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Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard

Location: Blogs Bob O'Brien's Sanity Check Blog    
Posted by:   bobo 5/11/2007 5:35 AM

If you have a chance, watch this clip. It's fairly lengthy, but worth the time. In it, Patrick Byrne describes the problem in the system, and gets to sit too close for comfort to a smarmy hedge fund apologist from Yale (why is it that all the hedge fund and short seller apologists are so, well, seedy in demeanor, usually smug and all knowing and deliberately incapable of making simple distinctions?).

Amusing stuff, as we get to hear the pap that passes for logic from the pro-Wall Street camp (all's well, everything is great, this is the new capitalism - the exact phrases Greenspan used to describe the S&L's that blew up within two years of his regrettable letter describing them as the future of banking and capitalism) and Byrne's rebuttals.

-------

In a yawn moment, a number of the usual suspects are trying to make much noise about OSTK having received a subpoena last year - that would be the one Byrne discussed openly when he received it.

The irony is that some of these clowns are the same ones that themselves received subpoenas. Of course, when Cramer got one, and then sold a slug of stock in TSCM before he announced to the public he was a target, they were silent. Apparently their finely ground lens has extraordinarily narrow and selective focus.

I'll leave you all with this tidbit from a typical article that attempts to cobble together a scandal out of, well, nothing:

"A former enforcement chief echoed this sentiment, adding, "If [the SEC] is looking at you, there [are] bigger fish to fry."

Uh huh. But apparently that sentiment is absent when the SEC is looking at you, if you are a journalist? Why is that?

You can fill in the remaining blanks....
Copyright ©2007 Bob O'Brien
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Comments (11)
Re: Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard By We Create the News We Need and Ignore the Truth on 5/11/2007 12:58 PM
All of these co-opted slimey media types have seen this statement from Patrick and have pretended it does not exist while they continue to bash with distortions. This statement would create the basis for a great headliner story but somehow it can't be told. Why is that?

Patrick's words:

"Here is the punch-line: as a matter of law I must tread carefully here, but I can say that the heart of the investigation is not, I would suggest, Overstock-centric, but rather, concerns itself with a strange set of relationships among ….. Well, let me just say that the irony here is just delicious.

In a strange occurrence that would tend to confirm the existence of a karmic balance in the universe, not long ago I was contacted by a source located at the core of the relationships alluded to above. That source paints a startlingly clear picture of how this “system” really works, backed up by approximately one-thousand emails and other documents provided to confirm every word. Given the apparent locus of the SEC’s interest, you can expect me to deal with this gold mine of evidence as any concerned citizen would.

Your humble servant,

Patrick "
Re: Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard By mhatmccane on 5/11/2007 12:04 PM
From David Patch (via NFI mb at InvestorVillage):

Today we are hearing by this same Commission whose motives have been under question that hedge funds may not be as safe for these public capital markets and our economy as originally presented. The SEC present Chairman recently stating, "We have made it a priority to investigate insider trading in the hedge fund space because of economic and circumstantial evidence that it is occurring."



Cox was later trumped by his Director of Enforcement who boldly stated "We are seeing deliberate, calculated misconduct by people who otherwise make a substantial livelihood from the very markets they're abusing," Linda Thomsen, enforcement chief at the Securities and Exchange Commission (SEC), said last week.”The behavior is not only illegal, it's repellent, and we will be relentless in pursuing it."
Re: Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard By n-tres-ted on 5/11/2007 5:07 PM
I've read the comments above by PB and by Cox/Thomsen, but I see not a ripple in the waters covering all the illicit activities.
Re: Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard By Lenofus on 5/11/2007 10:33 PM
This country owes Patrick Bryne the "Medal of Freedom". He'll never get it, as you know as well as I, this buck goes right to the top. But to see him debate, and tell the audience what he told me a long time ago, "I'm the most hated man on Wall St.", is so discouraging. If he's the most hated, who is the most loved? And isn't that a good reason to turn the whole mess inside out?
Re: Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard By Gobi on 5/11/2007 10:34 PM
Hi. What is going on!

I watched the vid and that guy says that hedge funds don't pose any systematic risk because he looks at covariance or correlation or something. He doesn't make sense because one would expect the counter party on most hedge fund trades to be another institutional investor or hedge fund. I wonder if he understands where the hedge funds borrow their money when they do the leverage. I thought they borrowed from the big brokers who borrowed from the banks and bond holders. He is a economist at Yale? That is no good.

Sincerely

Gobi
Re: Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard By Ted on 5/11/2007 10:35 PM
Someone call up Martha and see if she is available for another stint in the can so the rest of us can brush this under the rug and pretend it doesn't exist and that it isn't or hasn't been patently clear to everyone with more than one tooth.

I remember years ago when people talked about insider trading they would always say it's almost impossible now because the SEC tracks all the data on super computers with sophisticated software. I didn't realize that those computers were Commodore 64's with tape decks for external drives, or that the sophisticated software was taken from page 5 of a computer magazine where you type in the code yourself and then type "RUN."

After a while this stops being funny.

Ted Dansen - not the actor it's spelled different.
Re: Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard By mhelburn on 5/12/2007 7:33 AM
I had only heard the first half and these links include both:

http://www.cultureproject.org/index.php?option=com_content&task=view&id=49

http://cultureproject.org/video2/archivepages/hedge2.html

The presentation.. Mathematical models versus reality. All the "balance" that is supposed to be there because of the diversification doesn't address the reality of the fails being legitimatized in the system. While these are not delivered, it reduces the value of those issues and the people who hold those issues have been deprived of the fair market value of their holdings while those who are short are benefitting from the increased value of their position. Legitimate shorting can help keep the market fair as the investors are determining the value either by lending or not lending. Fails suppress the price of stock and secondary offerings are not issued at FMV. Other markets that don't use shorting are balanced by the competition for returns from all the returns. When something gets overpriced, people sell and buy something that is a better value. The idea that shorting is necessary to give valuable market information is a erroneous. Shorting is not necessary for efficiency. It is highly profitable for WS because it makes it possible for brokers to capitalize investors's holdings and earn money on it. Without shorting, the fraud of non-delivery would be identical. There would still be those who sold what they don't own.... fraud. The exemptions to provide liquidity, again selling what is not owned... fraud on the market and deprives the owner of a higher price because the market maker is capping the price and is able to determine the price.

What does "assiduously enforced" mean? "costs internalized"... does that mean "wrist slap if we get caught?"

The losses to the ordinary investor and the costs to recover anything when these abuses occur is enormous. This fraud is hard to uncover when the regulator has denied and buried the problem for years. The recognition of the problem is the first step, but the foot-dragging by the regulator in correcting the fraud epitomizes the corruption that is in place. It doesn't matter whether the regulator is captured or not if the regulator behaves as a captured regulator. Hand-wringing and buckling under to participant pressure is as wrong as if the regulators are on the payroll of those they regulate. Whether incompetence, corruption, or fear of a market meltdown is the driver for the SEC, the result is the same. Fraud is allowed to persist.

The recent ramblings from Commission members give insight into how complex the market has become with global implications. It scares me that the same people who can't fix something that has been illegal for 70+ years and legitimatized it because of "volatility" claim responsibility for investor protection and capital formation.. hahahaha
Re: Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard By InTheKnow on 5/12/2007 7:35 AM
From the Overstock Web site:

hannibal
Report

Joined: 24 Sep 2004
Posts: 54

Posted: Sat May 12, 2007 1:03 am Post subject: Gotterdammerung of the American mainstream media

--------------------------------------------------------------------------------

Ha ha - this is a great one. An all-time classic from Joe Nocera, New York Times.

Below you will find an email Joe Nocera sent me asking for my "reaction" to some odd claims he wanted to include in his weekly column. Alas, he sent the email Friday afternoon at 12:11 PM his time (note the "10:11 AM" time stamp of our email system, which is in Salt Lake City, that is to say, Rocky Mountain Time) and, as I was in Texas this afternoon in a meeting, I missed the window of a few hours that I theoretically had been offered to respond before Joe's deadline for his weekly column. Congratulations are due Joe, who has crossed a line never previously crossed (not even by Carol!) by those engaged in their desperate efforts to keep the wig in place.

=======================================================
-----Original Message-----
From: Joe Nocera [mailto:XXXXX]
Sent: Friday, May 11, 2007 10:11 AM
To: Patrick Byrne
Subject: david rocker

patrick-- David Rocker made a speech a couple of weeks ago in which he said, among other things, that your lawsuit was nothing mroe (sic) than an effort to silence critics. He also said that Gradient did its first report about Overstock a year before Rocker Partners even became a client. And he said that Mr. Anafantis (sp?) has been discredited with the SEC's "no action" letter. Your reaction?

--
Joe Nocera
XXXX
YYYY
nocera@nytimes.com
==================================================

Had Joe actually abided by the principles of Ethics in Journalism 101, I would pointed out the numerous flaws in his attempt to whitewash the criminal activity of his friend Rocker with a “Free speech in America is very important” spin. Remember, from the start Rocker’s lawyers have tried to spin his illegal activity as being about free speech, and this is how the argument has been met by the adults who have examined it:

1) On 8 counts versus 0, the trial judge in Marin Country sided with us and against Rocker’s claim that this suit was about free speech. In fact, the judge said in the courtroom that after his initial review of the evidence there was a “high likelihood” that we would win the suit. Rocker appealed.

2) The California Attorney General appeared out of nowhere and filed an amicus with the appellate court supporting our side and against Rocker’s attempt to spin this as about free speech.

3) The appellate court recently heard Rocker’s arguments. This Law.com article gives a good sense of how the appellate court responded to the hysterical attempts by Rocker’s lawyers to spin his illegal conduct as being about free speech. www.law.com/jsp/article.jsp?id=1176282246984

The Law.com article captures one judge’s reaction nicely: “Justice Ignazio Ruvolo indicated there was evidence even ‘at this stage of the proceedings’ that could substantiate Overstock.com's claims.” Somehow Joe missed that.

I’d also have pointed out that Rocker does not seem to think “Free speech in America is very important” when someone criticizes Rocker: Rocker famously sued some message board posters a few years back for daring to criticize him and his unethical behavior (incidentally, that case got laughed out of town). Free speech doesn’t seem to be that important to Rocker, Joe.

In the face of these facts, Joe blithely asserts that “The facts are not on Mr. Byrne’s side” without mentioning that the trial court, the California attorney general, and the appellate judge have indicated exactly the opposite, even at this extremely early stage.

Joe notes without question that, “Mr. Rocker wasn’t even a client of Gradient when it began writing its tough-minded reports on Overstock,” neglecting to mention that ex-employees of Gradient assert that the firm had a relationship with Rocker even before he formally became a client.

Joe writes about his friend Rocker “But you know how lawsuits are: a year and a half later, the thing has barely gotten started” without mentioning that we have been most eager to move forward, but that his friend Rocker has stalled and delayed at every opportunity, rejecting the appellate court’s offer to rule without delay for a hearing: there was even one article where an attorney for the miscreants promised to appeal the appellate court ruling. That is, Joe bemoans the fact that “the thing has barely gotten started” while conveniently neglecting to mention that it is his friend Rocker who is doing everything he
can to keep it from getting started.

And so on and so forth.

Is anyone else noticing that something seems to be going on this week? First, after a year of criticizing me for my decision to issue a press release celebrating my receipt of a subpoena from the SEC, the shills are now trying to make a case that I should have sent out a second press release when I received another addressed to me as a person, though it was a small fraction as long as the first, covered sub-issues of the first, as well as issues related to a broader investigation that is not about me or Overstock at all. As though there is a world of difference between a subpoena addressed to our corporate lawyer asking for our CEO’s materials, and one addressed to me at our corporate address: I hate to disappoint, but that distinction is such a fine one it did not occur to me it was worthy of a second press release. The funny part is how it still has not dawnede on the miscreants that a fair bit of the material being requested by the SEC concerns them, not me or Overstock.

What would have made them so angry this week? Perhaps they are mad that last Sunday, at an event hosted by The Economist (a publication with infinitely more credibility than Joe, Roddy, Herb, Gary etc. could ever aspire to), the bad guys lost control of the narrative?

http://www.cultureproject.org/index.php?option=com_content&task=view&id=49

http://cultureproject.org/video2/archivepages/hedge2.html


I think these fellows better hope that the scandal whose lid they are trying so desperately to secure never blows off, because if it does, in the aftermath not only with their journalism come under examination, but more importantly, the publications which have blithely published it will be seen to have been part of the cover-up. Which is entirely right and approrpiate. And then that will be the end of it.

Can anyone doubt at this point that we are witnessing the Gotterdammerung of the American mainstream media?

Patrick
[/i]

Re: Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard By Sean on 5/12/2007 7:34 AM
I am the only one noticing a trend here??

Ohio AG Applauds Efforts Of Federal Legislators To Scrutinize Policies Of Securities And Exchange Commission
Sat, 05/12/2007 - 08:26 — admin
Dann joins Utah AG Shurtleff in bi-partisan call for congressional oversight
May 10, 2007 -- COLUMBUS -- Preserving basic investor rights is at the core of Ohio Attorney General Marc Dann’s criticism of the Securities and Exchange Commission and its apparent recent shift away from protecting investors. In a letter, co-authored by Utah Attorney General Mark Shurtleff, the Attorneys General laud the U.S. House Committee on Financial Services for deciding to hold an oversight hearing in light of these criticisms and urge the Senate to do the same.

In the correspondence, Dann and Shurtleff write: “we are only five years removed from the scandals of Enron and Worldcom and yet many have forgotten the lessons those cases have taught.” Despite calls for sweeping improvements to investor protections through legislative reforms, the SEC has taken some alarming actions, including:

* SEC’s submission of a brief in the United States Supreme Court case Tellabs, Inc. v. Makor Issues & Rights Ltd advancing an “extremely narrow interpretation of the securities laws”
* SEC’s opposition to the pro-investor position taken by the Second Circuit Court of Appeals in the case of American Federation of State, County and Municipal Employees, Employees Pension Plan v. American International Group, Inc.
* Rather than scrutinizing investors’ claims of recent backdating scandals, SEC commissioners issued remarks minimizing this clearly fraudulent practice
* SEC’s consideration of rules that would allow companies to head off lawsuits by investors by changing its bylaws to mandate arbitration

Dann and Shurtleff also argue “private lawsuits are an important complement to the regulatory system,” reminding congressional leaders it was defrauded investors who fought and won to protect investors’ rights in recent corporate scandals.

The Attorneys General concluded by noting their willingness to work with the congressional committees to inform members of Congress of “the impact the SEC’s actions and inactions are having on the investors of our States.”

Source: Ohio Attorney General

http://www.allamericanpatriots.com:80/48723060_ohio_ohio_ag_applauds_efforts_federal_legislators_scrutinize_policies_securities_and_exchan
Re: Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard By bbhindyou on 5/13/2007 9:13 AM
To the people here who don't accept the givin answers because they don't fit the facts in front of them.
To the people here who find ways to make the creation of fake shares pay the targeted companys and their shareholders.
The little guys here who refuse to let the big guys win and take what they want.
To all the brave who stand up and say the emperor has no clothes.
I AM PROUD OF YOU.
Straight A's on your report card proud.
I would love to give you all a big hug and a cookie,since I can't consider yourself hugged.
Knowing you are there continuing on the fight every day makes it all worthwhile.
remember who will always bbhind you .
MOM
Re: Patrick Byrne Speaks Out About Hedge Funds and their Evil Ways, Media Collectively Applies Double Standard By clearthinker on 5/13/2007 2:58 PM
now all that's required is some meaningful action

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