Month: July 2006

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Article: Sell-out: Why hedge funds will destroy the world

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Sell-out: Why hedge funds will destroy the world

Janet Bush

NewStatesman, 31 July 2006

Something ominous is going on in world finance – again. On 11 May, the US Federal Reserve, America’s central bank, raised rates and hinted that it might do so again. Wall Street wobbled but stock markets in the emerging economies fell through the floor. Since that day, Colombia’s stock market has slumped by 42 per cent; Turkey’s by 38 per cent; Pakistan and Egypt by 28 per cent; India by 25 per cent; the Czech Republic by 22 per cent.

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Article: Hedge Fund Hell

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Hedge Fund Hell

Liz Moyer

Forbes cited by RGM Communications via Wayback, 28 July 2006

Toronto-based Fairfax Financial Holdings filed a $5 billion lawsuit against SAC Capital, Rocker Partners and a number of other hedge funds, claiming they manipulated the insurance company’s stock, shearing its market cap by one-third.

Earlier this week, the regulatory arm of NYSE Group, fined Daiwa Securities America, Goldman Sachs Execution & Clearing, Credit Suisse Securities, and Citigroup Global Markets $1.25 million for violations of Regulation SHO–a rule put in place in January 2005 to clamp down on abuses–related to how they handle and monitor short-sale transactions by hedge funds and other clients.

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Article: Lawsuits Accuse “Prime Brokers” of Securities Fraud

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Lawsuits Accuse “Prime Brokers” of Securities Fraud

Wayne Jett

San Gabriel Valley Tribune cited by RGM Communications via Wayback, 19 July 2006

Two class-action lawsuits filed in Manhattan federal court in April allege fraud by the world’s largest “prime brokers” in securities lending practices.

Goldman Sachs, Bear Stearns, Lehman Brothers, Morgan Stanley, Merrill Lynch, Citigroup, Banc of America Securities, Credit Suisse, Deutsche Bank Securities, UBS Financial and Bank of New York allegedly charge high fees to lend securities for short selling, but fail to deliver the securities sold short by hedge funds.

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Memorandum: Short Sales on the New York Stock Exchange: Their Share of All Trades and the Types of Companies Most Likely to be Sold Short

Memorandum

Short Sales on the New York Stock Exchange: Their Share of All Trades and the Types of Companies Most Likely to be Sold Short

Robert J. Shapiro

Sonecon, July 2006

We analyzed the extent and focus of short sales of New York Stock Exchange (NYSE) companies over a six-month period, February – July 2006.

    • More than one-fourth of all NYSE shares traded are sold short, or about 330 million shares out of 1.3 billion shares traded daily.

    • The proportion of shares traded that are sold short is inversely related to a company’s share price: Among NYSE companies selling for $20 or less per share, short sales account for about 30 percent of all shares traded, compared to about 23 percent of all shares traded in companies selling for $40 or more per share.

    • The proportion of shares traded that are sold short is inversely related to a company’s total market capitalization: Among NYSE companies with market caps of $3 billion or less, short sales account for more than 29 percent of all shares traded, compared to 23 percent of the shares traded in companies with market caps of over $10 billion.

    • The proportion of shares traded that are sold short varies by industry. Short sales account for nearly 29 percent of all shares traded in companies that produce discretionary consumer goods and services, including automobiles, appliances, textiles and apparel, hotels and restaurants – compared to less than 23 percent of all shares traded in companies in health care and consumer staples, including food, beverages, tobacco and household products.

PDF (3 pages): Short Sales on the New York Stock Exchange: Their Share of All Trades and the Types of Companies Most Likely to be Sold Short

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Notice: Speech by SEC Chairman Cox on Proposed Amendments to Regulation SHO

Notice

Speech by SEC Chairman Cox on Proposed Amendments to Regulation SHO

12 July 2006

The next item on our agenda is the serious problem of abusive naked short sales, which can be used as a tool to drive down a company’s stock price to the detriment of all of its investors. The Commission is particularly concerned about persistent failures to deliver in the market for some securities that may be due to loopholes in the Commission’s Regulation SHO, adopted just two years ago.

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Article: Covering Up Naked Shorts

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Covering Up Naked Shorts

Harvey Pitt

Forbes, 11 July 2006

As crisis after crisis afflicts the business community and our capital markets, all too often the response is a form of reverse laissez faire. Business waits for government to tell it three things: if it has done something wrong, why it’s wrong and how to fix it. The ineluctable result is that, like Rick’s crooked police pal, Captain Renault, in the movie Casablanca, we’re “shocked, shocked to discover” we don’t like the government’s responses.

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Video Series (1 + 9): Dark Side of the Looking Glass

Video

Judd Bagley: This presentation, created in 2006, launched the popular market reform movement. Overstock.com CEO Dr. Patrick Byrne explains illegal naked short selling, its roots and risks, in terms anybody can understand. It consists of short illustrated videos and then a final uncut full audio.

Robert Steele: This website is dedicated  to PB.

Continue reading “Video Series (1 + 9): Dark Side of the Looking Glass”

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Article: Dismantle the SEC

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Dismantle the SEC

Christopher Byron

New York Post cited by RGM Communications via Wayback, 3 July 2006

It looks like the Securities and Exchange Commission has finally come up with a plan for dealing with the devastating Court of Appeals decision two weeks ago that nullified the SEC’s efforts to regulate the hedge fund industry.

The strategy: Do nothing – except perhaps pout a bit and blame everything on the media.

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