might halt it or let ti run because they like the market to get publicity...especially in this market at this time.
Pressuring the market makers to create a run is the only hope at this time. Massive volume means they need to go really deep to keep shares on hand to sell. The deeper they go the harder the run because they will need to keep ahead to prevent the price from rocketing...
See how simple this could be?
z
TBS Tip on OTC Convertible Lenders:
Tripletail Wednesday, 04/27/16 10:32:19 AM
Re: mtlebomac post# 12164
Post # of 12764
Well, lets examine your statement...
A "ton" of shares is what happens when the the price is trips1.
25 million shares is about 2500 dollars. That was the volume yesterday. $2500.00....pitiful.
Here is the problem...people do not adjust their paradigm fast enough and the MM's know that...people just look at volume without looking at the trade amount in dollars. You are thunderstruck by 25 million shares being traded....if that was Apple, sure, it would be impressive. But this ain't Apple.
Retail is buying lottery tickets on this thing right now. People are dropping a couple hundred bucks for 2 million shares knowing that this thing is going to R/S at any time.
There is nothing left. The pumps were marginal on this thing because the SEC has absolutely put the brakes on this stuff. As a matter of fact, right now it is entirely possible that the SEC is giving some love to DCAC. You have heard nothing from the CEO. Some of you have emailed him with no response.
There may be one more dead-cat bounce left for you to get out on but that is iffy.
Once a CEO gets his check from the lender, he is done with any real control. They will promise him that they will lend more money if a CEO helps pump it. The lenders will fly a CEO to their HQ and make all sorts of promises to get shares to dump here on the OTC.
Sometimes the lenders get stuck and they are bagholders also. That is when things get a little nasty ( and I do mean nasty) and a CEO is forced to change the PAR value and move the decimal point to get the lenders out.
Most OTC penny companies are not real companies. They use virtual offices like Regus, or their parents address, have fictional partners, fictional financials, etc. Of course it is all legal because when you read the financials you see that they often actually say that the document is probably meaningless because they do not have the proper controls in place to assure the information is correct. The SEC allows that. All in an effort to make you think that it is a huge company with many employees, partners, etc. Not just one little man or woman with a stack of worthless corporate documents peddling par shares to a lender.
Of course, the average Joe Retail on the OTC ignores that and treats these companies like their favorite football team. They get angry if someone points out the "fine print".
Next thing you know...trips1 and every one is surprised that a CEO won't answer the emails like he did during the pump when the MM's were unloading the dilution for the lenders.
z
Why the US,France,Britain are destroying Syria
https://www.rt.com/op-edge/324853-us-france-britain-syria/
Sam Gerrans is an English writer, translator, support counselor and activist. He also has professional backgrounds in media, strategic communications and technology. He is driven by commitment to ultimate meaning, and focused on authentic approaches to revelation and realpolitik. He is the founder of Quranite.com – where the Qur’an is explored on the basis of reason rather than tradition – and offers both individual language training and personal support and counseling online at SkypeTalking.com.
Published time: 5 Dec, 2015 13:24
Get short URL
© Darren Staples
© Darren Staples / Reuters
Since Russia stepped up to the plate, suddenly western countries can’t wait to bomb ISIS. Are they now there to get the job done? Or are they there to stop Russia increasing its influence, and to make sure it doesn’t succeed where they failed?
The world is falling over itself to bomb Syria.
The following statement from Reuters summarizes the situation: “Most of the world's powers are now flying combat missions over Iraq and Syria against Islamic State. But any consensus on how to proceed has been thwarted by opposing policies over the 4-year-old civil war in Syria, which has killed 250,000 people, driven 11 million from their homes, left swathes of territory in the hands of jihadist fighters and defied all diplomatic efforts at a solution.”
Read more
Will the real terrorists in Syria please stand up?
While it may seem to the outside observer that this catalogue of mayhem is the result of incompetence, to me – on the contrary – it is evidence of things going to plan.
I have never, thus far, seen a war the ruling elite clearly wanted to happen not happen.
Here, as in all other cases, there has been a bit of hand-wringing, some crying, some protests, some moving speeches. But like the morality plays of medieval times, after enjoying the sermon dressed as entertainment, life has inevitably carried on as normal with the barons raping and pillaging and everyone else having to put up with that reality.
Destruction of Syria is the plan
This time the plan – at least judging from the outcomes – is to destroy Syria.
Syria has been anathema to the self-appointed arbiters of righteousness: the ‘international community’, that coterie of hypocrites which arrogates to itself the monopoly on meting out death to those who won’t get with the program.
This group dislikes Syria which has had an uncompromising stance towards Israel and an independent financial system, and is using the chance to destroy it to flood Europe with refugees, thus further debasing the makeup of its constituent nations, and simultaneously justifying a lockdown in those countries.
Enter Putin
Everything was going swimmingly until Putin stepped in.
While many in the West who have grown jaundiced at the obvious usurpation of our governments by outside interests ascribe almost saint-like motivations to Putin, I do not. He is a superb strategist. Exactly what he is strategizing for is not clear yet.
What is clear is that his move into Syria threw a spanner in the works of a status quo the US was quite happy with: growing terrorism and mayhem in Syria and spreading nicely to Europe.
Assad himself said a few days ago to the BBC (courtesy of Czech Television) that ISIS was growing smaller after Russian bombing intervention whereas moves by other countries served only to strengthen ISIS and increase their recruitment.
He added: "The facts are telling."
So what do the facts tell?
They tell us that Russia is the only country involved to date which has the removal of ISIS as an actual goal.
Russia is also the only country with a legitimate mandate under international law.
In addition, ISIS was most eloquently outed by author and journalist Gearóid Ó Colmáin on Russia Today as a US creation.
The banksters control the world via their power to 'create' money and control interest rates.
They instigate the 'de stabilization' or 'totally fucking up' countries who do not kow tow to them. i.e. Libya, Iraq, Syria, and soon Iran. It's not about 'terrorism' ...it's about money......but 'terrorism' and 'spreading democracy' sound a hell of a lot better.
Read the article.......it's all in there.
z
We’re all terrorists now
Sam Gerrans is an English writer, translator, support counselor and activist. He also has professional backgrounds in media, strategic communications and technology. He is driven by commitment to ultimate meaning, and focused on authentic approaches to revelation and realpolitik. He is the founder of Quranite.com – where the Qur’an is explored on the basis of reason rather than tradition – and offers both individual language training and personal support and counseling online at SkypeTalking.com.
Published time: 12 Dec, 2015 15:47Edited time: 13 Dec, 2015 04:41
The concept of terrorism has been extended from carrying out physical acts in which innocent people are killed, to wrong opinions, sweaty palms and disagreement with government. If you want to find a terrorist, soon all you will have to do is look in the mirror.
Words are political. They change shape to suite agendas.
In the 1970s, ‘terrorist’ meant a paid-up member of the IRA, the Irgun, ETA and the like. These were bad people perpetrating evil and indiscriminate deeds upon a defenceless public. They used bombs, worked in cells, and killed people without warning before fading into the shadows.
Although the UK had legislation specifically geared to deal with what is called terrorism on the books, people deemed terrorists, when they were caught, were prosecuted under existing laws – i.e. for actual crimes they had committed.
Bobby Sands, for example, who fought and died for the IRA cause, was incarcerated for nothing more sinister than owning illegal firearms.
Since 9/11 and the implementation of the so-called Patriot Act (and equivalent legislation in other countries), the definition of terrorism is itself becoming a source of terror.
As part of this process, we are being taught to live with the new nomenclature of ‘terror suspect’; that is you haven’t done anything wrong, but you might.
The Independent reports that: “315 terror suspects were arrested between September 2014 and September 2015, according to new figures from the Home Office.”
The same article continues: “[…] it seems what we are seeing is an increase in terrorism-related fear rather than terrorism itself – totally understandable of course in itself, but not when it leads to the kind of heavy-handed policing that can actually radicalize more people.”
Read another way: the British Government is harassing increasing numbers of innocent people and generating both fear and the chance of more ‘radicalization’ thereby.
The no-fly list
The Huffington Post reports that one can be identified and placed on a ‘no-fly list’ for any number of reasons.
It tells us: “government officials have secretly characterized an unknown number of individuals as threats or potential threats to national security. In 2013 alone, 468,749 watch-list nominations were submitted to the National Counterterrorism Center. It rejected only one percent of the recommendations.”
This is nearly half-a-million US citizens in one year; this means they are finding almost 1,400 new American enemies a day.
The article goes on to list seven criteria government agencies use to put a person on a list. These criteria are vague and admit to the broadest and most subjective interpretation; in short they break down to: we don’t like the cut of your jib.
Yes, some life-failed bureaucrat you will never meet can decide – extra judicially – that you may not travel on an aeroplane.
The no-gun list
If there is to be no due process, why stop there?
Edit: A president tweeting? WTF. insane.
Obama certainly agrees. The Guardian tells us: “Closing the No-Fly List loophole is a no-brainer,” Barack Obama tweeted on Tuesday, arguing that Congress should pass laws to prevent anyone on the government’s terrorist watch list from buying a gun.”
I see: the president calmly tweets that revoking the Constitution he swore to uphold is a “no brainer,” and we can all go about our business.
Terrorist events
Since Obama is so concerned with guns, he might want to do something about all the smoking guns that feature so prominently in the so-called terrorist attacks on US soil.
RT’s Marina Portnaya did a piece on the release of a report, which identifies the FBI as the mastermind of 95 percent of all domestic terrorism in the US.
What is the core theme?
Everything.............et z
Hi Zardiw! Read interesting! What is this about?
Best Article on Banking I've Ever Read:
https://www.rt.com/op-edge/327191-switzerland-money-banks-ban-referendum/
When Iceland jailed its bankers something changed. The unthinkable had happened: the real criminals had been held to account. Now Switzerland is also threatening to go off the fiat-bankster reservation. But will it happen?
Josiah Stamp once said: “If you want to continue to be slaves of the banks and pay the cost of your own slavery, then let bankers continue to create money and control credit.”
Stamp knew whereof he spoke. Among his achievements, he was appointed a director of the Bank of England in 1928.
All so-called modern, civilized countries are under the boot of the very mechanism Stamp described. Very few countries managed to achieve highly developed societies without it, such as Libya, Iraq and Syria.
Those countries all have something else in common. Whatever can it be?
However, other countries which have yet to become targets for unprovoked genocide at the hands of US agencies are waking up and smelling the pinstriped tyranny.
Switzerland, for example: hardly a place traditionally associated with wild-eyed fanaticism, Switzerland is set to vote on banning banks from creating money.
Read more
© Dado Ruvic Switzerland to hold referendum on banning private banks from creating money
The English play football, drink beer and beat each other up in town centers in the evenings. The French pout and shrug and make simple things take a long time and cost a lot. The Swiss provide money a safe, boring place where nothing dramatic will happen to it, so that it may then be passed on to the next generation of rich people – preferably in an amount greater than was received – by this generation of rich people.
So money is at the heart of what Switzerland does.
Switzerland is also home to the Bank of International Settlements, which – while it sounds as exciting as double-entry bookkeeping – is, in fact, the spider at the center of the entire financial web.
In an article entitled "Switzerland to vote on banning banks from creating money" the Telegraph reports: “Switzerland will hold a referendum to decide whether to ban commercial banks from creating money.
The Swiss federal government confirmed on Thursday that it would hold a plebiscite, after more than 110,000 people signed a petition calling for the central bank to be given sole power to create money in the financial system.
The campaign - led by the Swiss Sovereign Money movement and known as the Vollgeld initiative - is designed to limit financial speculation by requiring private banks to hold 100pc reserves against their deposits.”
This sounds incredibly dull, doesn’t it? But the idea behind it is what revolutions are made of.
The article continues: “Banks won’t be able to create money for themselves any more, they’ll only be able to lend money that they have from savers or other banks, said the campaign group.”
I’ll repeat that bit: they’ll only be able to lend money that they have from savers or other banks.
That’s probably what you think banks do: lend money they acquire from savers or other banks.
But no! They are busy creating money (albeit by a circuitous route); that is, they are busy magicking that thing the rest of us spend our lives working so hard to obtain – money – into existence. They do it by means of the creation of an imaginary thing called debt. We then undertake to pay these fictional notions back, and do so with interest.
Not only is this outright fraud and theft against the poor sap who signed the original credit agreement, it also debases the value of every single unit of the currency in which the transaction takes place.
Put in business terms, it is equivalent to printing more shares.
Every time a company’s board elects to do that, the value of existing shares is diluted unless there is an equivalent increase in the value of the company which, in the case of the kind of debt banks create – being both usurious and fiat in nature – there isn’t.
The article continues: “The SNB (Swiss National Bank) was established in 1891, with exclusive power to mint coins and issue Swiss banknotes.
However, over 90 percent of money in circulation in Switzerland now exists in the form of "electronic" cash created by private banks, rather than the central bank.
‘Due to the emergence of electronic payment transactions, banks have regained the opportunity to create their own money,’ said the Swiss Sovereign Money campaign.
That is correct: if we had access to the same computer terminals the banks have, we could magic in or out of existence all the imaginary stuff we are trained to think of as important – money – in whatever quantities we liked.
This is how it works: when they print quite a lot of this stuff there is a boom. When they print too much of it, there is inflation (actually, the printing of money is inflation). When they stop printing it or simply hold on to it, there is a depression.
As long as the people keep slaving away and let the bankers give them pieces of paper or blips on a computer screen in exchange for their blood, sweat and tears, everything is fine.
But if a nation begins to wake up to the con and starts pushing back it is visited by a color revolution, cultural invasion, or simply bombed back into the Stone Age.
That’s it. You now understand economics.
We are trained from birth to think we need the banks and their paper fictions because the same people who own the banks also direct our centralized systems of education, as well as own media and entertainment.
But we don’t need them. Anything can be used as a medium of exchange. Britain became a world power based on an economy in which taxes were paid using bits of wood.
At the macro-level, the US currency is essentially worthless; once oil is traded widely in any currency other than dollars, the US economy will collapse since there will be no reason for the rest of the world to buy its dollars.
At the micro-level, a ground-shift is occurring as more people understand that real friends with a functioning vegetable garden are worth more than a suitcase full of fictional money, or a job you hate that you could lose at any moment. Barter is now booming in Greece – a country sucked into financial oblivion by the money men at Goldman Sachs.
Now back to the prospective plebiscite in Switzerland.
I am skeptical that this duck will get airborne without being shot down. The democracy the Swiss think they have is a pleasant enough fiction, but I am sure it will never be allowed to interfere with business.
And if we read the article carefully, it does say that the central bank should be given sole right to create money. This would essentially leave the creation of money in the same hands as those who control the Federal Reserve or the Bank of England rather than allow them to farm out the process. But at least it shows that people are beginning to wake up to where the true power lies.
In the unlikely event that this grass-roots movement in Switzerland should get its way and its proposed legislation be enacted, and then begin to morph into something which really does threaten the banking elite, we must not be surprised if Switzerland is shortly discovered to be harboring weapons of mass destruction, or to have masterminded 9/11, or to be financing Islamic State.
Yes, we will need to brace ourselves to be educated by a Western media unanimous in pointing out the connections to be made between the production of precision watches, pavements so clean you can eat your lunch off them, and the evil of an irrational hatred of freedom – one with roots in a culture which tacitly supports jihad against all non-eaters of expensive confectionary.
Freedom. You’ve got to love it!
z
Btw.....you said you liked TA......we have some very interesting scans that you may like.
MACD Turn/XOver, 7-10MA Cross, Golden Cross, Pincher, 200 Day Low (both on price low and actual low)...
And the interesting thing we have is we keep track of the slope of the lines.....so we can actually predict X Overs b4 they happen......
And if you have a favorite that you like...we can probably program it....that's how we got a lot of our scans...people asked for them.....
z
Well....I wrote both DDAmanda and 8K Spy for myself originally.....it was even free for people. There wasn't much interest at first.
It takes a special kind of trader to use DDAmanda......of course 8K Spy is for anyone.
I'd literally be blind w/o DDAmanda....I keep it open ALL the time...even now. Really a breeze to research stocks with her.....and of course finding them in the first place. Lots of different scans....and she has $Traded which imo is gold. Volume is meaningless.....lol.....cause it depends on the price.
Anyway, as far as the cost.......If you can make 4-5 figures with her...well...then the cost is pocket lint.
Users have some control over comments, and other DD......so I wanted a higher class of trader using her. The price keeps out the riff raff mostly.
By Monday the price will be $105 instead of $80/mo...fwiw....
If you want you can try her out.......if you don't like her after 7 days you get your moola back.
And here's a Promo code you can use: han458
We have a pretty good group of traders in our Skype room too......Go read some of the comments on the FAQ page. Those are all from real users....
Are you on Skype?
z
same here.
good trading to you in 2016.
I noticed on your profile this link....looks like a trading system, a program,as well as the 8k spy...that sounds interesting too.
Is that a program you use? too bad its so expensive for the mom and pop folks like me... i manage my wife's inherited portfolio, but I suppose if I had an investing business I'd use some subscription tools.
Ive missed alot of chances to day trade and play options.would have been easier for me if I could do that.
cheers.T
I knew you didnt leave TPIV in a huff...more like a gentle puff.
or a tssk..
what stocks do you have your eye on these days.
do you do extensive charting on them with TA ?
I didn't leave in a huff....lol.....
I just wanted to at least let people know what's going to happen there.
FFaP gets cheap assed shares in return for helping run the stock.
BUT...him and his buddies then proceed to sell into any buying....and when that dries up they keep selling and drive the price into the dirt.
Look at RCFEF, TINO, BHGI .....there's more...just look where he's been posting.
I realize some of the guys on that board are part of his 'crew'......and I don't like to bash as a rule. I said my piece and am not going to get into any pissing war. Arguing stocks is like arguing women, politics and religion.....lol.
But he totally screwed us up on BHGI....we're gonna recover, but he really did a number on us.
Yeah......this is my private board where I post all the good shit I find.
Good to meet you!!!
z
WAAAAAASSSSSSSSSSSSSSSSUUUPPPPPPPPPPPPPPPPPPPP.........lol......et z
Greetings Santa Zar....
this looks like a great forum. Great name too Blind Squirrel.
Ive been a strictly TA chartist for several years now. always looking to learn more.
I saw your comments on TPIV. my instinct agreed with you. sorry to see you leave there in a huff of sorts, but There arent too many there who really understand charting.and TA.
myself, I'm restricted to swing trading ,since my portfolio is stuck within an Inherited IRA format at Schwab custodian.
so I have no experience with options, or shorting stocks. I can only swing trade.
unless I cash out and pay the penalties.
anyway, looks like alot of good reading about all things TA here, just from the intro.
Happy holiday to you.
BTW,do you know what the Santa Claus mythical story is really all about ? such an interesting shamanic story.
123tom
Compleat Guide to Stock Trading by Vantillian:
Sunday, 07/20/08 07:34:32 PM
Title: Top 25 Axioms Of OTC Investing
Subtitle: Understand These And You Might Have A Shot At Surviving The OTC Marketplace
Author: vantillian http://investorshub.advfn.com/boards/profile.asp?user=94357
INTRO
I am calling these 25 points "axioms" in that they are propositions that are not necessarily proved or demonstrated but rather are self-evident to those who trade/invest on the OTC. In other words, these truths should be taken for granted and serve as a starting point or a foundation when deducing or inferring other propositions about OTC investing. I will not seek to prove these axioms to you...they just simply ARE. An axiom appeals to no other authority for verification...it stands on its own as the truth. Therefore, with these axioms we are dealing more with beliefs and less with facts. But without fundamental beliefs, you will have nothing whereby to interpret the facts. So sit up and pay attention because the following are very important ideas that could keep you from losing your shirt and help you to win nicely at playing the OTC market.
1. The Center Stage Axiom
The longer an issue stays in the spotlight...the worse. There's always one or more good reasons as to WHY a company is trading on the OTC...especially if it is a sub-penny company. There have been many times in the past couple years I thought I had found that "true gem" that was going to be another Yahoo. I believed in it big time. I bought into it big time! But after the initial run and a dead-cat bounce or two...things began surfacing that were completely damaging to the demand for the stock. Simply put, the higher a stock climbs in the investing world, the more its rear end shows...and OTC butts ain't pretty. Are there the occasional rule breakers here? Yes (usually they are reverse merger plays). But those stocks are few and far between and they generally uplist very quickly to a higher exchange. As a general rule, the longer a company stays in the limelight, the more enemies it will attract. Bashers. Shorters. Bidwhackers. Apathy. New shares from various and sundry places (especially DILUTION and restricted shares coming off restriction). It's always a war to make the PPS (read: Price Per Share) go up on any issue. Don't stay too long at the war. Fight as long as you are advancing and retreat the moment you see the enemy reinforcements gathering. Or possibly better yet...retreat before you think you even heard the enemy reinforcements. Remember, it's not your job to make a stock PPS go up, it's your job to make your portfolio grow. OTC valor is much different than armed forces valor.
2. The Carpe Diem Axiom
Always take *some* profit when you're sitting on significant gains 50% or higher. Unless you are already independently wealthy and view OTC investing *only* as gambling for FUN (which isn't an altogether bad thing to view it as), take profit. The way to accumulate wealth playing OTC issues is to always exit too soon. Furthermore, it leaves one feeling pretty dern good when he left some on the table for the next guy and was not the chucklehead that singlehandedly killed the run. If it does make you feel good that you were the chucklehead that killed the run, shame on you. Always remember...you do not know the next time buying pressure will allow you to leak out of shares without injuring a stock and/or your portfolio! Seize the day. Seize the opportunity strong buying pressure provides.
3. The Itchy Trigger-Finger Axiom
Someone always has shares to sell to ruin a run. Read it again: Someone ALWAYS has shares to sell to ruin a run. Make this statement your computer desktop and/or screensaver. Say it to yourself ten times whenever you start your trading day. Paint it on the ceiling above your bed so it's the first thing you see in the morning. Please understand that someone owns a whole lot of whatever stock you're jazzed about at much lower average than you -- and often times they own it for NUTHIN' (i.e. compensated promoters, debtors, relatives of CEO, etc.). Also, if you think that YOU are the ONE that is holding all the shares that could potentially ruin a run...think again. Only God knows where all the shares are or will be coming from...because who knows what kind of shorts will attach themselves to your play and sell you nothing but VAPOR.
4. The Domino Effect Axiom
Almost everyone that loses money playing the OTC looks to point a finger somewhere. They want someone or some entity to blame for their loss. Forget that the CEO sold 100M shares into the open market, they'd rather lash out at the popular poster that promoted, endorsed, and otherwise "pumped" the stock. Here's what folks like that should understand...there is a domino effect of people getting screwed. Here's an illustration: the CEO legitimately plans NOT to sell shares but some emergency comes up...and believe me..."emergencies" almost always come up for these guys! Selling shares is the easiest way for him to raise the money and "After all," the CEO justifies to himself, "the reason I went public in the first place was to raise money." The problem here is that the CEO failed to tell his promoters and/or closest investors about his need to raise funds and that group of people is living under the assumption that the share structure is stable (i.e the supply will remain the same). So the CEO got screwed by somebody and had to pay up. He screws the promoters and his closest investors and they had to pay up. Now the promoters and close investors will probably screw another batch of investors. Scenarios like this have happened more times than I can count! When something goes wrong and you're holding several thousand dollars worth of stock, you're not going to be looking to inform the world about things that will negatively affect the stock's PPS! You're looking for ways to bring in buying pressure, not decrease it! Folks love pumpers/promoters when they are helping the stock they are in go up. Folks hate those same pumpers/promoters when their stock is going down. Heroes and zeroes in the microcap world are one and the same...it just depends on the day. Remember this though...if the guy at the top decides to take advantage of people...he most certainly will succeed. What you need to know is your place in the food chain. And friends, if you're a rookie to the OTC world...you are a bottom feeder that gets caught eating the crap of all the other fish in the ocean when the "Domino Effect Axiom" kicks into high gear.
5. The Vapor Shares Axiom
If you see a poster battling the idea of shorting OTC issues with determination and vigil, sit up and pay attention...that poster is either a short himself or working on behalf of the shorts. People and/or groups with the right connections can and do short OTC issues...many times they short stock into oblivion with the full approval and consent of the leadership of the company. Contrary to popular belief, many OTC CEOs don't give a flying fig newton what their stock price does...what they care about is getting their hands on YOUR MONEY. There is alot of money to be made when a stock goes up. There is even more money to be made when a stock goes down if you were selling vapor all the way down to .0001 and cover there. Microocap hedge funds exist. Microcap hedge funds manipulate stocks and steal the money of good people. Unless you are a microcap hedge fund yourself, you can almost never win a battle against a powerful microcap hedgie that is shorting the snot out of your beloved stock. Remember, this is an "axiom" that stands on its own. I will not seek to prove the validity of this point to you. You must simply either accept it or reject it.
6. The Glass-Half-Empty Axiom
Bashers on message boards are a very real force to contend with and it's not a coincidence that I've put this axiom after the "Vapor Shares Axiom." It is easier to get a person to sell a stock than it is to buy a stock...and they know this very well. If your stock's message board becomes infested with bashers...be careful! Unless you believe the company has some incredible news that may force these guys to cover or unless you know of a group with mega-bank that is going to push the stock and perhaps force a cover...be careful when playing with shorty. Many of these bashers will try and convince you that they are there out of the kindness of their heart to try and rescue other investors from the perils of a diluting CEO or worse. Nope. Their motives are to bring the PPS down down down. Bashers, in the end, are almost always right eventually because they are bashing OTC issues. They know axioms like "The Center Stage Axiom" too!!!
7. The Supply IS Demand Axiom
I have seen several runs simply because a stock has a low share structure. A low supply creates demand. Know the share structure. On plays where the TA is gagged, plan to exit within hours of entering and play the momentum only unless you have STRONG and SOLID reason to believe the stock will go up. Call transfer agents. Learn what authorized shares, outstanding shares, and float mean. The share structure is the first thing I look for when making a new investment...it should be the first thing you look for too. If a company is not willing to be transparent in this area, you can bet there's a hundred other areas they're not willing to be transparent about. I have and continue to invest in plays where the transfer agents are gagged (unable to report to you what the current share structure is) but I don't plan to stay invested for long.
8. The Don't Click The Mouse Yet Axiom
Never buy a stock at the high of day after a significant run (good rule of thumb here may be 70-80%). Wait for a pullback. And while you're waiting, do some due diligence. Check the company's filings on pinksheets.com or otcbb.com. Read a few of their PRs. Check the history of the leadership there. Call the transfer agent (T/A) and ask for the share structure. And on stocks that are pulling back, buy at the bid. Remember that it takes both bid buyers and ask buyers to make a stock PPS go up.
9. The Morning Patience Axiom
The first hour of the market is "amateur hour." With most first-hours on hot issues, it'll either be extreme bid whackage which will cause some panic selling which will create some excellent buying opportunities later in the morning OR it will be extreme ask slappage which will lead to a pullback around lunchtime. I hardly ever buy during the first hour of the trading day, and I'd venture to say 80-90% of the time that decision has paid off. I'd rather watch a few missed opportunities than be stuck in a bunch of "apparent" ones.
10. The Bruised Knee Axiom
There are too many enemies against an OTC issue's PPS going up to NEVER lose a battle. Know how to take a defeat. You lost. YOU made a mistake. Evaluate what went wrong. Evaluate why YOU lost money. It's okay to lose money occasionally but it's not okay to be just as dumb after as you were before! Think, think, THINK! Don't make the error again. Get smarter. Listen, school is expensive...tuition rates are high! If you want to make money trading the OTC you had better plan to spend the first year in school.
11. The Show-Me-The-Money Axiom
I once asked a poster that was complaining about getting lied to on a message board: "Are you stupid in any other areas?" Seriously folks, everyone on a stock message board has an agenda...including ME. Including YOU. Consider how often your posts are seasoned with fiction and/or things that you simply DO NOT KNOW TO BE CERTAIN. Consider that you have most likely served up a poo-poo platter covered thickly with powdered sugar. Trusting stock message boards for accurate due diligence is like trusting the National Enquirer for accurate UFO sightings.
12. The I'm-Rubber-And-You're-Glue Axiom
Develop thick skin if you plan to post on stock message boards much. 'Nuff said.
13. The Know-Your-Anthropology Axiom
Understand the nature of man! For this axiom, you need to be somewhat of a Christian theologian. The Bible clearly teaches us that mankind is not naturally good...he is naturally evil (Psalm 14 is a good place to start). The word Christian theologians use to describe our condition is "depravity." Because of the fall of man, we are morally corrupt in every part of our being and tend toward wickedness (i.e. greed, theft, lying). We stand in need of redemption from a Savior. So understand that you are playing amongst people (including yourself) that are not naturally good...they are naturally bad. In other words, you're playing with fire. Lies, half-truths, and misrepresentations abound in the OTC world. You better take EVERYTHING with a grain-of-salt the size of Texas. Some posters require more salt than others to digest. Be an evaluator of people. Learn how to ask the right questions. Make sure your yellow flags and red flags are ALWAYS working.
14. The Early-To-The-Party Axiom
Be willing to buy lower what you bought higher. I have often arrived to a party early. By "party" I mean a gathering of people and people's money that will result in a stock's PPS going much higher. By "early" I mean I got there before the stock was sitting at a low. I am always somewhat discouraged when a purchase I made continues to go down. But if I have done solid due diligence in the company, I often take it as an opportunity to add more shares cheaper and lower my average. In other words, don't look at your initial investment as dead money and hope that it goes back up again so you can get out. Average down, do the due, and then promote your stock to others and help jumpstart the party. Be a spark plug.
15. The Next! Axiom
Be looking to get out of an issue the moment you get in. Have an exit strategy in place. By buying a stock you are not entering into any kind of formal arrangement like matrimony. You are an investor and as such your goal is to make money. If your investment should go up within the first 20-30 minutes of purchase why is it any different taking some profit then as if it took 20-30 days for it to go up? Get in. Lock in profits. Ride freebies.
16. The Grow-Up Axiom
Somebody once said: "If somebody screws you once, shame on them. But if somebody screws you twice, shame on you." In the OTC world I would modify it a bit to say: "If somebody screws you once, shame on you. If somebody screws you twice, you really are a moron." Take responsibility for ALL your investment decisions. Almost nothing ever happens as planned or hoped here on the OTC. There are too many enemies against making a stock's PPS go up. If you're going to play the game down here...you better be ready to accept FULL and COMPLETE responsibility for EVERYTHING YOU DO IN THIS INVESTING REALM. Point the finger of blame at only one place: yourself.
17. The Ask-Yourself-Why Axiom
Understand that many of the people encouraging you to buy an issue are compensated promoters whether they disclaim it or not. Most times they do not have your best interest in mind, they have their best interest in mind cause they're sitting on a mountain of stock and can't wait to turn paper into cash. It has been said that "the man that can answer the question 'what' will always have a job but the man that can answer the question 'why' will always be his boss." Be continually evaluating EVERYTHING by asking questions that begin with "WHY."
18. The What-Was-That-Again? Axiom
Understand you are almost NEVER getting the whole story. The only way optimists will survive in the OTC is if they become compensated promoters. Pessimists can either become paid bashers or fast flippers. The OTC calls for realism. Be a realist. To be a true OTC realist you need to know and understand all that you are up against to make a stock's PPS go up.
19. The Public-Versus-Private Posts Axiom
Many of the people pumping stocks are stuck in them and want to inspire a whole new wave of bagholders to come take their place. Often times what is being said on the public message boards is completely different than what those same posters are saying behind closed doors. Realize this. Digest this. Embrace this. Don't be naive.
20. The Buy-The-Story-Not-The-Company Axiom
So you bought a stock because of a solid PR that came out. Cool. Why did you buy? Because of the story. Do you really know anything else about the company? Is it real? Do they have a big building? Do they have equipment? Are they producing? Forget all that. In many ways it is irrelevant. If you are going to invest in the OTC you had better learn to invest in STORIES. Now, ironically, one of the dictionary definitions for "story" is "a lie or fabrication." Do you really think that you are investing in the same caliber of companies on the OTC as you would on the NASDAQ or NYSE? Don't be naive! Do you think what your company outlined in that lovely PR is really going to happen? Two words for you my friend: SAFE HARBOR. In the OTC you are investing in POTENTIAL ALONE; therefore, be a discerner of the POTENTIAL OF THAT COMPANY'S STORY. What has great potential? Water to China? American Idol in a 3-D world? Gasoline replacement in a weed? Oh yeah baby! All those STORIES have great POTENTIAL. But there's a monster "IF" involved in every one of those. After some time, the reality that the "IF" is gonna stay a big "IF" sinks in and the stock PPS encounters a slow death. Sadly, some of the really real OTC companies go unnoticed because they do not have a great story with potential. The term many investors use to refer to the story is "kool aid." Does your stock have good "kool aid?" Well, does the potential of your company make you want to buy it? Does it make other want to buy it? I try to avoid investing in OTC issues that do not have good kool aid flowage or the potential for good kool aid flowage. Wow. What a concept. On the OTC sometimes you have to invest in the POTENTIAL POTENTIAL of a company. (That last sentence wasn't a misprint. Read it twice if you need to.)
21. The Don't-Gamble-Away-The-Mortgage Axiom
You *should* expect to lose your entire investment. You *should* expect to lose more money than you make playing OTC issues until you wise up, learn these axioms, and behave according to them. If you are playing the OTC to try and make some quick money to pay off a debt, good luck with that. Unless you are an experienced OTC Jedi Master that does this for a living (and I'm by no means saying that I am one or that I have arrived!), you better ONLY USE MONEY YOU CAN AFFORD TO LOSE.
22. The Dingleberry Axiom
This is the term I save for bidwhackers. Realize that the OTC market is unfortunately full of people that don't understand the concept of selling at the offer. They are more than happy to whack out the bids on an issue for their lunch money. Realize that usually the longer an issue stays in the spotlight, the more problem it is gonna have with dingleberries, er, whackers.
23. The Bid And Offer Axiom
Level 2 is often the truest of truths in the OTC. It tells a very accurate story. If you cannot afford to spend your day glued to L2 watching the issues you're trading...you shouldn't expect winning trades on the OTC. I simply cannot stress enough the importance of having LIVE Level 2 and understanding it. Spend some time paper trading which watching L2s. Practice. Practice. Learn. You just gotta understand what the Level 2s are telling you. Some of my friends would also come in here at this point and say it is not only L2 it is also the chart. I would argue that it is MORE L2 and LESS the chart. By understanding and watching L2 I feel like I can identify dilution much faster than by simply looking at a chart and all its indicators.
24. The CEO Is A Scumbag Axiom
Now I know we're all quick to defend our favorite CEO...but the truth is he or she is a scumbag. Now what level of scumbag she or he is I cannot say...but with confidence I can say that every OTC CEO is a scumbag. Deal with it.
25. The Know Your Friends And Enemies Axiom
You will have a hard time succeeding down here without friends. Any amount of public success will bring you more friends and new enemies. Understand which is which. Keep your nose clean. Loose lips sink ships. Know when its time to sever a relationship. Know when its time to repair a relationship. Know your associates.
Now, I must ask you, knowing all of the above, do you REALLY want to mess around with penny stocks? I mean...really???
Okay.
Those of you that have never traded in the OTC or are just beginning to trade down here and are right now shaking your head and thinking that you somehow transcend these axioms...you will have to learn the hard way. Traders like me will end up with your money. I want to thank you in advance for helping build my portfolio.
Those of you scared out of your gourd right now...GOOD. You should be. You should realize that you're absolutely nuts to be risking money down here (and I use the term "down here" on purpose) in the OTC!!!
Investing in the OTC is very risky. It's riskier than Alaskan King Crab fishing! But the rewards often outweigh the risk. The lure of monster profits is too much for many of us to say "no" to. The idea of finding that one true gem in a million that becomes the next Yahoo is too strong a draw for many of us to avoid. The surge of adrenalin that comes when profiting 100% on your money within the same hour you made the trade is addicting. The fun that comes from finding friends and having a successful trade with them is indeed AWESOME.
The OTC is a crazy world that attracts some pretty crazy people...and yet I have chosen to live in this world...I have accepted the consequences of investing in the OTC. I feel safer putting my money in an OTC issue than a NASDAQ or NYSE issue because I understand the OTC.
I have written all of the above as a student, not a teacher. I will always be a student of the OTC...ever learning. I do believe that is a good attitude to have if you want to truly be a successful OTC trader/investor. I do hope that some of what I have said above will help you retain and/or build your bank!
If you want to quibble about something I've stated above or you'd like to tweak something to make it a little more accurate...please feel free to come and engage me on my Van Scan board here: http://investorshub.advfn.com/boards/board.aspx?board_id=12481
Sincerely,
vantillian
NOTE: This material is original with me but please disperse and dispense far and wide as long as you give credit and you think it will be helpful.
z
What does Form 15 Mean?
Follow this thread (all the Replies) for the answer:
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=50926068
z
Stressed Out?
Front Running at ETRade on RSII:
Lately it seems the brokerages are 'saving up' (Read FRONT RUNNING) all orders until they can gather some advantage over us and THEN they execute them.
They do this ALL THE TIME..............Please make them fill orders at the time they are placed instead of SITTING ON THEM like they were Eggs that they wanted to Hatch.
This morning there was ONE trade on RSII at .0034.
The Bid/Offer was .0033 x .0034
I put in a sell at .0031
They sat on that order and did not fill it for almost a minute.
It took them 2 minutes to completely fill my order.
And before I filled, there were EIGHT (8) orders that went through at .0033 to .0034
Which means I SHOULD have filled at 33/34.
z
Cold Blooded c*** mother******.......this happens ALL THE TIME:
DDAmanda XMAS Special: $40/month: http://DDAmanda.com
z
Now the pigs are killing kids........I guess they consider killing a Mom in front of her 1Yr old in DC was a 'how to': http://rt.com/usa/boy-13-shot-toy-gun-644/
ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS ameritrade SUCKS
z
I love how vigorously they deny what they're doing.......lol.....et z
TBS Info: Why is ameriKa always behind the 8 Ball...when will we catch up with the rest of the world??? Obviously it'a all about the MONEY, instead of HUMANITY, and COMPASSION, and ETHICS, and MORALITY.......lol
Portugal drug law show results ten years on, experts say
(AFP) – Jul 1, 2011
LISBON — Health experts in Portugal said Friday that Portugal's decision 10 years ago to decriminalise drug use and treat addicts rather than punishing them is an experiment that has worked.
"There is no doubt that the phenomenon of addiction is in decline in Portugal," said Joao Goulao, President of the Institute of Drugs and Drugs Addiction, a press conference to mark the 10th anniversary of the law.
The number of addicts considered "problematic" -- those who repeatedly use "hard" drugs and intravenous users -- had fallen by half since the early 1990s, when the figure was estimated at around 100,000 people, Goulao said.
Other factors had also played their part however, Goulao, a medical doctor added.
"This development can not only be attributed to decriminalisation but to a confluence of treatment and risk reduction policies."
Portugal's holistic approach had also led to a "spectacular" reduction in the number of infections among intravenous users and a significant drop in drug-related crimes, he added.
A law that became active on July 1, 2001 did not legalise drug use, but forced users caught with banned substances to appear in front of special addiction panels rather than in a criminal court.
The panels composed of psychologists, judges and social workers recommended action based on the specifics of each case.
Since then, government panels have recommended a response based largely on whether the individual is an occasional drug user or an addict.
Of the nearly 40,000 people currently being treated, "the vast majority of problematic users are today supported by a system that does not treat them as delinquents but as sick people," Goulao said.
In a report published last week, the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA) said Portugal had dealt with this issue "in a pragmatic and innovative way."
Drug use statistics in Portugal are generally "below the European average and much lower than its only European neighbour, Spain," the report also said.
"The changes that were made in Portugal provide an interesting before-and-after study on the possible effects of decriminalisation," EMCDDA said.
z
You're welcome.....time to expose these assholes to every investor....maybe if everybody passes it on to their Representatives in Congress they will do something about it..........z
Absolutely a Must READ by every RETAIL investor in the US Markets
i stickied it on the NSS board and will add to Shorts exposed board
thx for the article z ..
====
4kids
all jmo
TBSTipShorting America
By Walter Cruttenden
It is widely agreed that excessive short sale activity can cause sudden price declines,
which can undermine investor confidence, depress the market value of a company’s
shares and make it more difficult for that company to raise capital, expand and create
jobs. This is particularly aggravating for entrepreneurial companies; the engines of new
job creation. In the crash of 2008 short sale activity reached record levels and
exacerbated the market turmoil, leading to one of the most severe economic declines in
modern history.
Job formation is highest among pioneering companies, such as those in the computer,
biotech and emerging growth industries. Studies show that approximately 80% of all new
jobs come from small businesses or new companies in their fast growth phase; those that
grow the fastest hire the most. However, because research, development and new product
innovation are risky and often require multiple rounds of equity financing, short sellers
often target these companies, to the detriment of America.
Short sellers are essentially traders that are hoping a company will experience problems
(such as product delays or the inability to raise financing) so they may profit from the
setbacks. These traders or trading machines make the most if a company struggles and
goes out of business, and some short sellers actively work to make that happen.
Aggressive shorters, and short selling pools, will sometimes hire stock “bashers”, people
paid to post negative articles on blogs and message boards. Their goal is to put out
negative news on a company or its products in an effort to cause the company problems
and insure the stock declines so their negative bets pay off. Others will put up “flash
orders” advertising to sell a large number of shares in an effort to drive down the price.
Thus entrepreneurial companies not only need to fight the battles of developing new
products and markets, they have to stave off the short sellers in the meantime. This
growing culture of betting against a company for the sake of short-term trading profits
(regardless of economic consequences) has negative economic repercussions. This trend
has been fostered by:
• Technology that allows trader anonymity without consequence. Short sellers, like
private hedge funds do not have to disclose their negative bets, whereas mutual
funds and most institutions are required to publicly report their holdings.
• Brokerage firm procedures that make it easy for short sellers to borrow stock
without informing the shareowner of the transaction or potential consequences.
• Internet forums and message boards that allow traders to quickly publish negative
comments about a company, thus forcing down prices. • The repeal of the uptick rule, which had required traders to only short when it
wouldn’t hurt a company’s stock price, and now allows shorting regardless of the
company’s current stock price direction, enabling “piling on” trading.
As asset prices decline people feel less wealthy and spend less, which in turn causes real
economic contraction. Economists recognize that investor confidence determines
economic activity and Fed Chairman Bernanke recently commented that the economy
could avoid a “double dip recession” as long as markets stayed healthy. Governments
around the world are now struggling with how to stop the proliferation of short sellers
that bet against the economic well being of their nation. This past summer Germany
banned short sales outright in an attempt to quiet its markets during a run on the Euro.
How did things get this way?
Short Sale History
Originally there was no short selling. People that owned shares of a business rarely traded
those shares and would never loan their shares out to a third party to bet against them.
Short selling began as a way to accommodate buyers and sellers. Market makers (such as
the brokers that originally met under the buttonwood tree which became the NYSE) knew
people that wanted to sell their shares if the price reached a certain level. If a buyer
showed up and wanted to purchase a security when that seller was physically unavailable,
the market maker would stand in for the seller and “short” the shares. The outstanding
short rarely lasted more than a few days. Thus there were no actual short sale investors,
just brokers that were temporarily shorting a stock to accommodate a real seller. And
these short sales generally took place when there was demand, meaning at favorable
prices, or at an “uptick” (increase to the prior sale price) and were triggered by the fact
the stock traded up to a certain level. It was a win-win transaction for all parties. In these
early days, traders did not bet against companies, and there was no ability to artificially
drive down the price of a stock.
Share ownership was originally represented by a physical certificate in the shareholders
name kept by the owner in a safe deposit box, or sometimes under the mattress. With the
prosperity of the post World War I economic boom, more people became invested in the
markets, and as trading frequency increased, investors began to leave their shares with a
brokerage firm for convenience purposes.
At first the certificates were kept in the name of the individual shareholder but as trading
volume increased the brokerage firm simply kept the shares in “street name”, meaning
the name of one of the brokerage firms on the street, with an accounting entry to trace the
ownership. This made it easy for the brokerage firms to get into the business of making
“margin” loans against the securities. The securities (collateral for the margin loan) were
already in the brokers name and possession so they did not have to worry about having to
foreclose on the collateral if that became necessary. As margin loans became common
trading volume further increased.
Short selling first came into vogue with the crash of 1929 when certain investment pools
realized it was easy to bet against a company, especially with so many margin loans
outstanding. The market was declining rapidly and shares could be borrowed from
brokerage firms, and the brokerage would get paid for lending those shares.
This historic first wave of large scale short selling probably exacerbated the market
decline, and in some cases, may have gone hand in hand with stock manipulation. Short
sellers realized that if they could force down the price of a stock they could force a
margin call. This effectively forced a sale of the shares allowing the unscrupulous trader
to make money on their short. The severe decline of so many companies in 1929 through
the early 1930’s forced the regulators to study the matter. Finally in 1938 the “uptick”
rule was adopted. This required any investor that wanted to short a stock to sell only on
an uptick (thus returning to the original de facto practice), and greatly reduced the
amount of short selling activity. Prosperity soon returned to America.
By allowing short sales only on price strength, the rule mitigated the “piling-on effect”
and the self-fulfilling prophesy that short selling can bring about when left unrestricted
(short selling causes price declines which in turn shake the confidence of long term
holders who then sell and prolong the downward price trend regardless of underlying
fundamentals, eliminating the company’s ability to raise new capital, causing a vicious
cycle). Thanks in large part to the “uptick rule”, short selling was held to a minimum.
Consequently, short sale activity and market volatility remained relatively quiet during
the 69 years the rule was in effect until its repeal in 2007. To the student of history it is
no coincidence that the repeal of the uptick rule was followed by one of the worst market
declines in recent memory.
Since 2007 there has been a marked increase in short sale activity. Aggressive short
selling not only hurt small companies, it aggravated the 2008 run on Lehman Brothers,
Bear Stearns, Merrill Lynch, WaMu and other long standing financial institutions, that
depended on stable equity values while they worked out their financial problems. Short
selling effectively reduced the duration of the workout window and the result was a
domino effect of economic decline. While the big names captured the headlines many
emerging growth companies suffered similar attacks on their stock and were forced to
downsize or otherwise curtail job creation efforts. As the securities of the unstable
companies, large and small, became worth less many companies found it suddenly
impossible to exchange equity for debt, raise new financing or otherwise restructure in a
normal manner. Rampant short selling causes adverse economic consequences on a scale
that quickly gets out of hand yet its full ramifications are still not widely recognized.
Aggressive short selling was a major contributor to the recent economic troubles as
evidenced by the fact that more large companies have gone into bankruptcy or closed
their doors in the three years since the repeal of the uptick rule, than at any other time
since before the uptick rule. During this period short selling activity became almost a
mainstream activity as new short selling funds proliferated. Many of these so called
“Bear Funds” now leverage their investments whereby ever dollar put up results in two or three dollars of shorted stock. Jim Cramer and other market pundits have called for a ban
on such funds.
This economically contracting behavior has been accompanied by an increase in market
volatility, evidenced by the rise in the “VIX” (the CBOE volatility index), which has
reached historical levels over the last three years. Needless to say, these larger than
normal market swings spook long-term investors, and drive people out of the equity
markets. This not only shakes investor confidence, but it is bad for the capital formation
process as it restricts financing for innovation and exacerbates economic difficulties.
Fed Chairman Ben Bernanke, Morgan Stanley CEO John Mack, Congressman Gary
Ackerman, Former SEC Commissioner Chris Cox and others have called for a review of
the decision to lift the uptick rule. However, there are now many traders that have an
interest in large short selling funds and as of this date there has been no agreement to
bring back the uptick rule. The SEC did recently adopt Rule 201, which bans short selling
if a stock has fallen more than 10% in a single day. But the fact is if a stock does decline
10% in a single day it has already spooked investors in that company. While it is a
laudable effort it does nothing to address the underlying operational issues that enable
large scale short selling. The easiest and most natural way to rein in aggressive short
sellers is a return to a permission-based system that involves the investors who shares are
being borrowed. In other words, require the approval of the person whose shares are
being loaned to the shorts before short sales can be implemented.
The Genesis of the Problem
Anyone that would like to short a stock must first arrange to borrow those shares, because
stock clearing rules require delivery of the shares to be made within three business days.
If stock certificates were still held by individuals, and these individuals therefore had to
approve the loan of their certificates to would be short sellers, there would likely be very
little shorting activity. After all, what long-term investor would actually loan his or her
shares to someone that wants to bet against his or her economic interests?
Since the 1960’s, technology, record keeping and trading activity have advanced to the
point where not only do most investors find it more convenient to keep their securities
with their broker, but many opt for full featured accounts that give the account holder the
right to borrow against the market value of the account, use a credit card against the
account, or enjoy other borrowing privileges. This means the investor has signed a
margin and hypothecation agreement with a brokerage firm and therefore that brokerage
firm can now freely lend those shares in the account to prospective short sellers without
the investor-owner’s knowledge or permission.
The original purpose of the hypothecation agreement was to give the brokerage firm
access to the client’s securities simply so they could put these securities up as collateral at
a bank to borrow the funds they were loaning to the client. But eventually the brokerage
industry realized the broadly written hypothecation agreement would also allow them to lend the securities to prospective short sellers, and generate additional income for the
firm.
Most shareowners are completely unaware they have given up such extensive rights
under these margin or “hypothecation”agreements. As they are now written, even if an
investor has a minimal loan balance outstanding, the brokerage firm can lend out shares
in that investors account. This practice has evolved so that most brokerage firms now
maintain “Stock Loan Departments” and they get paid well for loaning those certificates
out to short sellers, yet rarely do these proceeds make it to the individual investor. Many
investors have no idea they are effectively aiding the short sellers that are betting against
them. The ease of borrowing such shares nowadays, without an investor’s specific
knowledge, is a major factor in the increase in short sale activity.
Investor Rights Violated
If shareholders knew that their shares were being loaned to prospective short sellers,
whose purpose is to effectively bet against the owner of the securities, few of the stock
loans to short sellers would be made. There is currently no required disclosure to the
rightful owner that provides the owner with right to say yes or no. This lack of
transparency is the root of the issue.
While it is justifiable that a brokerage firm should have the right to borrow against the
shares of anyone they make a margin loan to, they should not be able to loan these shares
to a third party that has an economic interest opposite the shareowner s without specific
approval of that shareholder. But current margin agreements, written by the brokerage
firms to include blanket hypothecation language, do not differentiate between legitimate
borrowing to accommodate a margin loan, and the loaning of shares to short sellers. Thus
current procedures effectively allow the borrowing of shares from one party to be loaned
to another party that bets against the economic interests of the first party, without specific
disclosure.
Unauthorized Share Issuance
Another related problem, that occurs with significant short selling, is the lack of
disclosure that the float is effectively being increased without conveying that information
to the public. The creation of phantom shares, by loans of existing shares to short sellers,
boosts the float (number of freely traded outstanding shares) by artificial means even
though no such increase in shares was ever authorized by the company or the SEC. For
example, one company we have studied has 40 million shares outstanding and a 6 million
short position. Thus investors think they own 46 million shares, even though neither
management nor the SEC ever authorized the extra 6 million shares. In truth there are
only 40 million shares outstanding and the extra shares have been created out of thin air
by the shorts. Far from the original purpose of the practice these shorted shares often stay
outstanding in virtual perpetuity.
But worse than the issuance of phantom shares is the fact this is happening on a large
scale with many investors being taken advantage of without their knowledge. Again, this
is because most investors are effectively loaning their shares to short sellers without
realizing they are helping these short sellers to degrade the value of their securities. The
ability to borrow shares to short, which has become relatively easy, works to the
detriment of long-term investors and the capital formation process.
Solution
The present system lacks transparency. Investors should never be put in a position where
their investments are used to bet against them without their specific knowledge.
Fortunately, it is an easy fix:
Brokerage firms should be required to modify their hypothecation clause in new account
and margin agreements to specifically inform investors that their shares may be loaned to
short sellers that are betting against them, and only allow this practice with an investor’s
knowledge and express permission. This would only require a few sentences to be
changed and should include a check box where an investor is required to give permission.
This would not preclude the brokerage firm from legitimate borrowing against these
shares, it would only preclude the loaning of such shares to short sellers without an
investors knowledge.
The effect of this action would be that if a brokerage firm wants to loan out the shares on
its books (for short sale purposes) it could only do so if the investor has given permission,
whether or not those shares are held in street name or margined or otherwise obfuscated
by commingled ownership. Some brokerage firms would argue that if they have made
margin loans against those securities they should have the right to loan those shares to
other investors. But this is not a valid argument, as loaning shares to a bank for
borrowing purposes has no negative economic consequence to the owner of the shares,
whereas loaning shares to a short seller has direct negative consequences to the owner of
said shares. The two situations should therefore be bifurcated: investors should have the
right to approve any loans of their shares to short sellers, and brokerage firms should
retain their rights to the collateral for legitimate borrowing and collection purposes.
As long as investors are responsible for paying interest and paying back the margin loans
they should have the right to determine what is done with the underlying shares. They
should not forfeit this right under any circumstances. Giving investors this basic right in
no way diminishes the brokerage firm’s ability to liquidate such shares if for any reason
the investor is unable to pay his margin balance. In fact, it could be argued that the
collateral value of the underlying shares will hold “more” value if they are NOT being
loaned out to short sellers.
The result of such a rule (which could be adopted by the SEC or passed as a law by
Congress) would be to once again return short selling to its original purpose. This would
naturally limit the number of people that could bet against investors’ interests, as very
few investors would allow such activity if they were aware that it might directly impact the value of their securities held. Indirectly it would also reduce the number of “flash
orders” and “machine trades”, which are both highly dependent on the easy borrowing of
shares to short. Furthermore, it would help out entrepreneurial companies, by returning
confidence to the long-term investor, the backbone of America’s job creating capital
markets system.
Summary
In summary, investor rights were slowly usurped by the advance of technology that did
away with the investors name on specific certificates of ownership. This obfuscated the
rights of the certificate holder and led to an increase in the transfer of those securities for
short sale purposes, against the investor’s best interest. The potential damage of increased
short sales was held at bay by the uptick rule that effectively limited the amount of shares
that could be shorted but this rule was repealed. By returning to a permission based
system, whereby the holder of the securities regains the full right to determine the fate of
those securities, a natural balance will be returned to the short sale market (whether or not
the uptick rule is reinstituted). The rightful owner of the securities will once again be in a
position to determine if he or she wants to loan their securities to a third party.
The result of full disclosure and the return of this basic investor right will be reduced
market volatility, an economic system that does not penalize innovation, and a level
playing field for all investors.
Walter Cruttenden, 60, is a financial markets entrepreneur having founded and served
as CEO of two innovative investment banking and brokerage firms; Cruttenden Roth
(now Roth Capital, one of the largest providers of equity capital to emerging growth
businesses), and E*Offering, formerly part of E*Trade Securities. Cruttenden is also an
author of books and films on history and astronomy.
Email: Walter@CruttendenPartners.com
Phone: 949-399-0300
they all collude
===
4kids
all jmo
exactly .. btw here's a release out of the dolts *recently*
it totally contradicts the conditioning by rote *mantra*
of SMB *posters* who've claimed for years that there are
no hedgies involved in the OTC (snicker and snort and
christ on a crutch come to mind)
take a gander >> a pension fund .. hedge fund principal/s (plural) and a stockbroker .. does the comment >>> they all collude >> resonate
SEC Announces Charges Against Florida-Based Penny Stock Schemes
FOR IMMEDIATE RELEASE
2013-155 Washington D.C., Aug. 14, 2013 —
The Securities and Exchange Commission today announced the latest charges in a joint law enforcement crackdown on penny stock schemes with ties to the Florida region.
The SEC charged two microcap companies, their CEOs, and one penny stock promoter for spearheading illegal kickback schemes. The SEC also charged two other microcap companies, their CEOs, and four other promoters with arranging the payment of bribes to hype the companies in which they had a stake in order to create a false sense of market activity and illegally generate stock sales.
“Interested only in lining their own pockets, these company officers and promoters used underhanded tactics to cheat investors and manipulate penny stocks” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office. “Their utter disregard for investors underscores the importance of stamping out microcap fraud.”
The SEC has worked closely with the U.S. Attorney’s Office for the Southern District of Florida and the Federal Bureau of Investigation’s Miami Division to uncover the penny stock schemes. Parallel criminal charges were announced today against the same nine individuals facing SEC charges.
The SEC has now charged 40 individuals and 24 companies in this series of penny stock investigations. The first actions were announced in October 2010.
The SEC’s complaints filed today in U.S. District Court for the Southern District of Florida charged the following penny stock companies and officers:
Health Sciences Group (HESG) formerly based in Indian Harbour, Fla., and now based in Newport Beach, Calif.
President and CEO Thomas Gaffney of Satellite Beach, Fla.
Nationwide Pharmassist Corp. based in Boca Raton, Fla.
CEO and Chairman Stephen F. Molinari of Boca Raton, Fla.
Redfin Network (RFNN) based in Fort Lauderdale, Fla.
President and CEO Jeffrey L. Schultz of Fort Lauderdale, Fla.
VHGI Holdings (VHGI) based in Fort Worth, Texas
CEO Douglas P. Martin of Wellington, Fla.
The SEC’s complaints charge the following penny stock promoters:
Mark Balbirer of Pompano Beach, Fla.
Jack Freedman of Fort Lauderdale, Fla.
Richard P. Greene of Davie, Fla.
Peter Santamaria of Coconut Creek, Fla.
Sheldon R. Simon of Palm Beach Gardens, Fla.
According to the SEC’s complaints, one of the schemes (Health Sciences Group/Gaffney) involved an arrangement to pay an undisclosed kickback to a pension fund manager in exchange for the fund’s purchase of restricted shares of stock in the company. Two other schemes (Nationwide PharmAssist/Molinari and Balbirer) involved agreements to pay undisclosed kickbacks to hedge fund principals in return for their funds’ purchase of restricted shares.
The SEC’s complaints allege that other schemes involved the arrangement of inducement payments by officers or promoters of penny stock companies to coordinate the manipulation of their stock. Those who arranged the payment of bribes to create fictitious market movement were Redfin Network/Schultz, VHGI/Martin, and promoters Greene, Santamaria, and Simon. In his scheme, Freedman arranged to pay an undisclosed bribe to a stockbroker who agreed to purchase a microcap company’s stock in the open market for his customers’ discretionary accounts.
The SEC’s complaints allege that the companies, officers, and promoters violated Section 17(a)(1) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(a) and/or 10b-5(c). The SEC seeks financial penalties, disgorgement of ill-gotten gains plus prejudgment interest, and permanent injunctions. The SEC also seeks penny stock bars against each of the officers and promoters, and officer-and-director bars against Gaffney, Martin, Molinari, and Schultz.
The SEC’s investigation was conducted in the Miami Regional Office by senior counsels Trisha D. Sindler and Michelle I. Bougdanos under the supervision of assistant regional director Chedly C. Dumornay. The SEC’s litigation will be led by Patrick R. Costello and Andrew Schiff. The SEC appreciates the assistance and cooperation of the U.S. Attorney’s Office for the Southern District of Florida and the FBI’s Miami Division.
###
http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539776014#.Ug5M99LVB2D
The Blind Squirrel Board HOTTEST Stock of the Decade: JBIIThis Board is for posting general investing knowledge and hot picks. If you're not 99.9% sure of a pick, don't post it..........z 20 GOLDEN RULES FOR TRADERS
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