Here's the latest AP article, which should surprise no one - we have all seen this same article written a lot lately:
http://biz.yahoo.com/ap/060203/wall_main.html?.v=2
This, the latest in a series of “There Is No Short Selling Problem” articles, hits the Internet with a thud – we’ve seen any number of these pieces lately, from Gary Weiss, from Carol Remond, from Bill Mann, and now, from the Associate Press’ Ellen Simon.
These gems are relatively interchangeable – they invariably make little or distinction between legal short selling and criminal stock manipulation using illegal naked short selling, they take the position that there is no significant problem, and they ignore all data that contradicts that feel-good message.
It’s kind of amazing, really, how many of these articles say essentially the same thing:
1) There is no naked short selling problem – maybe a few trades that don’t get settled, but nothing much – certainly nothing abusive or done to drive stock prices done.
2) Short selling and illegal stock fraud are treated as pretty much the same thing – no distinctions are made.
3) Byrne/NCANS/the market reformists are all nutty as Christmas fruitcake – tilting at windmills, as there is no problem, which they, being kooks, refuse to acknowledge.
4) Companies shouldn’t worry about this, and neither should investors – in fact, if you see a stock that is heavily shorted (the legal variant) it is probably because the company sucks.
Now, it’s also pretty easy to debunk or refute these positions, using data which is easily and readily available. One of the most obvious is to observe that if there is no problem, why did the SEC grandfather all episodes of FTDs prior to a company showing up on the SHO list? The SEC says because they were concerned about large, open positions and the volatility that would ensue if they had to be bought it – as the rules dictate. So the SEC is saying there is a large problem – not we kooks. How big, we don’t know, because they won’t tell us. The data is secret. Shhhh.
But there is no problem, according to the articles.
The articles all also ignore Dr. Byrne and his Dad’s inability to get delivery of shares they purchased on the open market, for months at a time. Not one mentions that.
Isn’t that a little strange? This article commits many paragraphs to mocking the Sith Lord, and taking the stance that there is no problem, and yet it ignores the non-delivery of hundreds of thousands of shares to the CEO and Chairman, and further ignores all the FOIA data demonstrating conclusively that there are hundreds of millions of FTDs every day.
They are also uniform in their seeming inability to make a distinction between legal short selling, and the illegal stock fraud that is naked short selling.
One could say they strive to blur the distinction between the two. As if by calling them similar things, they become similar. It's a transparent rhetorical trick. They also invariably take the stance that the impact of illegal stock fraud is negligible, or even positive for the market. It is never explained how defrauding investors out of their money and not delivering the product they paid for is positive – rather, the latest kick is to point to all the other frauds that have occurred (from the long side) and to cite how the “shorts were right” in those cases. Hey, maybe they were, but again, we aren’t talking about shorts. We are talking about stock fraudsters who take money from buyers and don’t deliver the product – and who do so specifically to drive the price of thinly traded companies down, so that the fraudsters can profit from the decline.
We are also treated to epistles as to how Byrne should be running his company rather than complaining about illegal stock fraud occurring on a rampant basis in the markets. As if by running his company better, the illegal stock fraud that is allegedly impacting his company and their shareholders will somehow stop, or be curbed – not that there is any, of course, because they also all strive to state emphatically that there is no problem. But Byrne should be concentrating on the fundamentals, and further should stop whining – again, never any mention of the undelivered shares, or the FOIA data.
These are all so eerily similar, it's almost as though someone pulled the trigger on getting a bunch of crony writers to generate pieces that would declare that there is no problem.
That is odd. I'm sure that doesn't happen. Or rather, as we saw last week, it actually does happen with regularity, but not in this case. You know...because Wall Street and Wall Street writers are such an honest bunch.
The DTCC comes out with a press release indicating that there is no problem, filled with inaccuracies and half truths. Carol comes out with essentially the same invention. Gary Weiss stumbles through the flawed logic and tortured facts, Bill Mann chimes in to reassure us all that he has decided that there is no problem of note, and now this piece comes out, filled with all the hackneyed chestnuts heard from the rest of the apologist crowd.
Note that when the chairman and CEO can’t get their shares for months, there is nary a peep. When there is FOIA data showing hundreds of millions of FTDs, not a word.
But we are treated to a deluge of articles claiming that 1% of all trades in dollars NOT settling is good – even though that represents billions of FRAUD every day, wherein investors don’t receive products but are charged for them. And that avoid like the plague the simple observation that those FTDs are highly concentrated in just a handful of companies on the SHO list.
Like that is something to be proud of. Good work. Nicely done. Billions in a few companies.
But we can’t tell you how large the problem is – tut tut, no siree, only talk in vague statistical terms like percentage of trades in dollars (All trades? Just equities?) and aggregate FTDs (Aggregate of all clearing and reporting sources? Aggregate total FTDs?) – weasel terms with enough play in them to drive a statistical Mack truck through.
Of note in this gem is that Whitney Tilson is quoted as decrying that nobody knows anything about anything - sort of a Jeff Mathews approach - deny everything, demand proof, mock. Specifically of interest is that Whitney Tilson is closely linked to TheStreet.com - articles indexed on her web site Tilsonfunds.com are hosted on theStreet.com, so one could reasonably infer that the quotes about NSS are from The Street.com's little gang of merry men -- note how the AP piece is written as though there are multiple sources. There is a lot of intellectual dishonesty going on here - the DTCC's piece outright lying, this one torturing the truth as though it was a witch in old Salem, Weiss's wide-eyed silliness, Mann's ignorance is bliss piece. Wild stuff.
So the PR campaign is on. Repeat after me. There is no problem. Ignore any data that shows there is. Those raising a stink are nuts, or crooks. Don’t think it reasonable to simply settle the trades as the law requires, and show us the data. That is wrong and bad.
Freedom is Slavery. War is Peace.
And so on.