That was a good piece of research Bryan -
It touches on a sore spot with me, and I must warn you that I get upset about this - and my response is likely to be a little strong, and less than 100% objective, but here goes anyway:
In my view, the practice of naked shorting is one of the low and despicable aspects of life in the NASDAQ. A case in point was a small S&L not far from my home that became the attention of some of these 'market makers'. During the late 80's they drove the poor thing from 15 to 3 - and for several months there were actually more shares short than the company had issued! It then would rebound - the shorts would play with it - only to see it crash again - then rebound (always less strongly). They took it all the way to zero in this fashion - and dragged many honest investors with them. I was fortunate enough to stay clear of it - but it was a local scandal through and through. It hurt anyone trying to use normal 'market logic' and 'market rules' whether they were long or short. Sound familiar? While PRST does not have the total number of shares short that would be equal to the outstanding shares - the trading pattern bears many of these same hallmarks traits of the crowd that busted that S&L. They appear to be playing with PRST - no doubt making a fortune, and driving Mercedes probably bought with your money and mine. Through wide spreads - and violent price swings that cause any rational investor to eventually give up. Whew, that was tiring - but since you asked my opinion, that's the way I see it. No - I do not currently plan to join one of the four lawsuits alleging manipulation - but there are clearly plenty of people concerned that this very type of thing was/is happening in PRST. I do not know if it is or isn't - but it has certainly occured in the past, and to the best of my knowledge always on the NASDAQ.
Back to the facts: I do know that a brokerage can allow 140% of their inventory to be short at any one time. I also know that the Schwab affilate pulled out of making a market in PRST a couple of months ago. You could be right about naked shorting being the reason there are now so many MMs - in fact I was surprised to hear there were 14 (now 13) - I wouldn't doubt it, but can not confirm it. It is a very difficult thing to know for sure. The SEC is supposedly watching them closely - but who knows.
If manipulation is true, it would be great for both the bulls and bears both if the SEC cuffed a couple of the worst of them and dragged them out of the trading pit in tears (simultaneously impounding their Mercedes in the police parking lot) - that type of action is probably about all that might slow down the hosing they give the market, at least for 5 minutes or so. (Boy, I did it again!! - sorry for straying from the facts).
ANYWAY - thanks, and let's hear your trading strategy. :) RH |
