What a bunch of bunk. They don’t enforce penalties on bear raids, therefore they don’t exist?

A man is rational.

Mankind rationality…is just a conspiracy.

At least when you live in Russia you know what you are getting…here it’s say one thing, do the opposite….

The hedge fund doesn’t have to call the SEC directly. A former employee is seen as a fee generator and lobbyist by the law firm that hires him. The law firm collects fees for lobbying, but they are not registered lobbyists, they are just old friends who know how to play the game.

This fine upstanding guy calls a former collegue and says, “I think you might want to talk to Racer X of X Capital” and baits the guy at the SEC with enough of a teaser to incite a call or gets an invitation for Racer X to call.” The lawfirm generates fees for interceding and Racer X is on his way to knowing that an investigation is underway and initiates a short. There is an intermediary and the short is protected by privilege. The whole thing could be set up through the attorney. The short can be anonymous.

What is the incentive to leave the law firm? Not generating enough fees? Got passed over as partner? No reference in the article to 3 years with a law firm…. Does the hedge fund not like paying all those fees when they could just have an employee do the contact work for less? Why mention the time at the SEC and not mention his most recent employment? Hard feelings? Distrust of attorneys?

I do wonder, with Copper River closing shop, what will Sauer do now? He may no longer have that high priced sponsor he is accustom to and lord knows he is not intelligent enough to make it on his own.

Just knowing he standing aside a window, pulling the curtains back, looking for an approaching black and white works for me.

And yes. He is a bad guy. To work for your government and turn it into an Ashley Dupree trick is the lowest of the low. I can almost forgive Rocker before this guy.

Most people ignore them until they really start to show themselves. Acne is annoying, but it is easily defeated, as are the handful of arrestable billionaires that think they are smarter than us.

As the Madoff’s of the world and their puppermasters show themselves, we are there to arrest them.

“Mankind is a rational creature. We thrive by using reason to overcome the plight of disease and predators.”

I couldn’t agree more and that’s why I know we will win. Change comes slowly, like snowflakes drifting on a mountainside, but when it comes, the avalanche of change always wins.

Dirty money is no match for torches and pitchforks.

Everything you or I do to cause change is like a snowflake, but as we keep all trying, we pile up to form the avalanche.

Whenever you are about to not do something to help the cause, remember the snowflakes and realize you could be the one that triggers the paradigm shift.

The SEC’s own annual report proves that they lied when they said SHO works.

Failures to Deliver jumped 69.5% from 2005 to 2006, then another 34.6% from 2006 to 2007 with 2007 fails to deliver at least $60.1 billion. I believe this is based on NYSE fails (FOCUS reports), which excludes OTC and Pink Sheet stocks and any trading hidden outside of America or netted x-clearing between partners in crime, so this is a really “lower limit” on the real crime.

http://www.sec.gov/about/secstats2008.pdf

What’s telling is the transcript of the review of the grandfather clause where they determined the new rule.

Despite hundreds of letters from concerned investors, the transcript was 100% for shorting and the phrases “grandfather clause” and “comment letter” didn’t come up.

http://www.sec.gov/about/economic/shopilottrans091506.pdf

Check the comment section of the last blog post for my other posts of other links from the SEC’s own site, but the main theme is that the predators are there to eat the retail investor and keep the herd of stupid retailers strong by screwing the dumbest ones.

“But it seems to me that the optimal thing for the market maker to do might be instead of holding a large inventory when somebody comes with a buy to sell to them, you know, if somebody comes to the buy, just short it, just borrow it. It lowers your inventory cost.”

(SEC study)
“First of all, it was rather surprising to see how large a percentage of sell orders are short sell orders. As you can see there’s roughly 23 percent of all sell orders are short sell orders, a surprisingly large percentage.”

- there are usually more buys than sells when you look at market depth. Unless the price rises unnaturally, the only way to match it is to increase ask depth by 30% (naked shorting)

- allowing prices to rise by reducing shorting will lower average investment returns

- a higher price encourages companies to raise money and then waste it

- “If you look at the history of enforcement actions at the SEC, the number of actions to deal with pump and dumps vastly, vastly exceeds the number associated with bear raids. Bear raids are very uncommon.”

- shorting protects investors from paying too much “How many traders complained about being sold very high priced stocks in the late 1990s, and then after that lost a lot of money? I think huge numbers of small investors felt in retrospect like they got ripped off.”

- “So I agree with Larry that the short sellers are the big ally of the SEC in its efforts to protect small investors from schemes that would, essentially, be manipulative.”

- “the locate rule is an effort to throw a little bit of sand into the gears that would otherwise smoothly allow a market for borrowing and lending securities to operate.”

- And one of the proposals that I understand is up for discussion is whether buy-ins should be more strictly enforced to eliminate short positions on which traders have failed.
If you more aggressively force traders to liquidate their short positions, you make it easier for someone to corner the market and squeeze the shorts in the stock market. This would have the bad effect of making the schemes that Larry talked about, the pump and dump schemes, easier to execute and would, I think, therefore, be kind of a bad idea. So rather than have a forced buy-in for short positions that have been failed on for a long period of time I would recommend as an alternative just a series of escalating modest penalties”

- the cost of naked shorting falls to zero when interest rates are at zero as the only cost is borrowing to cover the margin on the fail

- “Short sellers are very important parts of our capital markets. Short sellers get pessimistic information into prices. We don’t want just the optimists to have a vote. We want to have pessimists also to express their view.”

- “I would characterize short sellers as an oppressed minority.”

- “why we were worried about downward price manipulation but were not worried about upward price manipulation. So it seems an odd, sort of, asymmetrical rule.”

- “I think banning trade, which is, essentially, what the uptick rule does, is rarely a good idea”

- “I was getting progressively more sad and more sad going through this discussion here. And I kept thinking poor uptick rule. I mean, it has been with us for 70 years now. Anybody to stand up in defense of the uptick rule? Well, it’s not going to be me. Of course, the other challenge I have I’m the last here, and so how can I make it different and interesting.”

- “short sellers are already handicapped, a lot of restrictions.”

- the retail investor “facing the lions and debating whether the ethics of eating someone that’s there to be eaten.”

- “the smallest stocks right now aren’t subject to the tick test, and you don’t see a lot of people clamoring for it. Of course, those are the ones that are most subject to the pump and dump.”

- the commissioners get spam emails telling them to buy stock, but they can’t go after the spammers at they have a right to express their opinion from eastern Europe. Naked shorting needs to be allowed to protect unsophisticated investors from paying too much for these scams.

- retail investors are often confused

- “But if they were going to be threatened with a buy-in on their 100 percent of the flow, that would eliminate their ability to protect the small investors from exorbitant prices.”

- “What I’m worried about is, you know, you publish stock ABC. It has a lot of short interest, and the CEO of stock ABC, who is a evil pump and dump guy, sees that and uses that information to somehow manipulate the securities lending market.”

- “Ken Lay’s defense was that Enron was a victim of a bear raid. I didn’t buy it. The jury didn’t buy it. I don’t know if anybody bought it. But the bear raid is the story that a CEO tells when the market is voting against him.”

- “I think bear raids probably occur hardly ever”

- “who is going to complain about being able to buy depressed stocks at really cheap prices and earning a great return on that?”

- “So after September 11th there was a massive manhunt for the alleged — Osama bin Laden was allegedly short selling airline stocks on September 10th. So there was quite a search for nefarious short sellers after that,”

- “The example of Osama bin Laden is insider trading, not a bear raid. Let’s make sure we have the distinction right.”

- “Maybe we should have transparency where everybody’s Social Security number is posted on the internet. That would be a form of transparency most of us probably wouldn’t like.”

One of the primary themes of classical tradition was that man could use rationality to overcome the base state of nature.

That tradition works. It brings on prosperity.

Mankind is a rational creature. We can improve our lot through reason and deliberation. Short selling appears to be undermining the ability of investors to engage in the rational process of assessing investment options. With modern communication technologies, the market is so efficient that we no longer need artificial regulatory measures like short selling.

Just as we don’t need rogues roaming the streets randomly killing people, we don’t need an elite class of insiders in brokerage firms randomly destroying companies.

Human rationality overcomes the need for predators.

In the last several years, there has been a predator class randomly killing large numbers of people in Iraq. I see absolutely no sign that the average Iraqi is better off with the killings. They actually look quite miserable and unhappy about all the killing.

Anyway, the current rot in Wall Street is more like a plague than a sleek predator. Sauer’s argument is akin to saying that the market needs to be covered with a festering pustulation to be healthy.

Mankind is a rational creature. We thrive by using reason to overcome the plight of disease and predators. That’s why there’s billions of us. Sauer is simply repeating a failed elitist ideology that causes widespread hardship and misery.