CNBC Spectacle Precedes Naked Short Massacre
October 9th, 2008
by Mark Mitchell
So the SEC today lifted its ban on short-selling, and all but declared open season for law-breaking naked short sellers to start destroying companies again – and who does CNBC have on for two hours as its honored “guest host”?
None other than Jim Chanos, the salamander-slick director of the short-seller lobby.
Asked about naked short selling, Chanos said, with a straight face: “Anytime a hedge fund or short seller shorts a stock, it is a legitimate short. We have to get a locate or pre-borrow from the broker….”
Chanos continued: “The one thing I have in common with Patrick Byrne, chairman of Overstock.com [and Deep Capture reporter], is that we are calling for strict, strict delivery…in terms of delivering shares…that is how to end this naked short selling…”
CNBC, which serves as a sort of seedy massage parlor to the short selling community, gave Chanos the usual treatment – lubrications and sweet nothings. No tough questions. No retorts to his outlandish assertions. No wondering aloud as to his absurd and self-serving logic.
Let’s get this straight.
Not long ago, Chanos insisted that naked short selling did not occur.
Now, he says naked short selling occurs. But it’s not short sellers who are naked short selling. Short sellers make sure their brokers borrow real stock before they sell it.
In any case, Chanos acknowledges that short sellers’ brokers are not borrowing real stock before they sell it. That is why they are not delivering the stock. And that is why he claims to agree with Patrick Byrne that there needs to be “strict, strict delivery.”
But Chanos is against a ban on naked short selling (which would force short sellers to borrow real stock, thus ensuring delivery). Chanos says that a ban on naked short selling would destroy “market efficiency.”
So, to summarize the Chanos position: Naked short selling didn’t occur, but now it occurs, except short sellers don’t do it, and the SEC shouldn’t ban it because the market would cease to function properly if short sellers were forced to stop doing what they don’t do.
And given that so many shares are failing to deliver (after being sold naked by short sellers who never sell naked), Chanos is calling for “strict, strict delivery” of stock (while praising the SEC for its “strict” new rules which stipulate that nothing happens to short sellers who fail to deliver stock).
CNBC treated us this morning to two hours of Chanos nonsense. At one point this charlatan even insisted that short sellers aren’t short selling financial stocks at all. Really, he said short sellers aren’t short selling. Period. Take his word for it. CNBC did.
That was around 7:30 AM, right after CNBC’s Becky Quick referred to Chanos as “the legendary short seller….er, investor.”
At 9:30 AM, the markets opened and the criminal naked short sellers…er, investors…went back to work, unfettered by the SEC’s “strict” new rules.
Within an hour, Morgan Stanley was down 25%.
deepcapture.com
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Comments:
lenofus Says:
October 9th, 2008 at 6:35 pm
Ironic thing is, GE is the parent company of CNBC, and they had to beg from protection from guys like Chanos. And then, they help guys like Chanos blow up MS and GS, where CNBC runs in the trading room.
I think the Street should just boycott CNBC, and that’s just a stock.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
putting it together Says:
October 10th, 2008 at 3:32 am
Chanos’ interview can be used against the brokers. He said that the brokers weren’t delivering.
If it were only the SEC that is corrupt, but it is worse than that. It is every government agency. They are all being run for a profit for someone.
Read this in its entirety: dunwalke.com
The privatization of prisons requires an increasing prison population for growth. That is why we won’t see border control. We will see no improvement in drug trafficking because the War on Drugs, like the War on Poverty and the War on Terrorism are all profit centers. Wall Street is just a money launderer.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Patchie Says:
October 10th, 2008 at 7:31 am
I submitted questions into Becky and Joe to ask Chanos but for some reason they never asked him:
1. Jim are you willing to to have your BD buying in for guaranteed delivery any fails that they are carrying on behalf of your trade. I am not talking best effort where the BD claims that can not buy it in because there are no shares available at this price but guaranteed delivery buy-in at the cost necessary to obtain settlement.
2. Jim, why do you think a BD is taking the financial liability of holding a Fail to Deliver in the system on behalf of their clients? Who ultimately benefits from this, the BD or the client who is represented in their trade strategy but represented not with a legitimized trade but with a trade that failed to meet the standards expected.
3. Jim, If you agree that the rules for settlement are essential, and that loopholes exist that you can drive a tank through, why are you opposed to the mandatory pre-borrow that would guarantee settlement is achieved. Isn’t any other alternative so far discussed providing for the existence of a settlement failures? Can’t trades that fail for even a day or a week be leverage used to drive away buyers in a market? |
