Dr. Byrne issued a press release a few minutes ago. You can read it here. You should. It is simple, straightforward, and easy to comprehend.
It states, with accuracy, that the legal short interest in OSTK is now 9.578 million shares. Not counting "ex-clearing", long and short FTDs (shares failed to be delivered on settlement date), "open positions" (WTF?), and FTDs hiding behind the curtain of offshore clearing entities.
That is 107% of all available shares held at the DTC (the subsidiary of the DTCC).
So, what is there to stop this from getting to 200%? 400%? 800%?
Nothing.
Nothing at all.
The DTCC assures us that the Stock Borrow Program doesn't create more shares than exist legitimately (issued by the company). That is technically true. It is also technically true that it does allow a virtually infinite number of IOUs to be created, which trade, and have the identical impact on the stock, as legal shares. Because if Wells Fargo lends a short seller a share of stock, and that seller sells it to a customer at UBS, UBS can then deposit it back into the Stock Borrow Program, to be relent to someone else tomorrow, leaving a trail of IOUs in its wake. One share at the DTC, who knows how many IOUs created? There is no real limit.
Legal short borrowing and selling from margin accounts could certainly account for a virtually unlimited number of legally shorted shares, as well - completely seperate from the Stock Borrow Program.
But here's a fair question: How can anyone put money into the market if there is no barrier to the number of shares that can be sold, both legally as well as illegally?
I mean, another way of saying this is, how can anyone ever hope for a stock's price to rise if an unlimited number of sales transactions can be generated, both legally, and illegally?
In the 1980s, following the revelations of Milken and Boesky and the Drexel gang, investor confidence was at a low - it became evident that Wall Street was a "Den Of Thieves" and that nobody was minding the store.
That is nothing compared to what we are seeing today. OSTK on the SHO list forever. 107% of the shares at the DTCC shorted. Unknown millions of shares failed (creating...who knows what to even call the fake shares - IOUs? Markers? Chits?), and yet traded as readily sell-able. What precisely is the difference between the legally precise terminology offered by the DTCC that it doesn't create any new shares, and the end effect that investors are concerned about, namely an infinite capacity for dilution and devaluation of a company's stock?
How can anyone with a brain believe that it is a good or fair system, if there are virtually no barriers to the wholesale creation of these "chits", which are traded in the system as though the company issued them legitimately - when in fact they are nothing more than something the brokers and their clearing system conjured up, and which completely lack any of the rights that imbue legitimately issued shares with their value?
I've said it before, I'll say it again. A share is an abstract, like a car title - it is a representation of something; in the case of a car title, it is the representation of a 3,000 pound juggernaut of steel and rubber and petroleum by-products. In the case of a share, it is a representation of a finite piece of equity in a company, with attendant rights - the right to vote, the right to dividends (with preferential tax treatment), the right to legal redress.
The chits trading in the system lack any of those rights. They have none of them. And yet the industry, in an effort to create more trading and hence more commissions, treats these worthless chits as being interchangeable with genuine shares. This is a fundamental dishonesty. If the brokers told the truth, and accurately represented that they were selling IOUs with no attached rights, very few would likely want those, thus they would trade at a steep discount, if at all. So they have created a system where they don't tell anyone. They pretend those IOUs are the same, by making them readily sell-able - how could they charge commissions with a straight face, and then have to tell the "shareholder" that they can't sell the IOU, because the broker has lent the real article out (in order to fatten the broker's wallet), thus the shareholder needs to wait until the broker can get the real share that supports the IOU back before he can sell it? Who would sign up for that?
Nobody.
So instead, we have the current system where the brokers lie to their customers, falsely representing IOUs as being "the same" as legitimate shares, and an entire industry derives its income by the trading of these shares. "It's good for liquidity!" Uh, liquidity is great if you are making your income from trades. It sucks if you are a shareholder being diluted into the ground by IOUs, or are a company being methodically undermined by depressed share prices.
Here's an idea: Why not just only trade legitimate shares, and notify shareholders when the shares are lent out of their margin accounts that they no longer own stock, but rather IOUs, and they are further restricted from selling the IOU, as there is only a market for genuine shares?
Why is that so far-fetched?
The answer?
Because Wall Street wouldn't be able to generate many, many billions of dollars of bonus money for itself every year if that was the market. It would be limited to getting paid only when genuine articles are delivered, and it doesn't want a fair system. It has created for itself a system that generates the maximum amount of income for Wall Street, and screw the investors, and Main Street America.
Screw them.
Or rather, more accurately, screw us.
And that is precisely what is being done - think of it as the 107% solution. You lose, they win.
Additionally, there are predators out there gaming the system, hedge funds using short and distort tactics, coupled with abusive short selling and illegal naked short selling, who are also screwing you/us. They do so with impunity, because they correctly believe that their crimes are so complex and sophisticated that the SEC won't ever be able to figure out what is really going on. These parasites are frontrunning, and committing 10b5 violations, and colluding in a manner that can only be described as racketeering, secure in the knowledge that the cops are asleep at the wheel.
We will likely hear more about that on 60 Minutes, this Sunday.
So to recap, the system is screwing investors for the benefit of Wall Street, the parasites and predators are screwing investors for their own benefit, and the regulators have gone nappies.
Any questions?