THE BALONEY CHRONICLES (Continued): The latest news from the fraudulent-market-reform-movement front is a posting on a Baloney Brigade website. Extra! Extra! Trading data from the Securities and Exchange Commission shows massive "fraud"! Massive "naked short-selling"! Not.

"I would say that when 78% of the trading on any given day is fraud, where investor money is taken, and then no product is delivered, that is a big problem - one might say a catastrophic problem," panted the site.

This "scoop" was published over the weekend on the "Sanity Check" website -- a suitably Orwellian misnaming here, by the way, given that this site is dedicated to the propagation of insanely misleading drivel. The author of this item was the leading spokesperson for the naked-shorting crusade, a person who goes by the pseudonym of "Bob O'Brien." "O'Brien," outed by the NY Post as an ex-used medical equipment peddler named Phil Saunders, wants to remain courageously anonymous so that he can publish dreck like this without ruining his real-life reputation. Also, anonymity helps promote a standard of discourse more common to the nuttier Usenet newsgroups than a supposed "market-reform" Internet organ.

As before, the baloney merchants are trying to peddle their trumped-up non-scandal by citing figures for "fails to deliver," which they falsely represent as synonymous with "naked shorting" or, as they put it, "stock counterfeiting."

A "fail" could happen because of a whole bunch of things aside from naked shorting (the much ballyhooed, largely mythological practice of short-selling stocks without borrowing 'em first). That's been pointed out a bunch of times -- here, for instance, and here. It's Trading 101, but it's tough to penetrate the skulls of conspiracy theorists, not to mention the stock promoters who know perfectly well this is baloney. They push this line to send regulators, and everybody else, on a wild goose chase and to divert attention from the real reasons stocks decline (stuff they don't like to talk about, such as maybe investors aren't buying the shares).

A "fail" doesn't even mean that the investor doesn't get the stock. The brokerage still has an obligation to deliver the shares to the investor, and the broker responsible for the "fail" still has an obligation to deliver the stock.

As usual, the Baloney Brigade's arguments collapse on even the most cursory examination. The shares of the stock in question (Overstock Inc.) actually rose a bit on the day in question (Aug. 1, 2005). This was pointed out by one brave person, and "O'Brien" responded that if the stock hadn't been so horribly shorted it might have really taken off.

If you go to the so-called "Sanity" site, by the way, be sure to check out "Bob"'s latest courageous, hiding-behind-phony-name attack on an AP reporter who dared to write a mildly skeptical article on Overstock CEO Patrick Byrne and his naked-shorting claims. It is, according to "O'Brien," it's all a conspiracy (one that, as he has indicated a whole bunch of times, is fueled by a massive corruption scandal). Says "O'Brien," "these are all so eerily similar, it's almost as though someone pulled the trigger on getting a bunch of crony writers to generate pieces that would declare that there is no problem."

I guess so. The "trigger" in this case being common sense.

The charlatans of the Baloney Brigade want you to think that the media is doing you a disservice by not swallowing their baloney. They're half right. Yes, the media is doing you a disservice, but for a whole lot of other reasons that I describe in my book.

A WELL-DESERVED RECOGNITION: The weird antics of Patrick Byrne, anti-shorting crusader and Overstock Inc. chief executive officer, made the 101 Dumbest Moments in Business list posted at Business 2.0.

UPDATE (2/7): "O'Brien's" "smoking gun" met with such widespread derision that he went back, took another look and said that oh, shucks, maybe the figures don't show masssive "naked short-selling" after all.

But even after eating crow like this, "O'Brien" was all bluster and baloney, as he thundered behind his phony name: "The SEC and the DTCC are allowing fraud on a massive scale - the only question now is how massive."

The Baloney Brigade marches on.