April 17, 2009
Naked short selling is clearly an abusive practice which has been used by Wall Street Hedge Hedge Funds and major trading firms to manipulate the stock market. Regulation SHO has not worked at all. What is needed is a rule which requires a hard borrow of stocks prior to shorting.
Major hedge funds with billions of dollars have consistently used a combination of naked short selling applied by massive trades to move equities down. The repeated nature of this trading activity is visible to any who watch the market on a daily basis. All anyone needs to do to see the impact from removing the uptick rule is look at the increase in the VIX since early July 2007. From July 7, 2007 forward, the market became a casino. Major brokerages such as Goldman Sachs, and Morgan Stanley etc. now trade millions of shares in minutes via formula based computer models. When the model gives a sell signal, they unload millions of counterfeit shares of stock in a very short period (no uptick rule) of time. Based on the number of married PUT sales going on, it is clear that this is being done with the intention of manipulating the stock.
Numerous hedge funds don't invest. They stake out a position first and than trade to move the stock so that the trade becomes profitable. No one can turn the types of profits made by some of these funds year after year by simply picking the right stocks. There are numerous gangs aligned on Wall Street who have engaged in RICO crimes which were made easier with the removal of the uptick rule and the implication of reg SHO which was but a sham. Who's behind this. Well, just go back and pull up a list of the hedge funds who testified in favor of removing the old uptick rule and who still are opposed to any legislation that requires a hard borrow on an equity prior to short selling it.
I suspect that the hearings now are but stall tactics and shams and I doubt that anything of substance will come from this. Everyone knows that most of the high level attorneys who have left the SEC in the past five years have quickly been hired by firms who are engaging in the practice of naked short selling to manipulate stocks. If I had my way, I would shut the SEC down and move all of the enforcement responsibility for security laws over to the FBI where the real law enforcement professionals are.
If you are really interested in enforcing security laws, why don't you just put a few of the bums who have been manipulating the stock market for the past decade in jail. Stock manipulation has been illegal since the 1930s. Laws already exist which could stop this if the SEC would just do its damn job. Just investigate what has gone on with stocks like Bear Sterns, Overstock.com, Martha Stewart, Allied Capital, American Capital, Ltd., Novastar Financial. I'm quite certain that you will see the pattern emerge where it is the same people trading using the same married put formula over and over to drive down the price of the stock. Use RICO to bring the crime together. These manipulators deploy the same batch of reporters over and over, who write the same type of scary articles over and over to worry investors. They than use the same option specialists and firms and the same brokers to make the same married put naked short sale over and over and the result is always the same. The stock price falls. Gee what a surprise
In regards to short sales in general, why not post the short sale position every day for every equity? That will help with price discovery. With that information visible, investors can decide whether a stock is declining do to short selling or do to other investors exiting long positions. Short sales are registered into the DTCC database at the moment the sale is made. The information exists. Why not make it public?
And finally, I think you should rehire Gary Agueri (sp) and put him in a high level enforcement position. We know that he is an honest guy who wants to do his job right. Use his rehire to help restore confidence in the SEC.
The Wall Street gangs who have been manipulating the stock market for the past decade steal more money from the market every day than Al Capone stole in his entire life. What they are doing has been illegal since 1934. Isn't about time you put a few of these bums in jail?
Regards,
Thomas Lu