Re: 4/20/05 - More replies from Mark Cuban's blog
Posted Apr 20, 2005, 11:55 PM ET by Jeff Mitchell
Ummm, Bob, you punched a great big hole in your own conspiracy theory!
In your example, you *purchased* only 180 real shares out of 1000 ordered, receiving the rest as an IOU. This means you are naked *long* the other 820 shares! Then someone comes along and buys all 1000 from you, meaning he also went naked *long* another 820 shares.
Since going long is far more popular than going short, might the imbalance create far more rises in stock prices than depressions? Uh oh. Back to the drawing board!
- Jeff
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29. Posted Apr 21, 2005, 1:00 AM ET by Tony Ryals
Anyone know anything about this ? Jeff Mitchell can you explain what's being said here ? If I understood I probably never would have beeen suckered by ddd in the first place.
Did these guys perhaps get a deep discount,as usual ?
from Yahoo NFI board:
HH: Any NFI MBS in Belle Haven ABS CDO?
by: veritas_i_seek_the_truth 04/21/05 12:44 am
Msg: 294417 of 294419
Howard,
What is the dollar amount of Novastar MBS in the Belle Haven ABS CDO that you and your colleagues put together?
Does NIBC know that you post stock advice to individual investors on message boards? I can't imagine that they'd approve of that sort of thing.
Veritas
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30. Posted Apr 21, 2005, 1:57 AM ET by Bob O'Brien
Jeff, tell me that was a joke, right?
The sell transactions that were being conducted were being done with IOU's treated by the ex-clearing system as genuine, providing more sell side volume that would be possible by shares issued by the company - i.e. artificial supply meeting fixed demand.
If I could sell as many widget IOU's as I wanted but there was, by definition, only a fixed demand, what would happen to the price of widgets as the supply outstripped the demand?
That's what I just described.
It is actually worse than that. You have the NSCC only satisfying 18% of the fails with shares from the borrow program, per their own admission. The other 82% ostensibly receive IOU's or markers or whatever other euphemism you want to call counterfeit shares (that's what they are when you represent them to they buyer as genuine.) And then those markers go into the system to the next level, and get traded back and forth between the various participants, who have all agreed that they will be treated as genuine for the purpose of effecting transactions. That's yet another level of fraud, systemic, actually.
The model that makes the most sense is a small bank, where you have a bunch of companies that are making deposits and writing checks all day long. Some customers just write a lot more checks than they have cash to back up, but because you have divided up your check paying department and your collections department, the way it is expressed in your computers are accounts with a debit. You smile and tell everyone that it's all good, but what you are actually relying on is that not all customers will come in and demand cash for the checks they got today - they'll just take your IOU (check) and hold it till the end of the week, or better yet, just sign it over to someone else when they need to pay a bill. You may not have nearly enough on deposit, but as long as the confidence in your bank is good, no one will question things - you're good for it.
It's a confidence game. It falls apart when a lot of shareholders lose confidence and demand certificates. There aren't nearly enough. So as long as the confidence can be maintained, most won't demand proof you actually have the shares before they hand over the money (i.e. take your word for it) and thus the game continues. They trust you. Or rather, they trust the few large houses on Wall Street and the Accounting firms that audit them.
In other industries it would be fraud. This one too. They just have institutionalized it to the point where the fraud is systemic and condoned by everyone on the inside. Otherwise the system would collapse.
It's a confidence game, pure and simple.
That's why they have to simultaneously mock and vilify those that question the system, while refusing to lift the curtain and reveal how it actually works.
That's how you get Mark trying to mock and denigrate Shapiro, one of the top credentialed economists in the country, rather than simply looking at his comments and saying "holy sh*t." A guy that doesn't know how many new companies are on the SHO list any given day and revels in his ignorance, denigrating someone that actually knows his subject matter. The attempted victory of hubris over substance.
Note that the game is wearing thin.
Like all confidence games, eventually the rubes catch on and demand to know what is being sold to them when their money is taken out of their account.
That's what is happening now, and they are fighting tooth and nail to make it all seem like much ado about nothing. The sound of their protestations is a trifle shrill.
If I wasn't laughing I'd be crying.
Truly.
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31. Posted Apr 21, 2005, 9:38 AM ET by Jeff Mitchell
Bob, you described a scenario of the same shares being *bought* over and over. For your premise that naked shorting kills a stock price to be true, then the reverse of naked buying, by definition, must also be true. Given that going long a stock is more common than going short, the FTDs, by defintion, would be most often inflationary to stock prices.
Your remaining paragraphs are just a plea for better tranparency at the DTC and in the markets in general. IMO, you'd have a much better chance at getting a more serious discussion about this if you didn't align yourself squarely with companies that blame all their problems on naked shorting.
- Jeff
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