Posts filed under “Short Selling”

Boycott Overstock.com

Whatever little patience I had with Patrick Byrne, and his overzealous friends at DeepCapture.com, has now become officially exhausted.

As I noted last week (DeepCapture.com Scraping Facebook Friends), this group found the Facebook friends and relatives of any journalist, critic, fund manager or blogger who dared to  criticize Overstock (or Deep Capture), and then published the list.

The publicized names were not just colleagues and friends, but family members, including teenagers and kids.

Big mistake.

As Gary Weiss discovered, the entire operation was a pretexting scam, run by former Director of Communications at Overstock, Judd Bagley. His sleazy cyber-stalking/identify theft approach probably violated some law somewhere.

I don’t know why I am on the Overstock enemies list. I am in favor of shorting, but I am against naked shorting. I’ve never said much about Overstock.com (see this and this) as they are mostly below my radar. The massive over-reactions to any criticism shows just how tenuous their business must be.

And whatever legitimacy the anti-naked shorting crowd had is thoroughly undercut by its association with Patrick Byrne. He is an imperfect messenger for what is a small but real problem. Having Byrne lead the crusade against naked shorting is like having Bernie Madoff chair a commission on Wall Street ethics; They are each simply the wrong person to lead any discussion on the issues.

My personal opinion on his obsession? It appears to me that Overstock CEO Patrick Byrne has used the naked shorting issue over the years as a distraction, a cover to take the focus off of problems at his company. Add some intimidation of journalists and sleazy behavior and you have the strategy one might expect from a mediocre CEO of a 3rd rate online retailer. The facts are that Overstock has a history of losing money (Joe Nocera called it an “unprofitable retail liquidation Web site”), and more recently of having reporting/accounting problems. Apparently, its a long their M.O.

Oh, and as a side note: I have no position in OSTK, long or short.

Here is a rhetorical judgment question: Why would anyone, especially the CEO of an online retailer, do anything to piss off the online world — just around the holidays? How frickin dumb is THAT?

I am totally out of patience with this bully, with Overstock.com, and the trolls at DeepCapture.com. Here is what I propose to do:

1) Request the FBI investigate and prosecute the identity theft, online cyber-stalking, and fraud of Judd Bagley of Overstock.com

2) Request the SEC investigate Patrick Byrne, Judd Bagley, and Overstock.com for their part in this scam. If they find it to be a fraudulent scheme, then they should prosecute.

3) Call for a boycott of Overstock.com.

Lastly, some free advice to the Overstock Board of Directors: You have a fiduciary duty tot he owners of your firm. It does not appear to me that you are fulfilling it. Your CEO appears to be dustratced from running the firm. At a certain point, you will be called out for how you handled your obligations. Wise up . . .

As to Facebook, I guess its time to defriend everyone who isn’t actually a friend or relative. (I was getting bored with irt anyway).

Category: Financial Press, Retail, Short Selling, Web/Tech

Bloomberg on Phantom Shares, Naked Shorting

I somehow missed this: > click for video

Category: Legal, Short Selling

DeepCapture.com Scraping Facebook Friends

Here is something weird, and a little creepy: The freakshow that is DeepCapture.com seems to have grabbed all of the Facebook friends of anyone who has ever: a) written anything positive about short selling or 2) said anything negative about Overstock.com. http://www.deepcapture.com/wp-content/uploads/2009/12/facebook-data.csv For those of you who are unaware of what DeepCapture is, the name…Read More

Category: Short Selling, Web/Tech

Trading Idea: Sell AIG

12/3/2009 We have been watching AIG after it fell below its recent support (red lines on the attached chart) around $32.75…Now after almost a week of trying, and failing to move above (failing on higher volume) we now see AIG moving lower. Our first trading target would be low $20’s….and use the level of the…Read More

Category: Short Selling, Think Tank, Trading

Banning Short Selling

We have a bull market excess stupidity.

Now that I think about it, this could very well be the longest bull market in history, running as it has for several 100,000 years.

The latest manifestation of this intellectual failure is the new government proposals to ban or radically restrict short selling.

Of all the anti-free-market proposals out there, turning equities into a one way bet is by far the least defendable, most ignorant, most damaging to the markets we have seen.

NYT excerpt:

“They have been reviled as the bad hats of Wall Street, nefarious traders who cashed in on the market collapse and, some insist, helped precipitate it. Now short-sellers, the market skeptics who correctly called last year’s downturn, are coming under even more unwanted scrutiny, this time from federal regulators. The Securities and Exchange Commission appears poised to reverse itself and reinstate rules that would make shorting stocks — that is, betting their prices will decline — somewhat more difficult.

Whether the S.E.C. will go far enough to satisfy the many critics of short-sellers is far from certain. The controversial role of these investors has divided not only the financial industry, but also federal regulators. As the S.E.C. considers its options, the debate is heating up.  Hedge funds and big pension funds argue that short-selling is vital to modern markets. Such trading not only enables investors to hedge their risks but also to ferret out weak companies or, as in the case of Enron, outright frauds.”

Short sellers are the messengers, and they tell the story of fraud, over-valuation, and irrational exuberance. They also act as a good counter balance to the Street’s inherent cheerleading. Short seller Jim Chanos explains why the SEC should not further restrain Short Selling in some recent commentary (Letter tp the SEC is here).

One of the factors that the lawyers at the SEC don’t understand is the importance short sellers play in cushioning collapses. A brief excerpt from Bailout Nation:

“In September 2008, with the crisis in full flower, [SEC Chief Christopher] Cox made shorting financial stocks illegal. Apparently, he was unaware that fierce market sell-offs often end with short sellers covering their positions, locking in profits on their bearish bets. With short sellers out of the market, the downturn became even fiercer. From the market highs of October 2007, the S&P 500 and the Dow Jones Industrial Average were cut in half in 12 months. Much of the damage came after the no-shorting rule went into effect.”

Here is a chart of the S&P500, showing when the ban went into effect and the subsequent result. The ban did not cause the sell off, but it removed natural buyers from the process that could have cushioned the blow:

spx-chart

via StockCharts.com

>

Sources:
S.E.C. May Reinstate Rules for Short-Selling Stocks
GERRY SHIH
NYT, July 2, 2009

http://www.nytimes.com/2009/07/03/business/03shorts.html

SEC Should Not Further Restrain Short Selling
JAMES CHANOS, PRESIDENT OF KYNIKOS ASSOCIATES LP,
Thursday, July 02, 2009 at 06:11 PM EDT

http://watchingthewatchers.org/indepth/21546/why-sec-should-not-further-restrain

Read More

Category: Bailout Nation, Legal, Psychology, Regulation, Short Selling

Shorts Story Video

Category: Short Selling, Video

Monthly S&P500 Inflation Adjusted

I meant to get to this from last week — but given that its a 140 year chart, I guess one week won’t matter much (via Ron Griess of The Chart Store): > click for bigger graph

Category: Inflation, Short Selling, Technical Analysis

Joseph Saluzzi: Orchestrated Short Squeeze in Financials

Joseph Saluzzi Says U.S. Stocks to Test Lows, Likes Gold

click for video
saluzzi

Category: Short Selling, Video

Boockvar on short selling

My 2 cents on the SEC talk on altering the short selling rules: Short sellers (SS) didn’t get people to buy homes with no money down, SS didn’t convince people to buy homes with teaser rates, SS didn’t convince people to lie about their income on their mortgage applications, SS didn’t tell banks/brokers to lever…Read More

Category: Short Selling

Did Naked Shorting Do Lehman In?

Oh, this is going to get the Sith Lords all hot & bothered! Both the WSJ and Bloomberg have articles this morning about Naked Shorting. The Bloomberg article more explicitly suggests that Lehman was “brought down,” in part, by naked shorting: Naked Short Sales Hint Fraud in Bringing Down Lehman “The biggest bankruptcy in history…Read More

Category: Bailouts, Credit, Derivatives, Markets, Short Selling