This is an excerpt from Jim DeCostas' last book on naked shorting. I hope you enjoy it.....
DOING WELL ($) WHILE DOING SOME GOOD”
Dr. Jim DeCosta
BACKGROUND
After spending 29 years researching abusive short selling attacks I’ve noticed that the two most commonly attacked corporate sectors involve the junior mineral exploration sector and the development stage biotechnology sector. As far as the commodities being abusive naked short sold the most the gold and the silver markets take the award in this category. The recent CFTC hearings on commodity price suppression and the testimony of whistleblower Andrew Maguire not only confirmed prior research in this area but also revealed the main players and the clever modus operandi with incredible detail.
There are literally hundreds of junior mineral exploration companies that have lost up to 95% of their share price and market capitalization as a result of abusive naked short selling (ANSS) attacks. These corporations are correctly looked upon as an “easy prey” by abusive short sellers mainly because of the distant odds against a junior explorer ever making an economic mineral discovery. Since the mineral assets are hidden under the ground and out of sight certain fraudsters are naturally attracted to this sector i.e. “there’s gold in them thar (barren) hills”. This results in certain abusive short selling “vigilante” types thriving in this sector. The most common quoted odds for a junior explorer to make an economically mineable discovery are about 1-in-1,000. It was Mark Twain that said that a mine is “a hole in the ground surrounded by liars”. Unparalleled investment opportunities present themselves when these 1-in-1,000 were misdiagnosed by abusive short sellers as “scams”.
OPPORTUNITY
If you are that 1-in-1,000 junior mineral explorer that hit the jackpot this doesn’t necessarily guarantee that the naked short sellers are going to voluntarily come out of the woodwork and cover their naked short positions. With a little bit of educating the management teams of these fortunate junior explorers can be trained to realize just what potential they are sitting on when the synergies between the mineral discovery and the yet to be covered naked short position are captured and harvested. In the absence of any naked short selling issues there is a reason why mining investors are willing to invest billions of dollars while taking on these incredibly distant odds for success. It has to do with the payouts for the shareholders of that 1-in-1,000 junior explorer that do make these economic discoveries because along with that ultra-high risk comes a commensurate ultra-high reward.
The premise for the investment opportunities being cited here is that this already ultra-high reward earned by these fortunate junior explorers can be augmented even more since they nearly all carry astronomically high naked short positions that have accrued prior to making the economic discovery. Due to the pandemic nature of abusive short selling in this junior mineral exploration sector there is no hurry to buy shares in these explorers UNTIL they prove themselves to be the 1-in-1,000. Due to the abusive short sellers the share price certainly isn’t going anywhere prior to any discovery. The confirmation of the discovery takes the ultra-high risk off of the table for patient investors. In an industry as technical and as specialized as the mining industry is it is critical to “follow the smart money”. Let the mining majors do the due diligence for you and don’t make your move on buying the shares of a junior until they stamp their imprimatur on the discovery. This is typically done when a major mining firm enters into a joint venture relationship with the junior explorer. Then and only then do you make your move on investing in the junior explorer and only those juniors with management teams willing to work with those with expertise in the abusive short selling arena.
To take this investment concept one step further consider the potential for buying shares in a “holding company” that has large share positions in perhaps a half dozen of these proven winners whose share prices have not taken off yet. Shares of this holding company could be marketed to large hedge funds as “one stop shopping” to gain exposure to perhaps a half dozen short squeezes since all of the management teams will be equally trained and going through the same program to “harvest” these synergies. It could be easily argued as to which is the more valuable asset the economic mineral discovery or the naked short position.
CONTRIBUTING FACTORS
The recent revelation of the extent of the suppression of the prices of gold and silver via the CFTC meeting in late March of 2010 has confirmed what many have known and written about for decades. Whether it be the alleged assassination attempt of the “whistleblower” Andrew Maguire that brought the modus operandi to the world’s attention or the recent discovery of massive numbers of gold bars in the vaults of central banks actually being tungsten bars with a gold plating the world’s largest gold investors are rapidly demanding the delivery of the gold and silver bullion that they thought they had purchased. This will undoubtedly result in a large spike in the price of gold and silver and a subsequent tailwind for the junior explorers that have made significant recent discoveries involving these metals. Why? Because the demand for these successful junior explorers via tender offers is bound to go ballistic due to the dearth of recent discoveries as well as the need for majors to add reserves to their currently anemic looking balance sheets.
There’s a reason why even billion dollar behemoth hedge funds and investment banks on Wall Street can easily strip away 95% of a junior explorer’s share price and market capitalization but not successfully bankrupt the company. That’s because many astute mining investors are aware of the rarity of these discoveries and the bargain basement prices available for investments in these corporations that have not only been able to survive these brutal attacks but make a significant discovery while under attack.
It’s important to appreciate that part of the distant 1-in-1,000 odds is due to the environment these juniors need to develop in while fighting off the attacks of these Wall Street behemoths. On a level playing field perhaps 1-in-50 junior explorers might make an economic discovery. Unless the management teams of these corporations understand how abusive naked short selling works and what measures to take to predictably reverse these damages the battle can result in a stalemate wherein opportunistic investors come to own many more “shares” of these corporations than there are “outstanding” but the share price still won’t budge.
With these recent revelations having been made we have already seen a significant uproar from the mining investment community that thought they had been buying gold and silver bullion. Since the hearings in which these revelations were made were public hearings at the CFTC we feel that the CFTC will be compelled to act quickly due to the obvious systemic risk implications involving foreign currencies and the role of gold in serving as a benchmark against which any fiat currency can be measured. Since one cannot very often rely on regulators to do the right thing what is more important is being able to rely on financially-incentivized bullion investors to demand delivery of that which they thought they purchased. Although the fraudsters will no doubt stall the delivery process once delivery failures start to become obvious everybody and their brother will be aggressively demanding delivery and filing lawsuits if they can’t get delivery. Think about it; what happens to the party demanding delivery of his bullion purchases right after the vault was emptied? Are the taxpayers going to be asked to bail out these corrupt bullion banks? The future of all commodity and foreign exchange markets rests on these bullion investor receiving delivery of that which they paid for.
It’s critical to realize that those that are short perhaps literally billions of ounces of these metals cannot just start buying them back in the open market. The mere cessation of their day to day naked short selling will cause the prices of these metals to soar. Trying to cover astronomically large naked short positions in a market that is already gapping upwards could be cost prohibitive. There is one way for these crooks to hedge these “open short positions” and that is to buy up mining companies that have made significant recent discoveries involving these metals before they become too expensive. Since there haven’t been many recent potentially “world class” discoveries those few “lucky” ones are going to attract the attention of not only mining majors but those that sold investors nonexistent bullion.
If the parties that are short these metals are also the ones short these junior explorers then they can kill two birds with one stone by taking out these junior explorers lock, stock and barrel. Assassination attempts and the counterfeiting of gold bars via gold-plating tungsten bars shows us to what extent these fraudsters must go because of the fact that they can’t simply go to the open market to cover these naked short positions in these precious metals without driving the price of gold and silver through the roof.
China is in a similar position because they own so many U.S. Dollars in their reserves. They want to diversify into gold but if they get caught selling U.S. Dollars and buying bullion the USD will tank and their reserves will be worth that much less. They too need to buy gold producing companies WITH their U.S. Dollars in order to diversify. The other fact that needs to be appreciated is now that the world knows the exact modus operandi of how the corrupt bullion banks have been manipulating the gold and silver markets their actions are now under a microscope and further misbehavior would likely result in criminal repercussions.
AI
