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Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

This is a direct attack on company transfer agents. Company transfer agents register the actual name and address of every shareholder in the company.

If you own your shares in street form, that registered shareholder is not you. Your shares are registered to Cede & Co. who is the mysterious nominee of the DTC.

Typically, the DTC keeps track of which brokerage or clearing house has a claim on those shares owned by the DTC's nominee. What Jill is suggesting with DRS is that she keeps track that you own the shares, not your brokerage or their clearing house.

In other words, she is suggesting you have a claim against the DTCC's ownership of your shares rather than owning them directly, as registered at the company transfer agent.

This bits and bytes versus paper argument is a red herring - most transfer agents can register your ownership (name and address) electronically without issuing you an actual physical certificate.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

The liability that is FTD's belongs with those selling them and the clearing and settling organization that pushed them through to the buyer. If the end run failed at getting a paperless market, what would be another way to get rid of that liability?

The DTCC, the clearing and settling organization, which is owned in part by the NYSE which recently went public.. How does that work? The former owners sell their liabilities to others. Who is going to be held accountable? The NYSE gets sued and the shareholders take a hit or the NYSE goes bankrupt, but the people who sold it have their money. Looks and smells a lot like Refco.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Rather than go on the defense, I think we should go on the offense.

The DTC is an unnecessary extra step. There is NO REASON to register share ownership to Cede & Co. The DTCC could use their exact same computers and databases to work with the DTC to make the brokerages and clearing houses the ACTUAL REGISTERED owners of the stock rather than only beneficial owners.

I find it outrageous that Cede & Co. owns all street form shares, but no one can tell me who Cede & Co. is. Is it a trust or a private company? What jurisdiction? Who are the officers, directors, trustees? Is any of that stock pledged as collateral in any way?

Why is it such a secret?

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

We americans conduct business in a parallel currency universe. One, the bits & bytes of the credit/debit cards. Two, the actual fiat currency we carry in our pocket ;just in case the power is out & we need some food.I have not noticed the Federal Mints ceasing operations. On the contrary, they are devising ever more detailed PAPER to prevent counterfeiting. It is common knowledge the bit & byte form of cash is easily stolen, damaged, & lost.

That is all fine and dandy until you get hungry...hwh

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Excellent points all the way around. Electronic theft is the easiest of all, a click of the mouse and you can alter any number....remember the voting scandal? If they didn't have paper ballots, there would be no fair elections (okay, bad example...but in theory...)

Also from Considine's article: "As a result of electronic book-entry registration and automated transfer systems, the inventory we hold in the vaults of DTCC’s depository has declined from more than 30 million certificates in 1990 to about 4.8 million last year."

So if they only have 4.8 million certs on file, what's the problem? It's obvious....they don't want companies like Overstock to even have that final option to prove physical ownership in their stock.

And finally? If they assigned an actual number to every share, they might not NEED paper certs. 25 million shares....25 million shares numbered from 1 to 25,000,000, just like every other item sold with a bar code or ID number. It really is just that easy.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Mary, you make a good point - the DTCC is partially owned by a public company. It will be interesting how they disclose the value of that investment and related party transactions in their public filings.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

A few years ago, a bunch of small companies dropped out of the DTC system altogether, saying it was corrupt beyond repair. They implemented "certificate only share transfer" which drove trades through the company transfer agent.

This was working and eliminated the naked shorting problem.

Unfortunately, the SEC banned it, the same way they got rid of other fixes that were working (the BBX which was to replace the OTC and the NASD rule which punished NASD members that dealt with foreign naked shorts).

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Off Topic, but someone (Dave, Bob, Mark, even PB) ought to call Drudge to be on his Sunday night radio show. He often talks about current events, and with 60 minutes showing that night it would be right on target.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

--------------------------------------------------------------------------------in regard to mr Faulks SANDIA connection on cmkx task force website,(mentioned on cfrn), could this be what They are doing?
The above words were told to us by someone who has been in the upper echelon of computer security for the past two decades. And yes, after 1 ½ years, WING TV has finally become such a danger to the bloodthirsty cabal which executed 9-11 (and beyond) that they are now taking extreme steps to shut us down.

These cowards who lurk in the shadows are doing so by jamming our server with millions and millions of what appear to be “legitimate” hits from various IP addresses, but in reality they’re coming from “spoofed” locales that are highly sophisticated in nature.

In other words, our server isn’t showing a single IP or IP range; but instead this massive spoofing is being distributed by a source which has “virtually unlimited resources to create bogus traffic.” (Any idea who that could be!)

Our contact also mentioned other possibilities, such as SMURFS, Fragle syn-floods, zombies, or a vanilla DDOS (all of which sound like a Dawn of the Dead cartoon show).

Nonetheless, as anyone who’s been trying to watch our show during the past week knows, our daily broadcast is either: (a) crawling along at a snail’s pace, (b) freezing up, (c) or simply shutting down entirely. This massive “jamming” is similar to a radio station being hammered by an influx of outside interference, or a radar screen that is “spoofed” and all the operator at the screen sees is snow. (By the way, that was how Ron Brown’s plane was deliberately made to crash – its radar was “spoofed”.)

To give you some idea of how MASSIVE this hack-job was, even though we tripled our bandwidth last week, our server told us that if left “uncapped,” our total usage would have been 9 terrabytes/month. Now, if you’re like us, you have no idea how much bandwidth this is. We have been told, though, that 1 terrabyte equals 1 trillion bytes, and it would only take 8 terrabytes to digitize all the tapes and movies in a typical video store. And we were getting hit with even more firepower than that! This wasn’t something being done by some snot-nosed kid sitting in his basement!

In essence, we were being hammered at about 622 megabits/second, which would have had to originate from numerous T3 pipes, or even an OC-12 pipe. We’re not exactly sure what all this mumbo-jumbo means, but every time we bumped-up our bandwidth, the attackers bumped-up their server requests.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Is this just another variant of fractional reserve banking. I've posted on MSN's Berkshire Hathaway Shareholder message board on this topic. Essentially that our stock market is being run like our fractional reserve banking system through the use of naked shorting or failed deliveries. Can any of you contact Patrick Byrne to ask him if this would make sense. Is this why the DTCC doesn't want paper certs. The same way the U.S. doesn't want currency backed by gold. Aren't we all really talking about making a run on the bank only to find out that there is not enough cash (stock certs) in the vault...

If this is the case, then it would apply to all public companies, and not just start-ups etc... As long as most shareholders hold there securities in street name, then the system can create more shares while the rest of us are none the wiser. There is no reason why this couldn't be done with Microsoft shares (assuming the DTCC is crooked). Actually, it might be better to do it with Microsoft because the crime is that much harder to detect.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Although I am of the opinion that it was mainly perpetuated in smaller companies (with a few historical notable exceptions) until the past year or so, it can be...and is increasingly so...prepetuated on larger companies. Overstock just happens to have awakened from the 100 year sleep before any other major companies (thanks to Dr. Byrne). Why hasn't Krispy Kreme, Martha Stewart, Netflix, or Global Crossing been raising bloody hell about FTDs? Who the hell knows, but they're all making a huge mistake by not addressing the issue vocally and publicly, IMO.

And your banking analogy makes sense to me, and seems to run through any capitalistic system that utilizes a widespread distribution of assets backed by a centrally held "deposit" as collateral. The assets might be there to cover any one shareholder, or even a number of them....but if there is a "run on the bank"? All hell will break loose.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

I think we all start treading on thin ice when companies such as Krispy Kreme, Martha Stewart, and Global Crossing (add numerous .coms and start up techs etc) are added into the argument. That's not to say that naked shorting isn't illegal (it is), and that these companies good or bad shouldn't be allowed to suceed or fail on their own, but outside of naked shorting, many of these companies had questionable valuations, questionable managements, and questionable accounting (stock option (pyramid schemes) included).

Now I'm sure that Patrick Byrne has a very good understanding of valuation and accounting and he can walk you through this (I can if you can get me on the phone), but considering the parties involved (SEC, DTCC, Wall Street, the miscreants, the mom and pop investor etc.), it makes good sense to make your case using companies with some underlying fundamentals to back you up. (Both Overstock and Netflix would qualify although at their peek prices I would question the valuation).

Why should we be selective? Because the honest and smart money wont take your claims seriously if you claim that the reason the stock price went down on KKD / MSO / Global crossing was because of Naked Short selling. It may be true, but most fundamental guys with influence (a voice and a following) will clearly see that there wasn't much value in relation to the lofty prices on these companies, and the shorts, naked or not, are able to come to the table with a valid argument for the price decline on their side. It just obfuscates the naked short issue (or bear pool/illegal collusion) when you have questionable businesses in your arguments. It shouldn't, but it does.

Lucky for all of us, they picked on Patrick. He can articulate complex issues. He has a good business (although 70 dollar stock price for Overstock could be legitemately questioned / 30 I like / liked it even more at 22). He has a well respected family. A nice connection in Warren (lends him credibility and gravitas not that he needed it).

Bottem Line: you can't win this battle on truth and facts alone. There's too much grey in those two words (truth and facts). Get rid of as much grey and we all have a chance of cleaning this mess up. I hope.

Side note: If fails are going unaccounted or better yet uncorrected, then we don't need bear raids for the miscreants to make money. Whatever the stock small or large whether the price declines or not it doesn't matter. All that matters is you have someone selling something they don't own and don't (ever) intend to deliver who gets to collect cash up front.

Lee A. Walter

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

If I take a 100 dollar bill to the federal reserve for redemption, they'll probably hand me two 50 dollar bills (if they don't kick me out first). If we lose paper certs, then when I go to veryfy those blips on my brokers computers, they'll veryfy it with more blips at the DTCC. If this is the same game as our fed, then that's exactly why they want to get rid of paper certs. While we are at it, why don't they move the decimal to the right on all our bank accounts and tell us we are all better off.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

"All that matters is you have someone selling something they don't own and don't (ever) intend to deliver who gets to collect cash up front. "

Lee,
I agree wholeheartedly with your statement, but I disagree with your statement that we should not be considering companies with questionable valuations also.
These schemers (IMHO) were probably part of a manipulation effort to move prices up as well as down thereby giving them an ability to steal more money as they drove the price down.
This situation will blow wide open when some big money people get hurt real bad and goes public till that happens, the small guys needs to keep every security that has been linked to this scheming thievery on the radar screen.

Alan

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Lee,

Your comment:

< think we all start treading on thin ice when companies such as Krispy Kreme, Martha Stewart, and Global Crossing (add numerous .coms and start up techs etc) are added into the argument. That's not to say that naked shorting isn't illegal (it is), and that these companies good or bad shouldn't be allowed to suceed or fail on their own, but outside of naked shorting, many of these companies had questionable valuations, questionable managements, and questionable accounting (stock option (pyramid schemes) included). >

only lends argument to the "naked shorting is good" crowd. The same crowd that says issues on the SHO list are legitimate targets. And then we have NYX.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Yeah the pump and dump. The only problem with that is that no one forces you to buy a stock that is overpriced. To me, at least, if investors (read: speculators) get burned buying things of which they have no basis in valuation whether it's a stock, bonds, or houses then that's their own stupid fault. The vast majority of people and profesionals in the market would have no idea what a business is worth if they weren't quoted a price first (if you gave them a 10k they wouldn't know what to do with it).

And maybe that's our biggest problem. The price of everything and the value of nothing. I don't practice law, and I don't practice medicine. I'm not a lawyer, and I'm not a doctor. I don't teach Chinese because I don't know or speak Chinese (hell, I can bearly write in English). Why is it that people who barely understand basic arithmetic, no understanding of accounting, and no concept of the time value of money should expect to invest in businesses? What is it the Buffett says about the "patsy" in the room? If you don't know who it is, then it's probably you.

My brother was arrested on a DUI one Friday night. When I recieved his call to bail him out, I told him sorry you'll just have to sit in that stinking cell till Monday. If you are stupid enough to get behind the wheel of a car after drinking then you should do the time for the crime. Same goes for investors. I don't have much sympathy for the vast majority of dumb money in the market. I don't have much sympathy for crooks either. I have an Uncle who asked me about investing in the stock market. I asked him if he knew anything about how to value a business, and he replied no. My advice to him was to do what he understands and or to learn about what he doesn't, and in the meantime if all he understood was cash (money market) then so be it.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Its obvious to me that the hedge funds who perpetuate naked short selling schemes tend to hand pick their targets....companies that are easy to bash for their fundamental weaknesses, so that maipulation by naked short selling can be supplemented by bashing the company as well, and then justified with the "girl in the tight skirt deserves to be raped" argument.

If the company sucks, so be it. Short it legally, and cover your position as required by law. That doesn't give ANYONE the right to illegally rob shareholders of ANY company. If that were true, we could all print and sell our own new Orleans Saints paraphanelia because they suck, and rob every McDonalds at gunpoint because we think their Big Macs suck.

I think my neighbor's a jerk and I don't like what he's done to his house....maybe I'll print off a few deeds and sell his house four or five times without telling him. That'll teach him...AND the people who buy the deeds thinking they actually own the house. They're stupid for wanting to buy that crappy house in the first place, so they deserve to lose all their money....to me.

For that matter, I think the dollar is overvalued, and it's obvious that our country isn't being run properly, operating at a deficit, lousy management....maybe I should just print my own money, add to the national debt, and bring the value of the dollar down to where it belongs....or where I think it belongs, I should say.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Mr. Faulk

I'm gonna do the assume thing. I assume your comments are in regards to my post. First, I never said that illegal activity should go unpunished. I thought that much was clear, and personally I think these Wall Street (et al) crooks should be handled as traitors to the American public (that means to suffer the worst punishment possible). Fraud on this scale damages our economic way of life in more ways than we can imagaine.

However, I think what you guys stumbled onto is bigger than even you think. More specifically, systemic fraud, that could possibley be ruinus to the American markets. The famed economist John Kenneth Galbraith termed a phrase, "the Bezzle," for undetected fraud in a system that actually has positive effects on the economy. The key to that is undetected, and the reversal, if widespread, could be disastrous.

Now, I'm a Berkshire Hathaway shareholder and a big fan of Charles Munger. Munger teaches the use of mental models. It was my mental model of fractional reserve banking that lead me to draw the parallel to naked shorting. But, for all those who think the federal reserve (and fractional banking) is a crime against America perpetrated by the money changers I offer only one conclusion. The fed is still here. Its chairman's are praised. Money center banks still wash us in paper money, inflation, and debt.

My point: If you are fighting a hydra headed monster, you had better have many hands and many sharp swords. Again, any grey in your arguments (any weakness) will only serve to obfuscate the truth.

The reason why Patrick is so effective is because he uses facts well. He lays out the facts to support his claims, but also tells you when he is veering off the reservation a bit (the public at large will follow a man like that). I think others should mimic that. If it is systemic fraud, it is bigger than we think, and the truth behind Eagletech / Overstock / etc... wont matter much in the end. The SEC's mandate was to restore public confidence and not the truth as many of us would have wished it. If we are all on to something, then therer are bigger nastier battles ahead... more than some punk Greenberg and some hedge fund prat named Rocker.

What was the only questioned asked of Eagletech CEO? What was it? How does a company usually pay for its filings (or something like that)? The answer was retained earnings, but the correct answer should have been retained earnings, debt capital, or contributed capital. My question is why someone from the SEC is asking a first year basic finance question? She's either stupid or crooked and either doesn't bode well for any of us.

Lee

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Thanks for the clarification, Lee. Your post is right on the money....and your point that someone like Patrick Byrne is a good spokesperson for our cause is accurate on many fronts....he is articulate, well-educated, and most importantly (in my book anyway), his honesty and integrity is unimpeachable.

And this is all about honesty and integrity. I've written a couple of articles over the past few months that say exactly what you're saying.....this is much bigger than any of us at first realized, and threatens the very fiber of our country's capitalistic society.

My feeling is that we need to quit confining our arguments to the topic of how it effects investors, and emphasize how it effects EVERYONE...loss of jobs, loss of new technologies, drugs, enviromental alternatives, loss of our tax base, which in turn effects our schools, roads, libraries, the elderly....and our ability to pay off our national debt.

THAT'S the approach that will reach all Americans, and not just the ones who are involved in the stock market.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Mr. Faulk

ditto.

Side Note: My point on the Eagletech / SEC question was that clearly she was trying to say you have no profits, you have no business model, and that's why you are being delisted etc etc... Oh, and I'm turning a blind eye to everything else you're telling us.

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

And Remember This Folks,

It is the forces of supply & demand that determine stock prices; and that means that all these surplus electronic shares floating around artificially inflate supply.

And now that it's apparent that regulatory agencies are controlling the supply side of this vital pricing equation, it's truly laughable that these same regulators who allow so much blatant naked shorting also claim to be protecting innocent investors by requiring small start-up Pink Sheet companies to adhere to same time-consuming & costly reporting requirements as Blue Clip companies.

And that raises this question: Of what practical use to investors are audited financial statements if the same investors have no way of knowing how many "real" shares of this audited company are actually being traded?

To conclude, the future survival of this great nation's equity markets necessitates the immediate and thorough cleansing of this sewerage system the OTC markets have become.

And in Sparky's humble opinion, the heretofore burgeoning hedgefund industry can rest assured that the game as they know it is soon going to be over, as well it should be.

Sparky

Re: The Parallel Universe of the DTCC: “Bits and bytes in book-entry form.”

Because the price on the exchanges are set in 100 share increments, Suppy and demand doesn't necessarily have to work like it's taught in your economic text. As Buffett would say, the price is set on the margin. What's also interesting about this, is that there doesn't have to be someone profiting for every one losing. 100 shares (for most companies not a lot of money) sets the new price. Sets the price for a company that may have billions of shares worth billions of dollars. This dynamic really screws things up (for trading manipulation).