More Short Selling Fraud

Every rock that one picks up in the area of short selling uncovers another ugly bug, viz., more fraud. The failure to deliver stocks, bonds and loans sold short is an on-going scandal. The fraud occurs in the dealer community and in the hedge fund community. The SEC seems clueless. Perhaps that agency should just be folded into a department at the Fed along with the CFTC. Neither seems capable of acting in the interests of the markets and the common man. Both are in the pockets of the dealers and the hedge funds in conniving to create loopholes for illegal and fraudulent activity.

FT online has a long article [Nov. 10] about how dealers sell short loans that they cannot or will not delivery in a timely basis. That's just fraud. They are effectively "printing" new loans to sell short and make money. Meanwhile the value of the loans drop due to the pressure of new creation.

This behavior is equivalent to the Gould Ring's using the printing press to print new shares of Erie Railroad to sell short on the NYSE in one of the Erie wars. At one time the ink was so fresh it rubbed off on the clearing agent's hands on the floor, creating a panic.

But the SEC seems willing to permit this fraud.

And another article that I read over the weekend shows how the SEC's "market maker" loophole is being used to avoid the purported "hard" 3-day delivery rule. That was predicted here. There should be absolutely no market maker loopholes. No loopholes, period.

But does the Fed do better ? Fails to deliver in the repo market are an ongoing scandal.

And what is the SEC doing ? It's connivinng to continue the fraud.

A friend sent me an article that seems to indicate the SEC is simply trying to come up with a fig leaf to deflect public criticism. Ideas of a huge "circuit breaker" seems gaining momentum at the SEC- but of course the large limit on a down move before it would be triggered shows that this is just a scam. Here are the relevant quotes:


"It would be restricted for some kind of panic situation," he said. The idea was to rarely, if ever, need to halt short selling. "


"A circuit-breaker rule covering short sales could include exemptions for firms, order types or trading activity such as market making, Ratterman said. Enforcement of the ban would rest either with the exchanges or the brokers, Ratterman added. "

The SEC is knave central.

Let's go back to the old rule: “He who sells what isn’t his’n, must buy it back or go to prison.” attributed to the infamous bear raider Daniel Drew (1797-1879).

Hard delivery rules - no exceptions.

Markets

G20 meeting over - nothing happened this time, but actually I expect some action next spring as the details can be worked out. Some restrictions on global hot money - aka hedge funds - is needed.

I see India is taking action to provide trade finance. That is an area that governmental action is needed fast in many places in the world.

I bought some more FCX in my Alpha Fund in the pullback Friday. I have a full position in that now.

I'm working out how the best take some tax losses. I have a lot of gains and I'd like to minimize the tax bill from those. This is real money that I pay every quarter, so it's worthwhile to take the losses. I can use both short term losses and long term losses as I have some large gains in both categories that can be offset, at least partially.

PS: In case anyone is wondering how I can have gains after my WB and C debacles, I booked quite large gains in the gold & silver sales in the Spring as well as in sales of the oils when the oil prices was so high, and the miners and a large profit on AAPL sales around 200.

Word of the Day

"Crime" - transitive verb (!) for this usage [$10 or $100 depending on your dictionary]
Crime means (verb - British Military, etc.) means to charge with or convict of an offense.
Sentence: When will the markets have an regulator willing to crime any short seller who fails to delivery the promised securites sold short ?