For You List Watchers Out There

More news from the "Reg. SHO" front, proving again that naked shorting conspiracy theories are a load of ca-ca.

Seems that naked shorting poster child Overstock.com just reappeared on the latest Regulation SHO "threshold" list, for Dec. 26. It had dropped off the list on Dec. 17. So, what does this mean for the naked shorting conspiracy theories? If appearing on the list means a stock has been a subject of rampant naked shorting, share prices should go down.

In fact, between Dec. 17 and Dec. 26, the stock rose from 15.11 to 16.17, a gain of 7%.

As I observed at the time, when Overstock shares dropped off the list on Dec. 17, it was after an immense "Byrne rally" -- a huge share share price decline.

That makes sense. After all, there are plenty of reasons why a stock can appear on the list apart from naked shorting, as the SEC itself points out: "A security's appearance on a threshold list does not necessarily mean that any improper activity has occurred or is occurring."

Overstock.com, as previously, issued a delusional press release that sought to mislead Overstock investors into believing that some kind of non-company-related chicanery was involved. It was replete with the usual hysterics, including this typically nutty quote from telegenic CEO Patrick Byrne:

"We're back on the list," said Overstock chairman and chief executive officer Patrick Byrne, "but I'm not surprised given the manipulation that has occurred for nearly three years. Here we are on the eve of the third anniversary of Regulation SHO (January 3) and hundreds of companies continue to be manipulated -- right under the SEC's watchful eye."

Note the absence of the caveats noted on the SEC's website. If that is not an intentional effort to mislead shareholders, I don't know what is.

Speaking of manipulation and the SEC's "watchful eye," what has become of the formal SEC investigation of Overstock.com and Byrne? Time for the SEC to stop watching and start acting, and bring Overstock to justice for its serial deceptions -- of which the naked shorting baloney is just one.

© 2007 Gary Weiss. All rights reserved.



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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.

'Doing Them Slow' Redux

Why is that man smiling (as if we didn't know)?

Overstock.com CEO Patrick Byrne once famously issued a vague, typically nutty threat to his "opponents" (by which I assume he did not mean "the truth" and "common sense"):

"I plan on doing these guys slow. "

It seems that this revenge fantasy has backfired on Byrne in recent days, with a spectacular decline in Overstock shares.

The decline began on Dec. 10. Since then, and counting today's 6.2% drop, the shares have declined from 23.84 to 15.11.

That's a 37% decline in a little over one week, much of it attributable to Byrne blurting out bad news on margins while preening on CNBC (left) and his lawyers hyperventilating as a result. But the shares have been spectacularly weak even after his latest big-mouth imbroglio.

Since Oct. 31, the shares of this naked shorting poster child are down 61%. Could it be that a conspiracy of nefarious forces, such as the ones that have beset Byrne's brethren at Universal Express, are to blame?

Or could it be.... wait a minute. I think I just figured out who those "opponents" were that Byrne was talking about. Of course! (Sound of hand slapping forehead.) He was talking about his shareholders!

Hey, he's not a perennial on "worst CEO" lists for nothing.

Meanwhile, Zac Bissonnette points out in Bloggingstocks that on Monday Overstock dropped off the "Reg SHO threshold" list, which is commonly twisted by crummy companies to claim victimization by the scourge of "naked short selling."

Zac suggests that "with Overstock off the list, perhaps Dr. Byrne will end his self-proclaimed "jihad" and go back to doing a lousy job running his terrible company."

Here's more food for thought: Overstock dropped off the Reg. SHO list after a period in which the stock was down substantially. If the stock was an actual victim of naked shorting, and dropped off the list as a result of short covering, the stock should have gone up, and not fallen off a cliff.

In other words, Byrne's claims of naked shorting were a load of bull -- something the SEC, if it is not brain dead, will be sure to notice in its ongoing investigation of Byrne and Overstock.

Byrne rationalized the obvious disparity between myth and reality with a press release in which he repeated a screwy theory advanced earlier this year by Universal Express ex-CEO Richard Altomare. A comment about the SEC ("displaying its customary deference to criminal elites") would seem to indicate that the formal SEC investigation of Byrne and Overstock is not going to his liking.

© 2007 Gary Weiss. All rights reserved.



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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.

Chris Cox OD's on Baloney

SEC members preparing for well-catered meeting

As I pointed out a few days ago, the SEC's meeting yesterday resembled a cheaply stocked delicatessen more than it did a regulatory agency, with half the agenda devoted to baloney -- the nonexistent "naked short selling" scandal, promoted by a handful of crackpots and corporate losers in the Baloney Brigade.

What the SEC actually did (involving a market clearing technicality of no importance called "fails to deliver") was less consequential than the irresponsible rhetoric emanating from the SEC chairman, Christopher Cox. The low point of the proceedings was this nonsensical comment by Cox: according to the New York Times, he contended that naked short selling is “a fraud that the commission is bound to prevent and to punish.”

OK, so where's all the punishment? Where are all the SEC enforcement actions? Where are all the customer complaints of genuine harm committed by genuine naked shorting of genuine, sound, non-money losing companies?

Why is naked short selling the only "fraud" that has no victims and no perpetrators, only a bunch of crackpots yammering about conspiracies?

The SEC has not commenced a single case concerning stocks being driven down by naked shorting, as has been alleged by the anti-shorting conspiracy theorists such as Overstock.com CEO Patrick Byrne and his fellow-traveling websites. Compare that to the thousands of cases involving long-side manipulation.

Yes, the SEC has filed a grand total of three suits involving naked shorting, and neither involved the "stock counterfeiting" or "massive manipulation" alleged by the Baloney Brigade.

One involved a hedge fund's complex manipulation scheme, which included shorting into PIPEs via a Canadian broker, where such trading was legal. But as you can see from the SEC complaint, that shorting was done to hedge the firm's positions, not to drive down the shares.

In the most recent case, Goldman Sachs got a rap on the knuckles for shorting in advance of an IPO without borrowing. Ditto -- hedging, albeit in violation of SEC rules. Cox called this "an important case and it reflects our interest in this area," but that's bull. "Important cases" don't warrant measly $2 million fines and "no admission or denial" settlements. "Important cases " don't involve situations where not a single investor was hurt.

Only one case involved naked shorting depressing share prices, the SEC suit against Rhino Advisors and Thomas Badian. That involved transactions involving "death spiral" convertibles, and again was a far cry from the systemic "stock counterfeiting" that naked shorting conspiracy nuts have claimed. As with Goldman, the suit was settled with a consent decree and a knuckle-rap fine of $1 million.

That's it as far as enforcement cases are concerned. The rest is regulatory wheel-spinning and pandering statements that have done nothing to satisfy the Baloney Brigade.

Either the SEC is turning a blind eye to a real life "fraud" on the market, as the Baloney Brigade claims, or Cox is behaving more as a politician than a regulator, pandering to what Seth Jayson of Motley Fool aptly calls a "squeaky wheel." Squeaky, shrill, and dishonest.

And insatiable. Since the Baloney Brigade is on a crusade against a nonexistent problem -- one that, since it does not exist, has no solution -- it will be never satisfied. Remember that the entire purpose of the Baloney Brigade is not to correct a "stock market problem," but to divert the attention of regulators and investors, and to provide excuses for inept CEOs and the brokers pushing their stocks.

Wall Street is no doubt ecstatic about the meeting yesterday. That's because the SEC eliminated the "tick test" for short-selling of securities. Since the 1930s, shares could not be shorted when prices are falling, but that's now out the window.

The "tick test" was a genuine protection against downward manipulation, and it is gone. And that's a good example of the Baloney Brigade's damaging effect on the regulatory process. By taking meaningless action against the nonexistent problem of naked short selling, the SEC had political cover to remove a safeguard against genuine manipulative short-selling.

I don't fault the media for being weary of this issue, as well as wary of falling afoul of the anti-shorting crackpots-- they've spread lies, mostly via Phil Saunders' "sanitycheck" website, about every single reporter who has written unfavorably about them. Several members of the media have told me that they avoid this issue for that reason, and I don't blame them.

However, I think the SEC's pandering to the Baloney Brigades requires more scrutiny. Media coverage of the SEC is notoriously flabby, and I think the failure to cut through the bull and fully analyze the SEC's actions in this area is a good example of that.

© 2007 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.

An Agenda For a Delicatessen, Not a Regulator

In Wall Street Versus America and in umpteen posts in this blog I've decried how the phony naked short-selling issue has been used to diverted regulatory attention from genuine issues that really hurt investors -- stuff like microcap fraud and brokerage sales practices. The SEC has wasted gobs time on this issue, which is pushed by Internet crackpots, failing CEOs, and unsavory elements of Corporate America.

No better proof of this can be found than in the agenda for the June 13 open meeting of the SEC.

The first two of the four items on the agenda items relate directly to "Regulation SHO," which was passed at the behest of the anti-shorting "Baloney Brigade." The SEC is knuckling under to pressure to tighten up the already dumb provisions of this unnecessary regulation.

As if to prove how boneheaded the whole thing is, while SEC policymakers are wasting their time fiddling with Reg. SHO, SEC enforcement has just begun proceedings against
Chris G. Gunderson, general counsel of something called Universal Express. The company and Gunderson had previously been a subject of lengthy SEC litigation, as noted in the filing. All pretty nasty stuff.

Universal Express's CEO Richard Altomare was the torch-bearer of the Baloney Brigade until he tossed the flaming talisman to the infamous Patrick Byrne, the SEC-investigated CEO of corporate chamber pot Overstock.com. Byrne has proven to be a worthy successor, exceeding Altomare every day in the stock-issuing, red-ink-generating and baloney-spewing department.

The SEC should stop kowtowing to crackpots and blame-shifting CEOs, and put an end to the Reg. SHO charade.

© 2007 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.

Annals of Baloney (continued)

Today is the end of the "comment period" for a Securities and Exchange Commission rule proposal on "fails to deliver" securities -- the central obsession of naked shorting conspiracy nuts. (The "baloney brigade," as I called 'em in my book.)

The "National Coalition Against Naked Short Selling," an "astroturf" (phony grassroots) group pushing the agenda of penny stock promoters and CEOs of foundering companies, has been busy as the deadline approached.

As I observed the other day, the NCANS sent the Securities and Exchange Commission an anonymous comment letter on the SEC rulemaking, pushing its "stock counterfeiting scandal" crusade. As you can see from perusing the NCANS letter, the "evidence" for the "scandal" consists of a jumble of statistics but without a single instance of any actual company hurt by any such thing.

If you're going to write a 23-page letter you can site one example, I would guess. Right?

So I was looking forward to seeing that evidence when the anonymous NCANS said on its various anonymous websites it has got 1,100 actual people to send in their signatures to the SEC. I said to myself, "Surely these people are going to scribble in a note about what happened to them!"

But when I saw what the NCANS was sending in, all I saw were signatures below a statement saying that "The undersigned have been negatively affected by delivery failures of equity securities in the U.S. markets, and by the crediting of security entitlements in quantities far in excess of the issued securities they claim to represent."

Just name and address. No space for "what happened" or "what stock I owned that got counterfeited or naked shorted or stuff."

So they still haven't provided a single example of a company being hurt by "stock counterfeiting" or "naked short selling."

Don't you think that if 1,100 people were "negatively affected" by something they could say exactly how they were "negatively affected"?

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

Keeping His Eye on the Ball

Nobody can say that Overstock.com chief executive/conspiracy theorist/journalist-taunter/short-and-analyst-suer/"miscreant"-blamer Patrick Byrne isn't keeping his eye on the ball.

While his company limps along, Byrne has his eye keenly focused on what matters -- naked you-know-what.

He has filed a comment letter with the Securities and Exchange Commission on the evils of same, with numerous attachments. A copy can be perused here, right below "anonymous individual investor, Florida." A lot of these comments are anonymous, in keeping with the paranoia of the Baloney Brigades astroturf campaign.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

Annals of Astroturf

A useful phrase has emerged in the world of political discourse -- the "astroturf" organization. Astroturf is fake grass, so the term neatly depicts fake organizations that describe themselves as "grassroots" to hide a corporate agenda. (Here's one example: an alleged front group for big telcos.)

Running a phony grassroots organization is problematic, because one must hide one's backing and corporate agenda. Wall Street's version of the astroturf organization, the NCANS ("National Coalition Against Naked Shortselling") had found a solution! This self-described "grassroots organization" discloses absolutely nada about itself, other than its name.

Take this Securities and Exchange Commission rulemaking comment letter, filed the other day by the NCANS. Interesting letterhead, isn't it? No address. No phone number. Unlike a previous NCANS comment letter, it wasn't even signed by the NCANS's paranoid minister of propaganda, the pseudonymous sicko "Bob O'Brien." And if you are unwise enough to give 'em money, you've got to send it to a lawyer's escrow account.

Why the secrecy? Since the NCANS fights the good fight for CEOs of money-losing companies and penny stock cons who want to shift blame for their failures -- well, I think it's pretty obvious. But it's not so obvious to the SEC, which has diverted its scarce resources from real fraud to pander to these anonymous screwballs. Or to the more vacuous members of Congress and state regulators who have done the same.

A good example is the SEC rulemaking in which the NCANS filed its recent missive. That involved revisions to the SEC's rules on "fails to deliver," which the NCANS has been anxious to use as a red herring to preoccupy investors in failed companies. The clueless SEC has played along.

If you browse through the comment letters on the SEC site, you will find not a single instance of a real investor being hurt by naked short-selling, not from the naked shorting movement's paid shills and, of course, not from the "small investors" posting comments (some of whom are no doubt real people). What you see is a lot of meaningless statistics and some people trying to find a scapegoat for their own poor judgment.

One thing I find interesting is how the naked-shorting goofballs describe themselves as attempting to "protect the investor." They remind me of some malware that recently infected a friend's computer, disguised as a "spyware defense." It showed up on his desktop and was hard to get rid off. Persistent, annoying and dishonest -- just like the anti-shorting nuts. It's a shame that some decent people are swallowing whole their baloney.

The SEC should take a lead role in putting an end to this nonsense, and not perpetuating it. If the good people of that agency want an idea of how ludicrous the naked shorting hysteria has become, I have a suggestion: They should read those comment letters.

Don't just write them off as crackpots, folks. If just one investor makes a bad decision because of the naked shorting campaign, that's one too many.

UPDATE: For an example of how state governments are pandering to the naked shorting astroturfers, see this SEC comment from the state of Utah -- always working hard to protect its crummier public companies at the expense of people who buy their stock.

A week after this item appeared, the embarassed baloney brigadiers sent in the letter with an actual person's signature -- but still no address. The NCANS website's "whois" information, likewise, contains no address information. Makes you wonder why an "organization" would go to such lengths to avoid people knocking on its door.

© 2006 Gary Weiss. All rights reserved.

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Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.

The Journal Stands Up for Free Markets

The Wall Street Journal editorial page today weighed in eloquently on the SEC's subpoena-frenzy, and also ripped to shreds the hysteria that has arisen concerning short-selling. Ditto for an editorial yesterday in the New York Sun, which made much the same points.

The Sun and Journal both recognize something has been overlooked by the SEC in its eagerness to please the anti-shorting cult: the free markets -- not an evil cabal of short-sellers -- is what makes stock prices fall.

As I pointed out yesterday, crummy companies have long used short-selling as a scapegoat for their own failures. Sure, stock prices can be manipulated downward. It happens -- about once in a blue moon, while upward stock manipulation is an immense, recurring problem, the subject of hundreds of regulatory actions and indictments. The anti-shorting crusade wants regulators to wear themselves out chasing after shorts, so that the daily plague of upward price manipulation is allowed to fester, unhindered.

The anti-shorting con men have succeeded handsomely. The SEC subpoenas, and the passage of Regulation SHO, are an example of their malignant power and influence. I explore their "Baloney Blitzkrieg," in Wall Street Versus America, and in recent days I've described their smear campaign against journalists. See this item and this one.

The leading anti-shorting website, which was promoted by Overstock.com's screwy CEO Patrick Byrne on CNBC yesterday, exploited its five minutes of fame yesterday with a cartoon libeling Marketwatch's Herb Greenberg with a cartoon showing him in prison garb. This kind of infantile feces-tossing is typical of the shorting cult's grimy tactics.

The anti-shorting cult doesn't want free markets. They want freedom -- the freedom to sell stocks in cruddy companies, and smear and bully critics like Greenberg, with as little government interference as possible. But when these same stocks decline, they want heavy-handed regulatory intervention.

The absurd Regulation SHO is the anti-shorters' handiwork. It is based on the proposition that extended "fails to deliver" of securities are bad. Yet regulators, including the SEC, have long insisted that whether a security "fails" or not doesn't hurt investors one bit.

The leader of the anti-shorting cult, Byrne, is a living example of the hypocrisy and intellectual dishonesty of this position. Byrne, when not making a fool of himself on nationwide TV, engages in inconsistent political posturing and at one point called himself a "libertarian."

In fact, he wants the government and court system to do his job for him, and improve the stock price of Overstock.com. He may actually believe the rubbish he has been spouting that a conspiracy of shorts has depressed his company's share price. The problem, of course, is not short-sellers but that Overstock.com isn't profitable. No amount of suing and TV appearances and journalist-bullying is going to change that.

Byrne's dad, former GEICO chief executive John Byrne, is clearly embarrassed by sonny boy's televised antics. The Toronto Globe and Mail reported today:

While the fight rages, Mr. Byrne's 74-year old father, John, who is a director of Overstock.com, is getting a bit impatient. In an interview yesterday, John Byrne said he has every confidence in his son but added: "There may be something to this, I don't know whether there is or there isn't. I wish he would just pay attention to just running his company. That's the problem with the world today, sons don't do what their father's tell them to do."

I don't know if that's a problem. Patrick Byrne's problem is that Overstock is losing money. The SEC's problem is that it has allowed its enforcement and regulatory agenda to be influenced by a screwball CEO and the nuts of the anti-shorting conspiracy cult.

UPDATE:

• Speaking of anti-shorting nuts, take a look at the anti-Semitic comment to this item from a prominent anti-shorting conspiracy activist named Darren Saunders, a former penny-stock pusher who was one of the anti-shorting crackpots who testified against Bradley Abelow in Trenton last week.
  
  Clearly, as Jeff Matthews once observed in his blog, there is an anti-Semitic tinge to aspects of the anti-naked-shorting cabal. The saner anti-shorting conspiracy theorists might want to take a hard look at the creatures crawling through their movement.



• Other good comments on the anti-shorting hysteria are available here, from Houston attorney Tom Kirkendall's blog, and here, from Ideoblog. Also, Loren Steffy clarifies his column on the short-selling nonsense and makes some keen observations.

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Wall Street Versus America will be published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site.