Goodbye to Naked Shorting
Floyd Norris today makes a point that I have made several times in the past, beginning with Wall Street Versus America and most recently here, which is that naked short selling -- to the extent it has ever existed -- has pretty much vanished from the market.
Floyd goes on to say:
.... and he also points out that despite claims that shorting has destroyed "thousands" of companies, people who say that are hard-pressed to cite a single one.
So are those who used to bitterly complain about naked shorting praising the S.E.C. for solving the problem?
Not a bit. Dozens of letters blaming naked shorting for the decline in share prices have poured into the S.E.C. in recent weeks, in response to a request by the commission for comment on the possibility of imposing rules to make it harder to sell stocks short when share prices are falling.
I pressed Wes Christian's law firm (the major suers on naked shorting) on this same point during research for WSVA, and got a very loud silence.
What Floyd did not explore is the why the NSS myth is continuing, and why there is political pressure to waste regulatory resources on this issue.
The reason, of course, is that the people pushing this phony issue have a great deal to gain. Overstock.com's Patrick Byrne, the standard-bearer of the Baloney Brigade, gets to divert attention from his proven incompetence as a CEO. The people and and astroturf groups he bankrolls, ranging from "consultants", lobbyists and "economists" to paid stalkers like the nauseating Judd Bagley, have paychecks to protect.
As I pointed out in WSVA three years ago, a phantom menace has no cure. So the Baloney Brigade will be marching on for as long as it can get financing for its lobbying and campaign contributions, and as long as it can find dupes to hoist its colors.
© 2009 Gary Weiss. All rights reserved.