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WSJ Issues Forth One Millionth Defense of Short Sellers Article

Location: Blogs Bob O'Brien's Sanity Check Blog    
Posted by:   bobo 4/5/2006 4:00 AM

The WSJ today published yet ANOTHER article bashing biovail and OSTK, and arguing that short sellers are good for God and country.

These are getting a bit tedious in their sameness. They invariably make no distinctions between illegal stock manipulation and legal short selling, or illegal failure to deliver and legal short selling.

Almost all of them commence by framing the lawsuits against Gradient and SAC and Rocker Partners as an assault on short selling (legal) or the 1st Amendment rather than what they are - lawsuit alleging illegal front-running of bogus research reports, and stock manipulation.

Why all these smart NY press guys can't read a simple complaint and get it right is baffling.

They will then usually trumpet a study by an academic concluding that companies that fight short sellers are usually bad (again, forgetting that these companies aren't "fighting short sellers"), and finish with some sort of argument that shorts are good and honest and true, and that companies that take them on are bad bad bad. It is always the same paper by the same academic.

I don't have a lot of time to devote to debunking this article, so I'll just take a few snippets and indicate where the conspicuous flaws are. By now I can do this on auto-pilot. That is how similar all of them are.

"Who'd have guessed short selling would become a subject for the magazine shows, such as "60 Minutes" and "NBC Dateline"? Less surprising is that the take has been hostile and conspiratorial: How dare you push down stocks owned by widows, orphans and other helpless shareholders?

Case in point: a CBS piece two weeks ago that uncritically embraced a lawsuit against short sellers by Canadian drug maker Biovail. Led by CEO Edward Melnyk, the company charges that its share price has been driven down in the past three years by an unholy conspiracy of hedge funds and analysts who write unfavorable reports on the company. Not once but twice in her report CBS correspondent Lesley Stahl ominously intoned that hedge funds are both "secretive" and "virtually unregulated."

Here CBS News aligns itself with a campaign already promoted by eccentric Overstock.com CEO Patrick Byrne and billionaire anti-tobacco lawyer John O'Quinn, who was given airtime on NBC last year to claim that short selling abuse is rampant and costing American investors billions of dollars in stock value."

Yawn. So 60 Minutes is bad, and O'Quinn is bad. They mis-characterize O'Quinn's battle against stock manipulators who use failing to deliver as a strategy as "short selling abuse." They chastise 60 minutes for correctly pointing out that hedge funds are secretive (they are) and virtually unregulated (they are). So far so good, nothing surprising yet. Standard rhetorical slam using innuendo and misstatement as a substitute for reporting.

"Funny thing, the very same Messrs. Melnyk, Byrne and O'Quinn have been the subject of repeated roastings in the business press, including this newspaper, Fortune magazine and several other publications known for actually having a clue about the stock market. Indeed, much of the print press has come to the defense of the shorts: How dare you defame these investors who take special risks to make sure negative opinion is registered in the stock market? (Shorting is an onerous way to make money -- it involves borrowing stock and selling it, hoping to buy it back cheaper before the loan comes due.)

Not surprisingly, we put ourselves on the side of the shorts (and print media) too. But the debate has some interesting features that have been overlooked."

Not surprising at all, as the NEW YORK financial press is pretty much tied at the hip to Wall Street, and credulously parrots whatever is in Wall Street's best interests. Given that hedge funds make up most of the trading and stock lending business on the Street, it is absolutely unsurprising that the WSJ is pro-hedge fund/Wall Street agenda. And lets not forget that Dave Kansas is a Thestreet.com alumni - he's the C section editor, where much of this dross finds a home.

So again, to be clear - mis-characterize O'Quinn and Byrne's battle as against short sellers rather than against stock manipulators, and then cite a variation of "1 billion flies can't be wrong" argument in support of your erroneous straw man position.

"These swirling controversies have brought fame to a study by Yale's Owen Lamont. He looked at 266 companies that waged legal and political campaigns against short sellers and found that their returns lagged the market by 42% over the following three years. Proof, apparently, that short sellers are frequently right about the companies they target -- a view supported by a growing body of studies that find shorts are better informed than other investors.

But overlooked is another implication of Mr. Lamont's study: Returns were low precisely because the companies apparently stopped shorts from quickly knocking down their share prices to a level that would allow higher returns in the out years. Let's acknowledge, if so, that this represents a big favor to company insiders and savvy outside shareholders who were able to get out at a good price even after the shorts identified their companies as overvalued."

Here is the obligatory academic - again, ignoring that the suits are not about short selling, but rather about front-running doctored research reports - classic stock manipulation. Amazing how this escapes these guys.

And finally:

"In the Biovail matter, the agency seems to be myopically focused on the improbable premise that the market is being "manipulated" by impure research. To this end, it sent (and later recalled) subpoenas to journalists who reported negative views on Biovail and were presumably kept on speed dial by the shorts.

This maladroit intervention not only benefits those who'd like to make short selling as hard as possible. In keeping with the agency's chronic failure to catch up with the modern understanding of markets, the SEC's efforts once again have the effect of keeping good information out of stock prices, which only hurts all investors and the economy in the long run. Of course, if the SEC can't figure this out, why should anyone expect better of TV reporters?

Write to Holman W. Jenkins Jr. at holman.jenkins@wsj.com"

And finishing with the obligatory slam at the SEC for DARING to question the integrity of those honest journalists on Wall Street who just happen to constantly advance the agenda of those being accused of stock manipulation.

As I said, not much interesting. If I have the time I will create a template for one of these articles to save our find journalist friends the 45 seconds it takes to print the PR spin out and organize it as an article. Then again, I may have a mojito and lay in the sun instead. Hard to decide which would be more productive at this point...
Copyright ©2006 Bob O'Brien
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Comments (25)
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By n-tres-ted on 4/5/2006 9:07 AM
What is actually surprising to me is that so many of these experienced, "dig deep" type business investigative reporters fail to report anything other than a very superficial picture of the market activity at issue. Surely they have more natural or acquired curiosity than what is apparent. So I can only conclude that they are studiously avoiding any reference to the concerns for market manipulation and naked shorting (counterfeiting). Why? Must be that somehow they have skin in the game.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By harryofanguslane on 4/5/2006 9:24 AM
So? What's so surprising? Establishment publications do yesterday's news. When's the last time that a tidal wave was predicted in the newspapers. They happen fast and so will ours. Then the WSJ can pontificate on the after effects.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By stand up to shorts on 4/5/2006 9:32 AM
The companies that fought the shorts performed worse than the market because the counterfeiters made an example of them so that other companies wouldn't stand up to them.

"If you try to stop the counterfeiting, then we'll show you just how much we can counterfeit."

They did that to Patrick - to punish him for doing the conference call on the Sith Lord, they flooded his stock with even more counterfeit shares than they had dared to do before he stood up to them.

It's like the gangs in the 1920's - if you complain to the police because we are extorting money from you, then we will burn your business to the ground.

Most companies have got the message and keep their mouths shut.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By Patchie on 4/5/2006 9:32 AM
Mr. Jenkins,

I read your article today regarding short sellers and was at least impressed that you openly stated your bias to this issue. Most Journalists try to hide the fact that their mindset is biased. With that out of the way, consider facts you failed to address:

It is documented that short sellers will use the media and the regulators to cause negativity that would damage a companies reputation and subsequent trade values. Lets use examples to explain this out.

TASER (TASR) - They manufacture stun guns. They also had a huge rise and precipitous fall due to the excess in short positions in the stock. The shorts were betting against the stock, the stock rose anyway, the shorts were squeezed causing a higher high, and something had to be done about it. In comes the negativity. In January 2005 an investigation into the accounting used by TASER was initiated by the SEC. The stock crashed. Then, lawsuit after lawsuit was suddenly getting filed against TASER and despite every one being thrown out, they continued to be filed. Soon between an SEC Investigation and lawsuits being filed and made public, TASER lost business. It was the negativity that created the lost business. Now Lamont would just use the bottom line to justify his results but...the bottom line was a manipulated bottom line. In September 2005 the SEC moved from informal to formal investigation and by December 2005 the investigation was closed out with no enforcement action taken. The result of the negativity clearly affected company performance and company share value. So was the short sellers right or wrong? If you believe the SEC Investigation and the courts, they were wrong but they profited handsomely.

Career Education (CECO) was an $80.00 stock with word out on the street that it should be shorted. Shortly after CECO was heavily shorted an SEC Investigation opened up on the stock and the stock crashed from $80.00 to near $20.00. This week the Company has announced that the SEC is considering closing the investigation without any action. Were the short's right or wrong? If you believe the SEC Investigation, wrong, if you look in their accounts Right.

Allied Capital (ALD), Catalina Marketing, Novastar, etc... have all had large short positions and SEC investigations suddenly occur that tarnished their reputations and their ability to grow the business. Looking at the Deer after it is shot does not tell you the story of how it was shot. So far the media has focused on the results without finding out how the results were actually created.

The Tech Bubble was created in part by a media frenzy that over hyped and over valued stocks. Buy Buy Buy there is no cap to this market. People buy into that. People likewise buy into the negativity the media can make on a company and damage a growing company along the way.

I would ask that before you drink the entire punch bowl of short selling kool-aid, look deeper into how short sellers operate. Look at their ability to move markets by feeding negativity into the media and letting the media loose. Watch and see how a company like TASER can be trashed repeatedly by all media outlets for accounting issues and SEC Investigations but how, when it is all said and done, there is no similar coverage about their exoneration by the SEC some 1 year later.

Taser claims their revenues and profits were down due to negativity on the product and monies spent fighting the legal suits. Want to bet the short sellers found the lawyers to ambulance chase those suits? Take away the manufactured losses and then decide whether the short sellers were in fact correct.

Commissioner Atkins (Feb. 16 & March 3) spoke publicly about "Bear Raids due to abusive short sellers" teaming up with lawyers and the media. Funny how the media dismisses those events as being real so easily with all the evidence to support those exact allegations.

For the record, I have never owned any of the stocks mentioned above. And as for the SEC subpoenas, apparently evidence already exists where CNBC personalities are seeking more Gradient "Hatchet Jobs" and where Herb Greenberg had his own password into the Gradient Reports. Now according to former SEC Chairman, it is a 17(b) violation to publish a report as independent if you know full well that report will be disseminated into the public and one of the clients paid for it. In several cases, Herb was reporting the same day the report was issue to Gradient clients.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By tbs_theman on 4/5/2006 9:43 AM
Bravo Patchie!
My email to Mr. Jenkins By StevieG on 4/5/2006 10:21 AM
Mr. Jenkins,
I read your article today on short selling and have to wonder whether your article was deliberately misleading or if you simply do not understand the issue at hand. Your assertion that Overstock and Biovail are fighting "short sellers" is patently false, and this false strawman serves as the basis for your entire and utterly off-topic article. The fact is, and this is clear to anyone who would take the time to actually read the complaints, Overstock and Biovail are fighting illegal stock manipulation and front-running of doctored research reports.

Allow me to pose a hypothetical scenario. Suppose I, Joe Investor on Main Street USA, take a large short position in a company I believe is 'bad' for whatever reason. Then I get on the phone with my buddy at a financial research firm, feed him all the reasons I believe the company is bad, and order up a hatchet job. He then publishes this regurgitated data in what is touted as an "independent" research report. Meanwhile, I get on the phone with my reporter buddies and ask them to write articles in prominent Wall Street publications also bashing the company and quoting these research reports, which they understand I ordered and ghost-wrote. I then relentlessly repeat this process over the course of months or years.

If I possessed the resources and connections to run an operation like this, Mr. Jenkins, I would become filthy, stinking rich in no time. It would be virtually impossible for me not to make millions, as most of the speculative aspects of investing are avoided thanks to the cooperation of a few crooked research analysts and journalists. If you believe this is the way Wall Street is supposed to operate, then you apparently believe the game we call investing is rightly and justly rigged in favor of the rich, powerful, and well-connected. But you would be wrong, because this scenario is in fact illegal, and this scenario is precisely what is alleged by Overstock and Biovail.

And just so that you understand that this is not about fighting "short sellers", change the scenario to me taking a long position in a company I think is 'good' and then ordering up and ghost authoring favorable "independent" research reports and disseminating them across the financial community. Just as illegal, just as immoral, and no short selling involved.

Now if you believe that the Biovail and Overstock lawsuits are without merit, then you would serve the investing community well if you would simply write an article that educated the public on the actual content of the complaints (rather than mischaracterizing them as an attack on short sellers) and offered a thoughtful explanation of why you believe these cases are without merit.

And one more thing - many believe that these hedge funds engaged in illegal front-running are able to enhance the effectiveness of their scheme via ILLEGAL short selling resulting in excessive FTDs(not to be confused with LEGAL short selling which no one is complaiing about). So to complement the doctored research reports, they engineer a downward price trend in targeted stocks by overwhelming the market with selling pressure via naked shorting. I'm sure you can imagine that these two attacks, widely disseminating negative information across the market and then subtly manipulating the stock price downward, when carefully combined can be very effective in sending a stock spiraling downward. But again, the investing community would welcome you writing an article that carefully explained the mechanics of naked shorting and then thoughtfully and accurately debunked this scenario. But be warned - recently obtained data on OSTK and NFI have all but proven that this sort of manipulation is in fact occuring.

Respectfully,
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By robelita on 4/5/2006 10:29 AM
I propose US penal code allow for castration-economic and physical-for those found guilty of violating securities law. Nothing sends a message better than a few miscreants with their testes in a glass jar, alongside their dentures. The SEC needs to make an example of Grasso-go after the big fish and the minnows will stop schooling with them. A suit against the DTC will yield more than ample evidence during discovery. Both the DTC and the Federal Reserve are PRIVATE enterprises which bear a public facade and need to be abolished. Both have been instrumental in transferring wealth from average Americans to the super-elite. I'd like to see Grasso and Greenspan tried in open court. Look for the common denominator-it will ALWAYS point you in the right direction.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By mhatmccane on 4/5/2006 11:05 AM
Great letters from Patchie and StevieG - doubtful they'll be acknowledged.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By mhatmccane on 4/5/2006 11:11 AM
Did the WSJ mention the SEC going after naked short sellers in the Sedona case ? Did the WSJ ever mention that the Judge had ruled in favor of Overstock in their suit against Gradient and allowed it to proceed ?
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By Sean on 4/5/2006 11:26 AM
The truth be told I think as long as "Short selling " is allowed there will always be those that will try to manipulate the system and use whatever mediums are availabe to direct the market in a negative direction. Betting on a company's demise is ay you would say it Bob.."BAD". Now has anyone noticed that the companies assisting in these shorting and Naked shorting activites stocks are doing quite well. Look at Goldman Sachs above $160.00 today a 52 week high I might add Nite is also doing wel,l so is Ameritrade, Schwab and others I have not mentioned. Yet Biovail , NFI and Overstock continue their freefall. Any companies that dare to challege the system is punished.Things that make you say hhhhhhmmmmmnnnnnn!!!
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By et on 4/5/2006 11:55 AM
Sent a reply to Jenkins that he should educate himself on the difference between legal and naked short sales before he attempts to write on the subject. Suggested he come to this site to begin the education process.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By Helen on 4/5/2006 11:58 AM
Wrote this email to Jenkins.

You would think that as a journalist you could read. The issue discussed by you was on short sellers--the jest of the Dateline piece and the Biovail and Overstock lawsuit is about NAKED short sellers. Big difference. Geez, surely you can tell the difference. How about an article now on naked short sellers? You could start learning the differences at www.ncans.net.

HIS RESPONSE:
yes, it's unfortunate that the wsj is reduced to hiring sightless journalists. my dog tells me, however, that neither the biovail nor overstock lawsuits mention naked shortselling. The dog also tells me we wrote that o'quinn's appearance on dateline did indeed focus on "abusive" (ie illegal) short selling. thanks for your note. holman (as dictated to dog)
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By golfwalt14 on 4/5/2006 1:03 PM
My short (no pun) and sweet email:

Mr. Jenkins:

I don't believe what I just read.

You and the WSJ are AGAIN incorrectly characterizing the Overstock and Biovail cases in order to make them seem like they are about short selling.

How many times do you have to hit over the head with the facts: those cases aren't about short selling.

They are about illegal market manipulation that includes channeling a particular view of a company through both independent media as well as captive media billing itself as independent. Those cases are about controlling the content of the information and timing of its release, and whether it was done illegally.

Those cases are not about short selling at all and frankly, I'm beginning to wonder why you keep saying they are.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By hoagx on 4/5/2006 1:13 PM
Here a message I have been posting on YHOO. My messages have been deleted. Is YAHOO owned by hedge funds? here the mesage.
SEC Files Suit on Hedge Funds
by: walleye1mi
Long-Term Sentiment: Strong Buy 04/05/06 05:00 pm
Msg: 824923 of 824928

here the link
http://www.thesanitycheck.com/Home/tabid/36/Default.aspx
CHECK NEWS

Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By bobo on 4/5/2006 1:17 PM
hoagx: try going to tinyurl.com and creating a smaller url for www.thesanitycheck.com and posting that. It may well be that it is the url that is getting you deleted.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By Niel Storts on 4/5/2006 1:28 PM
From my little missive to holman......... 'As a journalist you trade off of your reputation. Unfortunate the no one can sell short yours. Reading your wordsmithing is proof that you are overvalued.'...............
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By anon on 4/5/2006 2:49 PM
I've been following this story as a shareholder of another target company. Here's how I think the game is being worked:

At the core are the main players, who decide on targets that they are going to run up and dump, or 'short and distort'. No difference to them, but downward stock price motion is easier to engineer and pays off faster. Their tools include actual research they do, paying insiders for dirt (or they just get it from former employees in exchange for a nice dinner and a sympathetic ear), substantial legal short sales, "strategic" Failed-To-Deliver sales (AKA naked short selling -- although most likely marked as long sales when entered as orders), and large options trades like reverse conversions. In the ring to execute the game are a couple of 'independent research' outfits, a few 'sympathetic' reporters, a class action law firm or two, some mid-level SEC staffers willing to listen and ask questions with authority of the Agency, and "flexible" prime brokers that can add their market-maker proprietary trading desks to the momentum when it makes sense to them. It's Jesse Livermore updated for the electronic age.

When the main players have set up a target, they help the research guy draft a report to distribute to the second circle of players. Those players pay $25K to $50K per year for some reasonably written biased reports that provide cover for their coordinated trading. They can overwhelm the general market's buying or selling with their levered capital in any but the largest cap active stocks. The hundred or two hundred subscribers don't even have to talk to each other -- they just have to act at the same time when they receive the report.

The next circle is the smaller hedgies and individuals, who pay the reporters $2K a year for special subscription news services that often quote the research and/or (anonymously) the original main guys themselves with some snappy sound bytes that are, more often than not, really scary sounding. This last circle has learned over time that they can jump quickly and make some fast money following the "news". These players jumping in let the second circle get out with a profit. They take their profit here because they don't know whether the main players have decided to use the full set of tools at their disposal; only the original crew knows what they will do with any given situation.

The final act is for the reporters to distribute the story to the general public together with as much headline-value "news" about the target as possible, which helps the $2K per year subscribers get out with their day-trade profits, and generates enough volume and mom-and-pop selling for the main players to get out of their original position at maximum profits. If the original short position is really large, or if the play so far doesn't give the desired profit, the next slavo is fired. Class action lawyers file lawsuits against the company. The SEC staffers initiate informal inquiries, possibly based on the 'dirt' that came from insiders or former employees. The main players make sure the reporters are kept up to date on these developments so they can 'break the story' of the informal inquiries, the lawsuits, any old licensing issuers, lies on executive resumes, or whatever else it might take to create an atmosphere of fear and sense in the investing public that there is a lot of bad stuff going on at the target company. Reporters payoff is simple -- they get to break stories and sell a premium service, allowing them to easily rise in their profession and pay, without even having to work very hard at it. Rinse and repeat as needed.

It's very much analogous to Milken's setup. He, his brother and a small handful of others committed to invest in each new deal less reallowance and concessions, plus privately issued deep discount warrants, even before the highly confident letter was issued. Next came the circle with the likes of Executive Life and Beverly Hills Savings, who got in on the offer level, possibly with discounts as well. Next the resale onward to smaller institutions and those larger institutions that didn't 'play ball' on every deal. Finally the public.

The SEC subpoenas were issued knowing all the sources and the topics, with specific names of the counterparties talking to the reporters (five of them), and specific topics (five stocks). The SEC enforcement staff is simply filling in the time line in the web so they can present the whole repeated pattern of criminal manipulation to the prosecutors. There is *nothing* in this that threatens freedom of the press, unless you think the press should be free to commit felonies at will. They are not asking for *all* notes, or *all* communication, just the specific ones that they already know exist, in order to establish the pattern and timing of the criminal activity. The civil lawsuits are just keeping the SEC convinced it needs to do its job.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By gregcable2002 on 4/5/2006 3:01 PM
It's apparent that these wall street lapdogs print what thier told to print.So much for a free press.Objectivity is out the window.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By Wicked World on 4/5/2006 3:40 PM
anon,

Excellent overview. I'm behind you 100% come hell or high water! Stay strong.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By mhelburn on 4/5/2006 5:39 PM
I'm reading "Den of Thieve's" They actually had a very sophicated greenmail pump thing and insider info along with increased volume because of the size of the firms abilities to take large positions. Because it was actual insider trading, the secrecy level was higher and the pigs actually were proud of making money illegally. What a bunch of pussy crooks.

Now it is the same mob tactics, but instead of companies being forced to take out loans to ward of hostile takeovers where the companies who got blackmailed and overextended, today they are bullied into the ground with naked shorting, the WSJ writing bad press. That part.. the malice is very similar.

The difference is the lack of secrecy. Instead it is published. There are more layers with bagholders and smaller bagholders.. And the attack never ends. The shorts hold on forever... They are like a really severe case of amoebic dysentary.

Response from Jenkins By StevieG on 4/5/2006 7:50 PM
Posted my email to Holman Jenkins above (6th comment), and he graciously responded, although he did seize the opportunity ot subtly dismiss anyone who is concerned about naked shorting as a crackpot:

//Neither overstock or biovail alleged naked short selling in their
lawsuits, and both lawsuits have been amply covered in our paper and
others. My purpose was to let readers know what academic study has to
say about short selling (the legal kind).

Maybe one of these days I'll write about naked short selling, but I'm
not sure I have anything new to say about it. Every time I look into it,
it strikes me that the phenonemon is less interesting than the
psychology of the people who obsess about it. Anyhow, I agree that
anyone who touts a stock as a buy or sell (including journalists) is
implicitly in the self-fulfilling prophecy business. But to call that
"manipulation" is to admit defeat on the whole purpose of the markets:
to sort out good and bad information and put the right price on shares.
Thanks for your note. holman//

To which I responded, being careful not to further mention naked shorting and thereby reveal myself as a crackpot:

//Thanks for your reply. But you failed to address my key point. Your article clearly mischaracterizes Overstock's fight as one against "short selling": "CEO Patrick Byrne and billionaire anti-tobacco lawyer John O'Quinn, who was given airtime on NBC last year to claim that short selling abuse is rampant and costing American investors billions of dollars in stock value... Not surprisingly, we put ourselves on the side of the shorts (and print media) too... These swirling controversies have brought fame to a study by Yale's Owen Lamont. He looked at 266 companies that waged legal and political campaigns against short sellers..."

Again, the fight is NOT against short selling. Overstock is not waging a campaign against short sellers, they are waging a campaign against criminal stock manipulators who happen to use short selling as a vehicle in their alleged illegal schemes. This is not a subtle point or a matter of semantics, it is absolutely fundamental to a proper understanding of the current oft-referenced "short selling controversy", and your mischaracterization merely serves to confuse the issue. Byrne clearly states that he has nothing against legitimate shorts, and has shorted companies himself. He, you, and I all agree that shorting serves an important role in the market to put the right price on shares.

However your insightful comment on financial journalists being in the "self-fulfilling prophecy business" just underscores the importance of journalists maintaining their independence, and at least disclosing whether the sources of their information might have a stake in the securities discussed.

The true "value" of a stock is a slippery thing, and you know as well as I that perception rules the markets. When prominent players in the markets are accused of illegally conspiring to bend the market perception in some way to their personal benefit, this is a betrayal of the public trust and must be taken very seriously. Journalists must be held to a standard where their opinions are their own and have been diligently and independently researched. Otherwise, savvy and corrupt market players can falsely engineer the impression that there is a concensus of criticism across the market regarding a particular security, when in fact that seeming "chorus" of criticism can be traced to a single source with a clear agenda and bias. This artificially engineered perception has nothing to do with putting the "right" price on shares, and everything to do with pricing shares where it benefits those who engineered the conspiracy. In the case of OSTK, the question is whether this conspiracy existed, and whether it crossed the line into criminal behavior. For the sake of the integrity of the markets, if the alleged activities did take place, then they damn well better be illegal.

So again, it would be appreciated if you would not further mischaracterize the Overstock and Biovail actions as “legal and political campaigns against short sellers”. Further debate on the actual cases would be welcome, as I respectfully disagree with your assessment that the merits of the cases have been amply covered in your publication. Instead I seem to find ample inaccurate claims that Patrick Byrne doesn’t like short sellers and is angry that his share price has declined.//

I don't suspect I'll hear back.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By bobo on 4/5/2006 8:00 PM
mhelburn: The times change, but the tactics, and even some of the names, don't. When you look at the penny stock scams, the same bad guys have been ripping off investors for 30 years. Same here. Bad guys on Wall Street tend to continue to stay on Wall Street - where else can you make a living like that doing virtually nothing but being a parasite?

Stevie: Never try to teach a pig to sing. It doesn't work, and annoys the pig.

Word.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By SteveM on 4/6/2006 9:03 AM
[sorry for this repost. I posted under the wrong thread before!]

Stupid me. I assumed that there wasn't any direct financial interest by William C. (Christopher) Cox in the NY financial press. Boy was I wrong. He is the NY financial press!

http://www.shareholder.com/dowjones/governance/directors.cfm
DJ Directors: Christopher Bacnroft, Leslie Hill, Elizabeth Steele

http://www.secinfo.com/dsVQy.4f8Fg.htm
Mr. Bancroft, Mr. Cox, and Ms. Steele are first cousins. Ms. Hill is Mr.
Cox's niece and the first cousin, once removed, of Mr. Bancroft and Ms. Steele.

As of January 18, 2001, Mr. Cox, Mr. Bancroft, Ms. Steele and Ms. Hill,
certain of their relatives, and certain trusts and charitable organizations
established by them, including trusts for which Mr. Hammer serves as trustee,
owned beneficially a total of 17,112,503 shares (26.0%) of the outstanding
Common Stock and 16,339,866 shares (77.7%) of the outstanding Class B Common
Stock. Such shares account for approximately 65.4% of the votes represented by
the outstanding Common Stock and Class B Common Stock. Mr. Cox, Mr. Bancroft,
Ms. Steele and Ms. Hill, the trusts as to which they or certain of their
relatives are trustees or have beneficial or reversionary interests, and the
trustees of such trusts (including Mr. Hammer), may be considered in control of
the Company and therefore its "parent."

Dow Jones owns WSJ, Barron's, SmartMoney, CBS MarketWatch, Far East Journal. Dow Jones News Service (which is picked up by most other news organizations), many city newspapers, part of CNBC, Factiva, and others.

Unless I am mistaken.
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By curioser & curioser on 4/6/2006 11:10 AM
i also saw wsj tall story 4/5/06. what a piece of spin.
but, about last reply-william c.cox. i can't assume that cox is same as sec commissioner christopher cox...unles someone can verify otherwise.
it's important that we get our facts correct. incorrect innuendo should be kept with the bad boyz.
but if wlm c. cox of wsj ownership is same as sec chris cox...WOW!
Is there any independent imparitialty out there or is every influential is bed with every other big deal
Re: WSJ Issues Forth One Millionth Defense of Short Sellers Article By SteveM on 4/7/2006 7:01 AM
"Unless I am mistaken."

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