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So apparently I’ve gotten noticed?  In that case, welcome, actual readers.  So, what’s new, anything interesting happen last week?

Oh, and I really do appreciate the implicit compliment that my writing style could be mistaken for someone who actually writes for a living, like Gary Weiss.

Late update: What in the world was this supposed to be all about?  The bankruptcy court seems to have quietly ignored them and gone on with their job.  I suppose that this will turn into another piece of the conspiracy puzzle somehow, but still… just weird.


Interestingly enough, right about the same time as Byrne’s infamous interview with Kudlow and Cramer, the NASD passed a rule effectively closing the overseas exemption from finding a borrow prior to executing a short sale.  Prior to this, it was something of an open secret in the USA that if a stock was tightly held and hard to borrow, and you really wanted to bet against it, the answer was to open an account at a brokerage in Canada and trade from there, where shorting restrictions were much more lenient.  Mitchell’s piece describes the advantages of this tactic, but common sense should tell you that if a stock could be shorted to nothing at will via this method, we’d have seen more, or for that matter, any instances of this happening.  Instead the cases of stocks being “shorted to zero”  invariably came from debt offerings foisted upon naive company managements by shady brokers, which, all things considered, seems a lot more trouble to go through.

And, indeed, there were downsides to the Canadian method.  For one thing, since you don’t have the borrowed shares in place, if you do have to cover, now you have to go locate the stock to buy back.  If the market is moving rapidly against you, you may be hit with a harsh penalty by the markets due to this delay.  Furthermore, you have to keep track of your own captial gains and carefully report them on your taxes, lest you end up committing tax fraud out of nothing more than neglect.

Overall, the basic premise that this blog disagrees sharply with is that, in the open market, the short-seller holds all the cards.  In years like 2008 has been, that can certainly seem to be the case, but just try asking anyone who tried to short a tech or Internet stock ten years ago just how “easy” the money is on the short side.

With that as prologue, let’s get to what this section is actually about: an article by Dow Jones writer and soon-to-be Carl Loeb Award winner Carol S. Remond, documenting the NASD (now FINRA)’s change in policy and the reaction of market participants to it.  It’s pretty much a to-the-point, straight-down-the-middle piece, getting comments from various points of view and otherwise sticking to stating the facts.

But Mitchell doesn’t see it this way.  Mitchell highlights the fact that Remond quoted people bemoaning the loss of a short-selling tool, and ignores the fact that she states that others want short-selling done away with altogether.

But Remond’s worst sin of all in this article, in Mitchell’s eyes, is this pargraph — and I quote it in full:

“It’s taken us by surprise,” said Richard Thomas, head of compliance at Canadian brokerage firm Pacific International.

From here, Mitchell goes on to recount the rather substantial number of scandals and other nastiness that subsequently occurred at Pacific International.  I haven’t personally bothered verifying any of them one way or another, because Mitchell’s point isn’t so much to attack Pacific International as it is to attack Remond, who in more recent days has stood out as one of Overstock’s most vocal critics.

Now you might think that a four word quote that basically states the obvious is a pretty flimsy linkage.  I might well think that too.  But in conspiracy land, there is no line too thin if it will connect a pair of dots someone wants connected badly enough.

And so we have the spectacle of Mitchell slamming Remond for citing this brokerage as a “credible source” in regard their own state of surprise.

So, with all this media conspiracy to allow dodgy sources to scurrilously cop to having been caught unawares, are there no heroes to look to anymore?  Is there no one out there still willing to speak the truth to power?

Well, yes, but next week we’re going to meet a stupid message board troll instead.

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4 Comments

    • URSAC'ed
    • Posted September 23, 2008 at 2:43 am
    • Permalink

    ok, so you’re not weiss. how about steve cohen? r u steve cohen?

    • underbond
    • Posted September 23, 2008 at 1:19 pm
    • Permalink

    Who?

  1. Underbond:

    Rumor has it that you are a close confidant of the Sith Lord?

    Can you confirm or deny it?

    • underbond
    • Posted September 28, 2008 at 5:11 am
    • Permalink

    Well I did watch the Rifftrax commentary version of The Phantom Menace this weekend. Does that count?


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