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Post by fastwalker on May 28, 2005 19:31:09 GMT -5
Ok, so where do we go now?... we continues to review the past for more information to make our case in the present. For example.... this letter was extracted from another case, dealing with market manipulation...
November 27, 2002
More than 20 years ago, in 1981 to be exact, a graduate student produced an important research paper comparing the returns on stock investment based on market size from 1926 through 1969. Much to everyone's surprise, he proved that large-cap stocks - the ones that everyone knows about, such as IBM and GE - significantly under performed smaller companies that most people have never heard of. He showed that small-cap stocks had risen at a compound rate of return of 12.1%, as compared to 9.8% for large-cap stocks.
The premium performance of small caps resulted in a huge difference in wealth accumulation in the long run. Portfolio theorists were fascinated by the findings and immediately began to seek explanations for the divergence in returns.
A few simple explanations seemed to account for most of the difference. The first explanation suggests that smaller companies can be more effective than larger ones in evading competition. Smaller companies can serve "niche" markets, where they may face less competition and consequently can charge higher prices. Higher prices then lead to higher earnings, and thus a higher stock price.
For obvious reasons, large companies are seldom found engrossing niche markets, although Microsoft might have been an exception for a time. The idea was that the "niche" strategy provides a sustainable competitive advantage that could explain why some small-cap stocks have outperformed larger companies over time. Of course, sometimes the "niche" market is also a new market, and among the factors forestalling competition is patent protection. Many fortunes have been made on investments in small-cap companies employing patent protection to develop niche markets.
The second reasonable explanation shows that smaller companies are often in emerging industries, and therefore have the possibility of generating huge earnings growth in the future.
The greatest opportunities for wealth creation arise from buying the stock of a small-cap company that has the potential to grow into the next Microsoft or Intel. For reasons of simple arithmetic, it is implausible that an investment in Microsoft or Intel today could compound as far as investments in companies like GeneMax, a company developing immunotherapy treatments, can if they attain their potential.
At $8 per share, GeneMax has a market cap of about $121 million. If its immunotherapy, which has effectively cured cancer in laboratory animals, works as well in people, it is easy to imagine that GeneMax could be worth $80 per share, or even $800 per share. I don't know what a cure for cancer would be worth. But it could be worth a lot. GeneMax could grow a hundred fold in value. Or maybe a thousand fold.
To attain a market cap equivalent to that of Microsoft, GeneMax would have to reach a share price of approximately $15,500 per share based on the current number of shares outstanding. The MicroSofts of the world cannot easily grow a hundred fold in value. At its recent price of $43.77 per share, Microsoft had a market cap of $234.76 billion.
While it is unlikely that the GeneMax stock price could appreciate by almost 2,000-fold, it is impossible that such an appreciation could happen again to Microsoft. To be more precise, for Microsoft to compound by 1,960 times, equivalent to the growth that GeneMax would require to become the size of Microsoft now, Microsoft's market cap would have to exceed the GDP of the United States by about 45 times over.
It does not take a divine genius to see that that is unlikely. Put simply, very-large-cap companies cannot grow much faster than the economy as a whole. They certainly cannot duplicate the growth rates that are possible for mini- and small-cap companies.
Given the strong track record of small-cap companies in the half century prior to 1981, it is hardly surprising that a number of new-money management firms were founded in the early '80s with the express purpose of investing in small-cap stocks. We know small-cap stocks dramatically outperformed large- cap stocks from 1926 to 1969, but over the last 15 years, from 1987 to 2002 - after the small-cap "anomaly" was discovered in 1981 - the returns have not met the expectations that the research supported. In fact, after the experience of the 1990s, most investors probably feel that large caps outperform small caps.
Almost everyone has had a personal experience of a small-cap holding that seemed promising but ended up plunging in price. From 1987 to 2002, the S&P 500 generated a compound annual rate of return of 12.1%, while the smallest capitalization stocks averaged only marginally better - 12.6%. The strong performance of the large-cap S&P relative to small-cap stocks is particularly noteworthy in that there are strong reasons to expect large-cap stocks to under perform ever more significantly.
For example, Ray Kurzweil, a computer scientist at MIT, has recently calculated that we will see a century of technological change in the next 25 years. Kurzweil believes that exponential growth of computational power - up by an astonishing 40 billion times in the past 40 years - has set the stage for ever-accelerating technological change. This exponential growth, which he calls "the law of accelerating returns," proved predictive of many of the technological advances at the end of the last century.
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Post by fastwalker on May 28, 2005 19:31:29 GMT -5
continued...
According to Kurzweil, "the rate of technological progress is speeding up, now doubling each decade." Kurzweil believes we will see 20,000 years of technological progress by the end of the 21st century. Rapid-fire technological change of the kind foreseen by Kurzweil turns the logic of 20th century investment strategy upside down. It makes investment in smaller companies with simpler business models, paradoxically more attractive than blue chips like Cisco Systems or conglomerates like Tyco or even General Electric.
No one has ever become wealthy buying shares in companies that were already successful. To make big money, you have to buy when companies look like dogs, and most people doubt that they will ever succeed. John Templeton based his fortune on buying shares of the hundred lowest-price companies he could find listed on stock markets before World War II. Even during the Great Depression, profitable stocks did not trade below earnings.
That said, it is important to understand why the over-performance of small-cap stocks has virtually vanished at a time when technological change should have given an added impetus to smaller companies. This is a complicated issue. Part of the explanation for the greater performance of large-cap stocks is the buoyancy of the market itself during the decades of the 1980s and 1990s.
During the 1980s, for example, stocks as a group returned 17.57%. During the 1990s, returns were even higher - 18.17%. Only during the 1950s did market returns exceed those in the last two decades of the 20th century. Obviously, when markets are compounding at a high rate, small-cap companies soon become large-cap companies, and thus escape from the category. Microsoft was a small-cap company when it began trading on March 13, 1986. But after the rapid growth of its business and eight stock splits, it migrated into the "large-cap" category.
So paradoxically, part of the reason that small-cap investment appeared to be less successful was precisely because it was so successful. But there is also a darker subtext to the issue.
It involves market manipulation made possible by well-meaning institutional responses to the staggering increase in trading volume on U.S. stock exchanges. Prior to 1829, total stock trading volume in America never reached even 50,000 shares a day. By 1886, daily volume first ballooned to more than one million shares. Yet even in the heady days of the 1920s, stock ownership remained relatively narrowly based and volume relatively small. Indeed, the last time daily trading volume fell below 1 million shares was in the Eisenhower administration, on Oct. 10, 1953. By 1972, daily trading volume exceeded 15 million shares per day.
By the end of last year, volume had exploded to more than 2.5 billion shares per day, more than a 10-fold increase from the early 1990s and thousands of times greater than in the early '50s. This stupendous explosion of trading volume created a logistical challenge of the first magnitude, namely how to transfer stock certificates to reflect the changes in ownership from sales and purchases by customers. In the infancy of stock trading, when volume was light, it was relatively simple to effect delivery of shares.
Messengers scurried around and delivered paper certificates by hand from one investment bank to another. In 1924, the Stock Clearing Corporation was established to facilitate trading. But with trading volume escalating into the billions of shares daily, securities dealers and stock market officials sought a better way to clear their trades.
The result was electronic clearing organized through the Depository Trust Company. The Depository Trust Company is a trust company organized under the banking laws of New York State. It is owned by banks and broker-dealers. It is a custodian of securities that effects "book-entry delivery" in which "transfers of securities within the DTC system are processed by debits and credits to Participants' accounts."
In reviewing a lot of material about the DTC, which I must say is obscure and boring in the extreme, I got the distinct impression that its organizers were more concerned with effecting payment for securities than with the niceties of securities delivery. The DTC says, "DTC does not itself guarantee any funds or securities transfers which its Participants are obligated to make."
The DTC is organized on the assumption that broker-dealers, market-makers and clearing agents are all operating in goodwill and need looking at mainly to ascertain that their wire transfers in payment for securities don't go astray.
Where this electronic settlement becomes an issue is when it comes to the shares of mini and small-cap companies traded on the Pink Sheets, the OTC and the Nasdaq. The rules and conventions that have arisen around electronic settlement effectively permit unscrupulous operators among the many thousands of broker-dealers to counterfeit large quantities of stock, which they can sell for payment.
Given the magnitude of the logistics problem in clearing trades, it is understandable that this could happen. It is much easier to monitor the delivery of payment than it is to authenticate the delivery of shares, especially in an electronic clearing system where every broker-dealer has the de facto capability of counterfeiting securities by simply finding a buyer for them.
Say you want to buy a million shares each of GeneMax and another small cap company. Market maker Doaks has shares of neither. But, either on behalf of some client or on his own account, he sells them to you, crediting your broker's account with 1 million shares of GeneMax and 1 million shares of the other. Your broker now has an electronic credit for those shares, against which he wires funds or nets funds against his credit at DTC to Doaks' Participant account there.
Thus are counterfeit shares created and put into circulation. Doaks or his client has pocketed a lot of money for counterfeiting shares he did not have. And your broker has an electronic credit for those shares at DTC. When another of his clients dies, the executor of his estate orders the liquidation of his account, including 500,000 shares of GeneMax. The credit for those shares originally concocted by Doaks now transfers to the account or accounts of the participating broker-dealers whose clients bought the GeneMax shares from the estate. And so on.
Ostensibly, broker-dealers have the capacity to sell securities they don't own and don't have to borrow - as you would if you were selling short - to facilitate market-making. In theory, the broker-dealers can sell quantities of stock they don't own in order to make an orderly market and prevent the price from spiking on big buy orders. In theory, abuses are limited by the requirement for the market-maker to post capital and limit "naked short sales" of any one issue to 10% of the capital account.
That is the theory. The reality is a bit more ugly. No one is really monitoring the aggregate impact of the counterfeit sales on any given issue. It is simple to confirm that payment has been rendered for a sale. When the cash credit is transferred between participants within DTC or the Fed wire hits, the issue is resolved. But in an electronic, book-entry deposit system, every credit for a share purchased is indistinguishable from an actual share issued by the company treasury, even if it was counterfeited. No one bothers to reconcile the share credits in the DTC system with the authorized, freely trading shares of the company.
Consequently, it is quite common for the effective float of small-cap companies to be inflated significantly by electronic counterfeiting. In some cases, the total effective float has been multiplied many times over. Hence the sometimes weak performance of mini- and small-cap stocks. Their stock prices plunge because the supply of stock is artificially multiplied by naked short selling, better understood as electronic counterfeiting. Unscrupulous broker-dealers and market makers can effectively drive the prices of stocks into oblivion by selling vast quantities of stock not issued by the company.
Having come to understand this, I see an urgent need to curtail this electronic counterfeiting of the shares of small-cap companies. It not only fraudulently deprives investors in the affected companies of wealth but it is also destructive to the economy. And the news media seldom deign to report on it. Other than a few minor squibs on the news pages of The Wall Street Journal, there has been virtually no coverage of this issue. Indeed, it is so obscure that you may not even know what I am talking about.
If so, that only underscores the need to shed more light on this predatory practice. I should also say that I am confident that this problem will be rectified. Maintenance of honest and orderly capital markets is tremendously important to the economy of the United States.
eom
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Post by fastwalker on May 28, 2005 19:34:28 GMT -5
Here we have a "collextion of data" relevent to the NSS issue.....which goes to support the notion that by their lack of enforcement and passive neglect, the SEC is therefore guilty of aiding and abetting criminal activities. Since the SEC has failed to take adequate counter measures to stop illegal short selling by members of the financial investment industry, we should be demanding an independent accounting as to the reasons for their years of inaction. National Association of Securities Dealers, Inc. Hedge Fund Manager Hilary Shane Barred May 18, 2005 The Street.com Refco Faces SEC Charges in Short-Selling Probe By Matthew Goldstein May 17, 2005 New York Post The Ionatron Bomb By Christopher Byron May 9, 2005 New York Post Spooky Situation By Christopher Byron May 2, 2005 New York Post Penny Stock Spies By Christopher Byron April 25, 2005 Securities Exchange Commission SEC Charges Former SG Cowen Managing Director with Insider Trading and Fraud Washington, D.C., April 21, 2005 www.sec.gov/news/press/2005-61.htmCasinos, Markets and the Philosophy Of Manipulation Commentary by Bob O'Brien Sunday, April 10, 2005 Fordham University Graduate School of Business Short Selling, Death Spiral Convertibles, and the Profitability of Stock Manipulation By John D. Finnerty Professor of Finance March, 2005 South Florida Business Journal Brokerage tied to a top figure in mob case By Jim Freer March 31, 2005 The Motley Fool Who's Behind Naked Shorting? By Karl Thiel March 30, 2005 Washington Legal Foundation What's Up With The SEC? By Daniel J. Popeo, Chairman March 28, 2005 The National Coalition Against Naked Shorting Windows Media Player tinyurl.com/5vq8yMarch 25, 2005 Check out this independent video news feature that includes amongst others, Dr. Patrick Byrne of Overstock.com, Dr. James Angel, one of the foremost authorities on the capital markets, and Bob O'Brien. The Motley Fool The Naked Truth on Illegal Shorting By Karl Thiel March 24, 2005 New York Post Too Little, Too Late By Christopher Byron March 14, 2005 U.S. Securities and Exchange Commission CIBC Mellon Trust agrees to pay $6 Million for Fraudulent Scheme www.sec.gov/litigation/litreleases/lr19081.htmFebruary 16, 2005 Samex Capital Partners U.S. Stock Market Commentary on "Naked Short Selling" February 7, 2005 The Globe and Mail U.S., Canadian Regulators Charge Trio of Hedge Fund Managers By Michael Flaherty February 5, 2005 Associated Press Jury Finds Elgindy Guilty of Fraud in Stock Scheme January 24, 2005 New York Post NASD Scores in 'Crooklyn' By Paul Tharp January 14, 2005 National Association of Securities Dealers, Inc. NASD Panel Expels Yankee Financial for Fraud January 13, 2005 New York Post Shame on the SEC By Christopher Byron January 10, 2004 United States Department of Justice Florida Internet Stock Promoter Admits Securities Fraud Newark, NJ January 5, 2005 Year 2004 New York Post Feds' Double Take By Christopher Byron December 20, 2004 Christianity Today The Fraudbuster www.christianitytoday.com/ct/2005/001/12.28.htmlBy Rob Moll December 17, 2004 Securities & Exchange Commission SEC, NASD Sanction Knight Securities $79 Million for Fraud December 16, 2004 Triangle Business Journal triangle.bizjournals.comPenny stock tied to Local Fitness Outfit December 10, 2004 The New York Post Weill, Grubman Must Face Suite By Holly M. Sanders December 4, 2004 University of New Mexico Strategic Delivery Failures in U.S. Equity markets Ms. Leslie Boni November 13, 2004 New York Times Judge in Stock Adviser's Trial Bars Testimony on Terrorism By Eric Dash more.....
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Post by fastwalker on May 28, 2005 19:35:22 GMT -5
continued.... November 9, 2004 The New York Post FBI Agent Fed Stock Guru Risky Information Staff Reporter November 5, 2004 The New York Times Stock Adviser, on Trial for Fraud, is Portrayed as a Crusader By Eric Dash November 2, 2004 The New York Times Broker who Aided U.S. Going to Trial for Fraud By Eric Dash November 1, 2004 The New York Post Travelzoo's Skidoo By Christopher Byron October 18, 2004 The New York Post Pink Sheets Bluster By Christopher Byron October 11, 2004 The New York Post Gagging the Market By Christopher Byron October 4, 2004 Canada StockWatch CMKM Diamonds mired in outstanding muddle By Lee Webb October 1, 2004 www.thestreet.comHedge Fund Short-Sale Tactic Faces Uncertain Future By Matthew Goldstein September 16, 2004 BioWorld Financial Days of "Naked" Short Selling in Biotech Might be Numbered www.bioworld.com/By Randall Osborne, Editor August 30, 2004 The New York Post Wall Street Scofflaws By Christopher Byron August 23, 2004 The New York Post Pink-Sheets Strumpet By Christopher Byron August 16, 2004 The New York Post Prosecution Fumbles By Christopher Byron August 2, 2004 National Association of Securities Dealers, Inc. NASD Bars scott Ryan, Expels Ryan & Company in Short Sale Probe July 8, 2004 www.faulkingtruth.comWho's Looking out for You? By Mark Faulk June 27, 2004 St. Louis Post Dispatch Rogue brokers resurface overseas By Christopher Catey June 14, 2004 The New York Post PIPE Deals Smoking By Christopher Byron June 1, 2004 The Cincinnati Post Short selling scheme hits from Berlin By Jon Newberry May 29, 2004 The Financial Times Berlin-Bremen listings abuse rules By Norma Cohen in London May 14, 2004 www.financialwire.net DTCC Chief Spokesperson Denies Existence of Lawsuit May 11, 2004 Text of the Lawsuit between Nanopierce technologies, Inc., a Nevada corporation; Stephen Seitz, an individual; and Jane Seitz, an individual, Plaintiffs, - against - The Depository Trust and Clearing Corporation; the Depository Trust Company; and the National Securities Clearing Corporation Defendants. April 29, 2004 Newsday, Inc. Bail yanked for Wall Streeter By Anthony M. Destefano April 19, 2004 TheStreet.com Looking Out for Desperation Finance in PIPEs Deals By Matthew Goldstein April, 9, 2004 Dow Jones Newswires Penny-Stock Company Says SEC Harassing it for Speaking Out By Judith Burns March 19, 2004 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Dow Jones Newswires NASD Asks SEC To OK Tougher Short Sale Rules By Carol S. Remond March 18, 2004 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) The Financial Times The heat is on for funds' Pipe strategy by Jason Huemer March 15, 2004 National Association of Securities Dealers, Inc. NASD Charges Advantage Trading Group, Inc. and its Trade Desk Manager with Creating False Trading Records to Mislead Investigation www.nasdr.com/news/pr2004/release_04_013.htmlMarch 8, 2004 National Association of Securities Dealers, Inc NASD delays "Naked Short selling" help yet again! February 17, 2004 Canada StockWatch TSX -V firms Global, Union fail on shorting application February 10, 2004 San Antonio Business Journal Two San Antonio firms claim fraud stinging stock By Mike W. Thomas February 2, 2004 Dow Jones Newswires NASD Tightens Short Selling/Delivery Rule Carol S. Remond January 23, 2004 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) MoneySense.ca One way to clean up Canadian stock markets by Larry MacDonald January 8, 2004 U.S. Securities and Exchange Commission Comments on Proposed Rule: Short Sales Comments by Russell K. Godwin President, RGM Communications Inc. January 2, 2004 Year 2003 Canada StockWatch SEC bans WAMEX, Absolutefuture promoter DeTrano forever by Brent Mudry December 30, 2003 Canada StockWatch SEC short target, brother face criminal charges in Sedona case by Brent Mudry December 29, 2003 The Financial Times LSE acts to solve Room Service short-selling scandal By David Blackwell December 20, 2003 Dow Jones Newswires Criminal Charges Brought In Sedona Short-Sale Case By Judith Burns December 10, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Business Week Don't Force The Shorts To Get Dressed by Gary Weiss December 8, 2003 The Financial Times FSA probes Room Service short-selling By Elizabeth Rigby December 6, 2003 The Financial Times Shares in scandal-hit Room Service to resume trading By Elizabeth Rigby December 3, 2003 The Globe and Mail Tougher stance urged on Securities Fraud By Patrick Brethour December 2, 2003 The Financial Times Hedge funds fight back against accusations of stock short-selling By Elizabeth Rigby November 29, 2003 The New York Post Hedge Fund Field Day By Christopher Byron November 10, 2003 San Francisco Chronicle Double whammy in stock fraud case: Short sellers trash, then sue, Santa Clara tech firm By Reynolds Holding, Chronicle Staff Writer November 9, 2003 The Financial Post SEC targets ex-CIBC Mellon staffer in Bogus Shares fraud By Sean Silcoff October 25, 2003 Dow Jones Newswires New SEC Rule Could Curtail OTCBB Shortselling By Carol S. Remond October 23, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Canada StockWatch SEC known Kelly fraud trial results in hung jury by Mort Lucoff in Miami and Lee M. Webb October 16, 2003 Canada StockWatch SEC target Lancer featured in Kelly Bermuda Short trial By Erik Schelzig in Miami September 25, 2003 Dow Jones Newswires SEC Looking To Overhaul Short-Selling Rules By Judith Burns September 24, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Canada StockWatch SEC target Lancer receiver files initial report By Lee M. Webb September 11, 2003 The Street.Com Figure in GenesisIntermedia Scheme Pleads Guilty By Matthew Goldstein September 11, 2003 Canada StockWatch Zi a personal favourite of SEC target Lancer leader By Lee M. Webb September 8, 2003 Canada StockWatch Zi short sellers zapped with forced buy-ins By Lee M. Webb September 5, 2003 Canada StockWatch Zi booster cops a plea in Operation Bermuda Short case by Lee M. Webb August 22, 2003 The PIPEs Report - Painting The Tape by Brett Goetschius Part #1 PIPE Players Accused of Global Stock Scheme July 1, 2003 Part #2 Anatomy of a Naked Short Scheme July 15, 2003 Part #3 Draining the Naked Shorting Swamp August 1, 2003 Dow Jones/Associated Press Defendant pleads guilty in FBI insider trading case July 16, 2003 New York Post The Lancer Papers By Christopher Byron July 14, 2003 Canada StockWatch SEC targets Lauer's Lancer in first big hedge fund case By Brent Mudry July 11, 2003 Dow Jones Newswires Elgindy & 4 others charged again with Insider Trading and Extortion By Carol S. Remond June 30, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Canada StockWatch SEC files first suit in GenesisIntermedia debacle by Brent Mudry June 4, 2003 Investment Management Developments SEC Brings Enforcement Action for Manipulating Stock Prices Through Short Sales and Deceptive Covering Practices By Harry S. Davis Winter 2003 Edition New York Post Hedge Fund Hijinks By Christopher Byron April 14, 2003 Canada StockWatch SEC targets Chicago tout Frank Custable by Brent Mudry April 3, 2003 Canada StockWatch TSX member Global's client Elgindy noted in new charge by Brent Mudry March 25, 2003 Dow Jones Newswires Elgindy Case Broadened With New Arraignment By Carol S. Remond March 24, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) more...
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Post by fastwalker on May 28, 2005 19:36:00 GMT -5
Business Wire Fresh Del Monte Files Suit Charging Conspiracy to Extort Money March 19, 2003 The Financial Times SEC widens probe into "death spiral" schemes By John Labate in New York March 9 2003 Canada StockWatch SEC fines Rhino $1-million (U.S.) in Amro death spiral by Brent Mudry February 28, 2003 U.S. Securities and Exchange Commission Rhino Advisors and Thomas Badian get exposed www.sec.gov/litigation/complaints/comp18003.htmFebruary 26, 2003 New York Times Penny-Stock Fraud, From Both Sides Now By Diana B. Henriques February 16, 2003 Canada StockWatch Harry Bloomfield and ally Stuart Creggy get probation, fine by Brent Mudry Februrary 11, 2003 Canada StockWatch Pacific International in new Mafia indictment by Brent Mudry February 6, 2003 Red Herring The Shell Game By Christopher Byron January 17, 2003 Red Herring No Safe Haven By Christopher Byron January 17, 2003 The New York Times Online Brokers Fined Millions In Fraud Case By David Barboza January 15, 2003 Dow Jones Newswires Some Small Companies Get Physical To Fight Shorts By Carol S. Remond January 14, 2003 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) New York Post Offshore Maelstrom By Christopher Byron January 13, 2003 The Globe & Mail OSC seeks to suspend all of Valentine's trading By Jacquie McNish January 8, 2003 Year 2002 The Globe & Mail Deutsche Bank, Nomura subsidiaries embroiled in lawsuit By Karen Howlett December 23, 2002 Canada StockWatch Valentine's offshore Lemmon flips by Brent Mudry December 20, 2002 Canada StockWatch Chell Group's chairman nabbed in boiler room raid by Brent Mudry December 18, 2002 Dow Jones Newswires Canadian Regulators Review Naked Short Selling By Carol S. Remond and Steve D. Jones December 11, 2002 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Investment News Prudential Securities new head's business associates under cloud by Bruce Kelly December 11, 2002 The Globe & Mail Trustee slaps former Thomson Kernaghan staff with suit By Jacquie McNish December 11, 2002 Dow Jones Newswires Some Wall Street Firms to end Trade Processing By Lynn Cowan and Cheryl Winokur Munk December 4, 2002 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) The Daily Reckoning The Law of Accelerating Returns by James Davidson November 27, 2002 Canada StockWatch IDA bans, fines Kasman; one Rampart client (Jeffrey Ray Senger) still in jail by Brent Mudry November 19, 2002 Globe & Mail, Report on Business GeneMax battles short sellers By Peter Kennedy, Vancouver John Saunders, Toronto November 18, 2002 Canada StockWatch TSX member Deutsche Bank in major penny stock scandal by Brent Mudry November 14, 2002 Canada StockWatch SEC halts 800America, notorious con man CEO arrested by Brent Mudry November 14, 2002 NASD Fiero Bros. expelled from NASD for Naked Short Selling News Release October 30, 2002 The Toronto Star/Canadian Business Newsmagazine Predator Or Prey? by Matthew McClearn October 28, 2002 Canadian Business Newsmagazine Blame Canada by Mark Brown October 28, 2002 Canada StockWatch BCSC-aided SEC fines Maid Aide rigger $378,000 (U.S.) by Brent Mudry October 21, 2002 Dow Jones Newswires Brokerage Collapse hits Canadian Fund Hard By Steven D. Jones October 18, 2002 (The above article has been removed from viewing at the request of Dow Jones Newswires. To view the article in its entirety please go to the following web site www.djnewswires.com/ ) Canada StockWatch BCSC target Pacific International served dastardly Davis by Brent Mudry October 17, 2002 USA TODAY Mighty Merrill Lynch bogs down in legal troubles by Thor Valdmanis October 10, 2002 Canada StockWatch BCSC paints Pacific International as a cornucopia of client crooks by Brent Mudry October 9, 2002 Inside Wall Street Online Foul Play Among the UAL Shorts? By Gene Marcial October 8, 2002 Canada StockWatch Investment Dealers Association court win underlines Supreme Court landmark case by Brent Mudry October 26, 2002 New York Daily News Spare me because of 9/11 By Greg B. Smith September 25th, 2002 Canada StockWatch BMO Nesbitt has quick deal on table in OSC's Lett case by Brent Mudry September 19, 2002 Canada StockWatch OSC targets BMO Nesbitt Burns as prime bank fraud conduit by Brent Mudry September 18, 2002 The Globe & Mail The Rise and fall of broker Mark Valentine by Jacquie McNish July 8, 2002 New York Law Journal NASD Information Disclosure Lacking by Tamara Loomis June 12, 2002 Year 2001 Hemispherx Biopharma vs. Manuel P. Asensio et al Report by Robert W. Lowry RL Consulting Services Leesburg VA January 31, 2001 more....
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Post by fastwalker on May 28, 2005 19:52:24 GMT -5
Found this article to be very interesting, so set aside your political bias and just read. Economic corruption US style Joel S. Hirschhorn Online Journal Contributing Writer March 2, 2005—The latest semantic chicanery of the Bush administration is to talk about the “ownership society” as part of its attempts to privatize social security. Give Americans “personal” accounts and make them owners through investments in the stock market. Who says you can’t fool most of the people all of the time? This slice of Bush baloney sparked some attention to a largely unknown means of cheating regular, small investors. Forget playing by the rules on a level field and winning with your smarts in the stock market. Just when you think you have heard it all about corruption American-style, comes the obscure status quo phenomenon of “naked shorting.” Company stocks can be sold short. Shares are borrowed from brokers who actually have them (or can get them), transferred to the purchaser, and then returned to the lender by the short seller. The short seller sees a relatively high price in the stock market and bets that the price will decline significantly. Then the stock can be bought and returned to the original lender within three days. But “naked shorting” is different. No actual stock is borrowed and delivered to the purchaser, even though the purchaser pays the short seller. The investor believes that real stock has been delivered to their account. Naked short selling has been illegal since 1933, but it has still flourished. As many experts have observed, naked short shares are counterfeit shares; they do not exist and were not created by the real company. In effect, an artificial and fraudulent number of shares are created when demand for them is high. Naked short sellers are not just pessimists; they are predators, motivated to ensure a stock price drop, through planted stories about imminent financial problems, for example. Innocent small investors lose incalculable amounts of money from inflated stock prices and then through manipulated reductions in stock prices. The winners are hedge funds that sell non-existent shares, and the brokerage houses and the clearing company that make money on transactions of phantom shares. The stock exchanges and the Securities and Exchange Commission impose no meaningful penalties. As Bob O’Brien summed up: “A couple of hundred guys in New York are robbing the system and investors blind.” Recently, the National Coalition Against Naked Shorting said: The losers…are the shareholders and the companies who are defenseless against this systemic grift. …<br> There is no excuse for allowing a group of predators to fleece the public and victimize sound companies for their own profit. …Where is the consideration for the millions of unsuspecting investors seeking to supplement their retirement income—people who innocently rely on a “level playing field?” Where is the Congressional Oversight Committee? Where is the media? What a country. You can put your trust in god, but little else and certainly not the stock market (remember the Enron share owners and several cheating mutual funds), nor Bush’s Social Security plan. A nation with too much freedom to cheat and ineffective government protection of its citizens is not a great democracy. America’s wealthy power elite feast off corporate welfare, tax loopholes, tax cuts, stock market shenanigans, offshore banking, military spending, desperate illegal immigrants offering cheap labor, crippling consumer debt, exporting of jobs and technology, unending federal budget deficits, and skyrocketing trade deficits. The rest of us remain economic slaves, workers, not owners. Karl Rove’s (aka George W. Bush) righteous right-wing zealots are either part of the ruling class, striving for membership in it, or unknowing victims of it. Who else has real power now? The many foreign banks and investors who own our national debt and reap profits from our imports. They can pull the plug, take their money and put it elsewhere, or just threaten such action. Bush wants Americans to buy stocks in private Social Security accounts, coincidentally when foreign investors are getting pretty nervous about our economic future. Here’s the dirty little secret of our economy. Wealth is leaving our country faster than economic growth is creating more of it. Like they say, follow the money. Poor nations become richer because the United States becomes poorer. For nations, the rich get poorer and the poor get richer as they exploit their biggest asset—low-cost workers, from child laborers to Ph.D.’s. Foreign workers earn more as Americans work harder and earn less. We also export our money through trade and then borrow it back, at increasing interest rates as our economic future looks bleaker. We’re on the losing side of the global market. We are completely out of balance. We and future generations are being sold out. Globalization is cannibalization. Within nations, economic inequality is mounting. With our money, in developing nations the poor are doing better and super-rich are multiplying. But here, poor Americans stay poor, the unemployed stay unemployed, the homeless stay homeless, the prison population increases, housing and college become less affordable, personal bankruptcies increase, and millions without health insurance get sicker. Here, it is their ownership society. You know who – the likes of Dick Cheney, Rupert Murdoch, and Bill Gates. Prosperity is for the ruling class. With Bush-blindness, you fear Islamic terrorists, ignoring the greater threat—America’s ruling class and the international, free-trade hyping financiers. When we send our wealth overseas, we also send our future there. When you buy cheap stuff at Wal-Mart, you give China more jobs and greater control over our destiny. With low Wal-Mart prices, come more Americans desperate for them. Wal-Mart does not spread prosperity here; it exports it to China and elsewhere. They tell you: Don’t sell America short. But if you could sell shares in America short, you would make money, because our worth is declining. You may have heard more about the declining value of the dollar than about our declining democracy. Yet millions of time-blind Americans still have faith in the Bush administration. Perhaps their solace is that it is all god’s will. Actually, it is the will of the rich and powerful; it is a case of the means not justifying the ends. When will mainstream media call our political leaders what they really are, liars – and call those sucking the lifeblood from our corrupt economic system (including the Bush dynasty) crooks? When more citizen-victims wake up and demand a fair-shake. Until then, we the people—distracted economic slaves—will not get even a small piece of power in the ownership society. It is already owned. Bought and paid for by the privileged that have corrupted our society, politics and economy. (note..fastwalker).. As I stated earlier, set aside your political leanings. As you see by the amount of information contained in this post, the problem with market manipulation is a serious one, with a history that goes way...way...way back. It's not a new problem, rather a problem that many over the years, for one rreason or another, have failed to address and or adequately rectify. Consequentiallym we are now, in this time and place, faced with the pure and simple ramifications of the greed by which our society has decided to operate. I would be remiss if I didn't sate the problem is merely a Republican one. It isn't, as you see by the various dates strewn throughout this thread, many adminstrations have been involved and could have made sufficent headway toward resolving the problem. But none have. What we are faced with, as many other "activist" of a "grass roots" movement, is the "apathy" that will soon overcome our members, if in fact a "united front" is not forthcoming, in which we as Americans first and shareholders second, induce our elected officials to join us in our movement to take back the market palce and the American economy before it gets too late.. TAKE CARE The end...... for now anyway....lol
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Post by hexges on May 28, 2005 22:33:26 GMT -5
quite a good long post there.. phew...proboards character limit really does annoy the heck outa me.. I gave up posting long ones due to breaking things up
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Post by fastwalker on May 28, 2005 23:17:32 GMT -5
Hey Hex, Thanks...yeah it gettings tedious to say the least...hust trying to keep everyone up to speed on the fact that this has been goping on (NSS) for really long time.. Take care
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Post by fastwalker on May 28, 2005 23:18:30 GMT -5
-------------------------------------------------------------------------------- ragingbull.lycos.com/mboard/boards.cgi?board=GBLL&read=7407By: bobhwang 22 Jul 2004, 09:36 PM EDT Msg. 7407 of 13692 Jump to msg. # I'm sure they are doing this to gbll: There’s a new game in town and it’s just getting started. The group playing this game is called “The Cannibals.” They are a group of very opportunistic hedge funds who have decided to take advantage of a new market phenomenon - that of excessive “naked shorting.” In the past 4 or 5 years there has been an alarming increase in naked shorting, most of it illegal. It started in earnest when some of the Internet momentum players of the 90’s realized that the game was over, the bubble was bursting and they better start making money on the short side of the market running hedge funds. They soon realized that with their new power they could actually deny smaller companies access to the capital markets by shorting them into oblivion, especially those with losses ”burn rates“).They have probably destroyed hundreds of companies, some say thousands. In some cases they have collectively shorted several times the entire number of a company’s outstanding shares. As crazy as this sounds, it happens. But one person’s abuse can be another person’s opportunity, and now, along come “The Cannibals.” Their game is to identify companies which have been victimized by these shorts to the extent that their stock is now well below any objective level of intrinsic value and where certain minimal investment standards have been met. The company must have decent technology or products, adequate management, meet certain aspects of viability and have a large enough short position to provide substantial economic gain. Information recently obtained from inside sources say that this is how the game is played. First the funds will very quietly accumulate a large number of shares at the already low price. Since the shorts would still be shorting they would look at the buy orders as “free money.” The key will be for the funds to make their initial purchases with considerable stealth until a significant position has been established. It is altogether possible that they will acquire as many or more shares as the company has outstanding, since at first, the shorts will be very accommodative. Then, once the core position has been established they will likely approach the company and consult with them about possible strategies such as delisting from the Berlin Berman Stock Exchange (which has been a hotbed of illegal shorting), declaring a stock dividend, maybe initiate a corporate maneuver requiring the issuance of new shares and probably working with outside consultants to do an in-depth “shareholder audit” to determine the extent and source of the shorting. Then comes “crunch time”! The Cannibals come out of the closet and start buying with gusto. Buy orders will be coming from every direction, on shore, off shore, hedge funds, well-heeled individual investors, chart readers, momentum players, etc. The Internet can be a useful tool in spreading the message. Once the market knows the shorts are on the run the pressure can get relentless. Unlike a soaring stock where most buyers have a choice of chasing or not, shorts have no choice but to cover at any cost as margin calls dictate the timing. The hedge fund community is one of the most opportunistic in the world. Results over the past year or so have been sub-par which means their 20% fees aren’t being triggered. Here comes a chance for a handful of hedge funds to take advantage of a once-in-a-lifetime opportunity to strike it rich over the next year or so. The Cannibals are greed-driven and they plan to take full advantage of this unprecedented moment in market history, even if it comes at the expense of their fellow hedge funds (hence the name “Cannibals”). Some have already started to accumulate shares, but the fruits of their labors probably won’t start to show up until later this summer of early fall. Don’t be surprised to see this catch on in a big way. Once others see how the game is played there will be lots of copycats. Some of the cannibals are already planning for web sites, market letters, trading rooms, etc. It’s even possible that one or two mutual funds of “distressed stocks” will surface before this is over. What comes around, goes around,. Now the Cannibals are coming to town to eat their young and to create a new batch of billionaires.
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