The ever-ranting and invariably inaccurate 'lilGW has birthed yet another pearl for connoisseurs of true drivel and pap. The flawed reasoning and hyperbolic stupidity can be read here, and was sent to me by one of the few still reading Raging Bull, presumably out of boredom, or having lost a bet.
Apparently one of the 'lilGW tag team of sock puppets posted his article in its entirety, requiring that I waste about 45 seconds debunking it. So here it goes:
'lilGW cites a study published at the Social Science Research Network site, and claims that its purported "findings" (that delivery failures in IPOs aren't necessarily correlated to marked short sales) is some sort of revelation. He helpfully doesn't link the actual document, thus what it concludes is left to....'lilGW. To read the SEC-generated document one has to be an SSRN subscriber, which I'm not. But let's take it at face value, and assume that the study has more intellectual honesty and logical rigor than the SEC's pronouncements that "Reg SHO is working" or its investigation into the Gary Aguirre cover-up. How this relates to Patrick Byrne's press release memorializing his company's 500th day on the Reg SHO list is unknown, however he makes much that it might, or should, or must, sort of......er.......you know. Because.
Most notable among the badly-reasoned and poorly-crafted sentences is our hero's inability to recognize that when a share of stock isn't delivered, it doesn't really matter what you called it when you lied and represented a genuine, available share available for delivery - doesn't matter whether you lied and said it was a short sale with a genuinely borrowed share to be delivered, or lied and claimed it was a long sale with a share to be delivered. It's sort of immaterial what it was called when you lied, just as it is immaterial whether you claim that 80% of bank robberies aren't committed by "bank robbers." What matters is that no share was delivered. Or that a bank was robbed.
To borrow from the small one's prose, "Uncorrelated" means "they ain't got nothing to do with each other." Correct. How you lied when you lied is uncorrelated with whether the buyer received what he paid you for or not. In a delivery failure, he didn't. Your lying terminology is uncorrelated to anyone's confusion over whether their product was delivered (as you committed to doing when you performed the trade). Just as the number of sales transactions are uncorrelated with the number of shares issued and authorized by the company, and the price is uncorrelated to supply and demand of those limited genuine shares. Just as Congress' mandate to link payment and delivery is uncorrelated with how the market's larcenous participants prefer to work.
Astoundingly, he claims that investors aren't affected when the seller doesn't deliver what the investor paid for. That's all hand waving to 'lilGW. Tut tut, you don't actually have to get the car you just bought. As long as the car dealer tells you that you have a nice new car, it's the same as driving one. 'lilGW ignores that FTDs lack any of the rights and entitlements of genuine shares, rights and entitlements that create the value that the investor paid for in the first place. Details, details. Not one to waste one's time on that sort of thing, is our icon.
Apparently, getting the product one pays for is all part of the "highly technical" workings of the market that evade his powers of explanation and reasoning. See, you pay your money, but the seller refuses to deliver the shares, preferring to pocket your money and flip you the bird while he runs the price of the stock down, and that is really super-duper technical.
Every other industry it is called fraud. Simple fraud. I paid my money, and the scam artist fraudster never had the product to begin with, and cheated me out of my money by fraudulently representing for sale something that didn't exist in his possession - which of course he couldn't deliver, as he never had it to begin with.
But 'lilGW feels that is highly technical. Obviously far too technical for us to grasp. It couldn't be that simple. Who are you going to believe, 'lilGW, or your lying eyes?
See, you pay your hard dollars. But then the Frixxmagalorphmatron at the far end of the Gazangolator stutters, and Bathmospheric Ragalretrenuators lock into place, stabilizing the Salancrophic Hyperborotron Field....and you are out your money, and Wall Street and a bunch of hedge funds make record profits.
Very very technical.
Don't even try to understand it. Your brain will fry if you get close to the manual experts like 'lilGW consult for their wisdom, much less try to simplify it to, "I want to get what I paid for when the rules and law say I should." That's for wusses and cretins.
Because it isn't that simple. Interfenestrated Saliostracophyloms are dis-intermediating the Barcolimited Macrogeliospheres that limit the entire market mechanism's Kranderhoph-algorithms, and occasionally their Silancronism-centricity causes Greolaptic oligarchatrism, and that's really why you don't get what you paid for.
Simple ideas like bad, and good, and legal, and illegal, are silly. And so are we for expecting delivery. That's the message.
"lilGW celebrates that "SEC Economists" posted a study he claims is significant, and which he screechingly touts erroneously as a debunking of naked short selling critics. What it isn't is a debunking of anything. It doesn't do what he claims it does, just as he fails to deliver what he claims he does. Which is any semblance of coherence, or linear reasoning.
The contentions of the piece, that delivery failures are unrelated to the level of short selling in IPOs, ignores the obvious question - "How is the buyer, who fails to receive the shares they paid for, any better for this "non-short" related delivery failure than "short" delivery failure? Or how about the other obvious question: "What amount of delivery failure is erroneously marked short sales disguised as long sales, that then FTD? And more pressingly, how is whether they are called long or short or naked a meaningful distinction when the same result - a delivery failure where the buyer doesn't receive the shares he paid for- is the inevitable conclusion? Simply put, who cares? If I embezzle billions, but call it clerical errors, does that make the billions any less gone?"
I guess someone should read Cox the study, as he apparently agrees that the "anti-naked short crackpots" have a meaningful beef.
One does have to wonder whether 'lil-GW is paid to mangle logic with as much effort, if little dexterity, that he displays. I mean, why else would he ignore the SIA's own spreadsheet showing $82 billion of delivery and receipt failures just in NYSE member firms, as of the last day of Q4, 2006? Why ignore all the FOIA data, for years now? Why else would he ignore that the vast, vast majority of Reg SHO problem stocks aren't IPOs at all? Why would he trumpet as a triumph the failure to deliver shares in IPOs as a pervasive practice? Is he really such a dimwit that he doesn't understand that falsely offering shares for sale, taking investor money, and then failing to deliver the shares, is bad, regardless how the sale is marked - long or short?
I mean, how hard is that to grasp?
It's like he's slipped through some sort of logical wormhole into a time and place where all the rules of logic are suspended...likely also a world where his belief that anyone is reading his screeds is valid.
Sweetie.
Please.
Try this on one more time: The 1934 Act requires one to deliver the shares one sells, regardless of how they are marked, in the same period - three business days. When one doesn't do that, one is engaging in misbehavior. If one is doing so in order to manipulate or depress the price of the security one is doing it to, it doesn't matter what one calls that - genocide and murder can be called ethnic cleansing all one wants, but most still understand what they are dealing with. Not, apparently, our own bumbling 'lilGW. If one fails to deliver but denies one is doing so as part of a short sale, apparently that is good. War is peace. Got it.
It's passed from tragedy to farce. Obligatory, illogical ranting from paranoid delusional sock-puppeteers is now what passes for the industry's self-defense.
And we are all supposed to say, "hmm, I see, I paid for shares and didn't get them, but that's good....not bad....uh, you know, because some hack insists it is...."
Wow.
I guess he left Bloomberg, and academics, and scholars, and market pundits, and brokers, and securities attorneys, off his list of pro-naked short selling audience prospects. Too bad. They probably could have used a good chuckle.
What's next - an unofficial SEC-connected study showing that Gary Aguirre is irrational, or that Grassley and Specter were misguided when stating that the Commission is either incompetent or corrupt, and engaging in a cover-up? Maybe 'lilGW can set that one to music, a la "The Producers," and get a tent and take it on the road?
Yikes.