My Posts of Yesteryear

Posted: Sun Oct 29, 2006 10:32 pm
Post subject: Back by popular demand – my posts of yesteryear

Hi folks.

Sorry for the long absence: I decided to use this board sparingly, and only when I had worthwhile announcements, rather than just writing to fill up a blog (as some do). I do have some announcements coming (as our new site header suggests), but I will leave them for another day.

It pleased me to learn recently that some weeks ago a financial blogger of sorts was complaining that I had taken down the posts that preceded “Take 5 With Patrick.” I had no idea he was such an admirer, and regret the discomfort I seem to have caused him.The truth is, as you know, I am under federal investigation, of sorts, anyway: I have accused elements of the SEC of being puppets of Wall Street, they are starting to wake up and snoop around into the issues I am fighting to raise. I cannot quite tell if they are looking into my allegations, or looking into a way to silence me. Maybe a little of both. In any case, one of the things I had to do comply with the SEC’s discovery requests was to round up all my message board posts. I asked a pal to do that and burn them onto a CD, and then I restarted this new board without carrying them all over. I thought it would be cleaner that way.I had no idea of the consternation I was going to cause this blogger: as I said, I wish I had known what a fan I had before I took the old ones down. So I decided to repost them: unfortunately, they had all been turned into Adobe files, and I needed some time to convert them back. I have done so, and will repost them all below, if only for the curious. I am not going to take the time to reformat them to their original look and feel, and certainly suggest that no one (other than those who apparently obsess about me, such as the blogger in question) take the time to wade through them all.Sincere there are 25 pages, I will break them up into numerous posts.And to the blogger who missed these so: thanks so much for bringing to my attention how much you missed these. A researcher at a well-known publication has told me that 93% of this fellow’s blogs concern me in some way. Some would find that attention a little creepy, but I, for one, am flattered.

Regards all,


Posted: Mon Dec 13, 2004 10:11 am
Post subject: just some small updates

Dear Colleagues,

I write to report to you on several developments.

1) As you may remember, we were running at around 22,000 – 25,000 listings until the day we had our free listing day. At that point they jumped to around 150,000.

2) As expected, as they sold through the number of total listings gradually declined towards its earlier level. Still, that spurt did a couple good things for us.

a. Sometimes the best way to tune an engine is to gun it and see where it first starts breaking down. By having a 6X increase in our level of listings we were able to uncover and fix some shortcomings. As I have mentioned in an earlier posting, Oracle was terrific in this regard, sending out a killer team to help us do this. We resolved those issues, and the site has been running far more smoothly than ever.
b.Once they began declining, our listings declined to around 27,000 listings before stabilizing, so some of that increase stuck to our ribs.

3) We are now ready to do it again. As you have perhaps heard, we are going to have another free listing day Wednesday, December 15. Pile in! We want to see it get back to the earlier high-water mark, and surpass it even. My belief is our systems are going to hold up really well this time.

4) There is a third party listing service who is in the final stages of testing their tool with our API. It will be live soon (but not before Wedensday). I really look forward to our announcement when it comes live. Must run. I hope everyone’s holidays are going well.

Humbly submitted,


Posted: Fri Dec 31, 2004 9:11 pm
Post subject: thank you

Dear Colleagues,

I have much for which I owe thanks. You folks, as-yet-unmet denizens of our auction tab, are high on my list.A year ago we decided to do auctions. Though long before that I was anxious to do them, I needed to wait until we had the cycles to develop this, and until I had the general (Brilliant Holly) to lead the charge.

For all that time I watched eBay, convinced that the more dominant they became, the greater would be our odds. When we launched auctions the Wall Street boys thought I was nuts. “Compete with eBay?!?! Are you crazy?” was their predictable response.

All my life I have seen good new ideas met with derision and rejected as “obviously” dumb. The doubters forget that if the wisdom of a new idea were obvious, others would likely have thought of it first.Your reception has been intriguing. We expected a hard time convincing sellers of the advantage of helping us build a legitimate competitor to eBay. In fact, of course, it took your community about one day to figure that out (far faster than Wall Street!)

Since then, the support and tolerance you have shown us has been amazing. I understand from these boards that customer service (which is housed in a facility twenty miles away from our HQ) has not always been satisfying. Two weeks ago we decided to expand our auction customer service, but rather than doing it at that remote facility, we went out and hired a 25 people, and since then have been training them as auction specialists.

On Monday they start work at HQ, in an office across the hall from Holly, Sam, and Byron, so the loop between your needs and our auction executives will be much tighter and we will, I hope, better meet your expectations.This autumn, while some on this board were screaming that we were uncommunicative, it was because people were working around the clock (literally, sleeping and showering here) to finish up some piece of code (like O-lister). So it was with our API’s: we needed to get them released to the world so that folks like Infopia and many others could go to work interfacing with our system. Sometimes, when we were non-responsive, we actually just had our heads under the hood. Believe me, we hated it when we saw auctions crashing, the “triangle page” being served, and so on. There simply was no way to debug all the code until we launched and put stress on the system. But the long-timers here will agree, I think, that things have greatly improved over three months: for example, while the first free listing day (late November) caused us to stumble, the ones in December were pulled off with ease (our action CPU’s now clock at 10%: they are just purring along). Less time fighting fires means more time to build the features you want.

In closing, I want to thank you again: we, a thousand strangers, have this odd, symbiotic relationship with each other. As always, I am in your debt, and I remain,Your humble servant,


Posted: Sun Feb 20, 2005 6:09 pm


My SITuation REPort:

1. Listings:

a. Friday, February 18, eBay raised their fees.
b. We were already 30%+ off of eBay, but against their new fees we drop to about 40-50% off. As a bonus, we dropped fees another 52% on February 18, for one month, and are giving credits.
c. Also on Friday, we went live with . For 60 days, anyone listing on our site using ChannelAdvisor’s tool will see free postings (“big thing brewing” I referred to last week.)
d. As a result of these dynamics, our listings have soared from 50k to 90k in two days. The quality of listings is excellent.

2. Advertising.

a. When we launched we thought it was going to take us awhile to show eBay Powersellers that their interests aligned with ours: “You will not get a fair shake from eBay until a legitimate competitor develops, and we want to be that competitor, so help us.”
i. Thus, our TV commercial promoting auctions, and our radio commercial, were designed to convince eBay SELLERS to give us a shot.
ii. In fact, of course, it took the community of eBay Powersellers about 48 hours to figure that out.
b. Thus, we have been rewriting our radio and TV ads to focus more on drawing eBay BUYERS to our site. I sought and received excellent advice from this message board, advice I incorporated into our new buyer-oriented radio ad, and the new TV ad whose filming we are arranging.
c. Starting on Friday, all radio and TV ads switched to focus on auctions. All radio ads are the new, buyer-oriented ad you helped me write. We switched all TV advertising to the auction ad as well (on
cable stations: we are still fighting to get the networks to play it). For the next N weeks, all advertising will be focused on auctions, to try to make this catch fire.

3. HOW YOU CAN HELP. We (you and Overstock) have one chance to make this work. You gain, we gain. Given the confluence of eBay’s fee hike, our drop, ChannelAdvisor, and our focusing all advertising
on auctions, now is that chance.
a. Listen to our new radio ad. I tried to hit all the points you wanted.
Let me know if it is too wordy. Post any edits you want to see.
i. Our listings are respectable in quantity (» 100,000) and quality.
ii. Our technology is working smoothly.
iii. Our auctions customer service department is staffed, trained, and broken in.

In sum, if there were ever a time to strike, now is it.

We are doing our part. We built and tuned the site, staffed customer service, cut fees, did a deal with ChannelAdvisor to get good listings, and redirected $500k/week of advertising to focus on auctions. PLEASE DO “YOUR PART” BY TELLING THOUSANDS OF EBAY BUYERS TO TRY US NOW. You’d be doing us a favor, I know, but you are doing yourselves a favor too.

Your humble servant,


Posted: Sat Apr 01, 2006 4:52 pm
Post subject: Fortiter in re, suaviter in modo

Dear O-Auctions Community,

It has been a year since I wrote here. I apologize.I have been busy, but that was not the real reason I stayed away. I decided to take my act to a more public forum, and also, to distance my crusade from my role as president of Overstock.So I left here and moved over to I have been in and out of, sometimes taking a month or two off, but pretty much sticking there.Also, I have been doing a lot of behind-the-scenes writing that you occasionally see pop up in other blogs. That was all a mistake. I wish I had just stayed here, if for no other reason than nobody separates my role as president of from my attempt to reform the market.Also, if I had stayed it might have drawn traffic here for you buyers and sellers.

There is another good reason for coming back: you folks know by now how I feel about the financial media. I think it is corrupted and betrays America.There are Tools of Satan who explicitly try to corrupt it, in fact. And when I started appearing on, and started gaining traction, the tools showed up and started playing the same games they do elsewhere: lies, “Do you still beat your wife?” questioning, and endless, endless clogging in an effort to wipe out any good material.

So it was a mistake to leave. I am back home. I am going to seal my return by going and finding the choicest writings I have posted elsewhere on the Internet in the last year, and bring them back and repost them here. Good to see you all again.

Warm regards to all,


Post Date: Wed May 31, 2006 8:49 pm
Post subject: More debate with Mann, Fool February 15, 2006

Dear Bill,

If it please the Court, I would like to respond to your post on Feb. 9
(“Re: Guest Appearance: A Brief Reply to Bill Mann”). My apologies for
not getting back to you sooner; I have been busy selling toasters.
I would agree that the SEC’s decision to grandfather old fails is curious,
and contemptible. It’s also extremely predictable. One must ask one’s
self “qui benes?”

As one who has let many an unedited typo slide through, I should avoid
saying, “You mean, ‘qui bono.’” But I am too much the schoolmarm, I

The people who are being screwed the hardest for heavily shorted
companies are not the shareholders — these are largely static short
positions. The people who really get screwed are the short sellers who
hold legitimate positions.

A) Are not shareholders who suffer capital losses also getting screwed?
Let me break that down into two questions:
B) If a shareholder suffers a large capital loss due to naked shorting, has
he been screwed?
C) Do you think there are any shareholders anywhere who have suffered
such losses?

If your answers to B and C are, “yes,” then so must be your answer to
A. If you would answer “no” to either B or C or both, I would love to
know which one(s) and why.

Why would the brokers cover, or clear? They’ve got those shares short
in a heavily shorted position for free.

Another point of agreement—it’s the broker/dealers who are carrying out
the naked short selling. I don’t recall explicitly alleging that hedge funds
were the ones naked shorting, though I believe they play a key role and
benefit through collusion. Did you watch my presentations on sell you a call at today’s price for $1.”
a) Now, if the stock goes up $10, the BD makes $10 on the call and $2
for selling the puts, loses $10 on the short and a cost of $1 for the call.
He comes out $1 ahead.
b) Now, if the stock goes down $10, the BD makes $10 on the short and
$2 for selling the puts, loses $10 on the put and a cost of $1 for the call.
He comes out $1 ahead.
i) Lemma A: In sum, the BD comes out $1 ahead.
c) Note that if the stock goes up $10, XYZ loses $10 on the call and $2
for buying the puts, but makes $1 for selling the call. He loses ($1 plus
the gain in the stock).
d) Note that if the stock goes down $10, XYZ makes $10 on the put and
$1 for selling the call, but the put cost him $2. He makes the amount
the stock dropped minus $1.
ii) Lemma B: Note that the last two sentences would also precisely
describe the economics of this situation, “XYZ pays $1 to short one
e) Lemma A + Lemma B = The BD rented for $1 his market maker
exemption to XYZ so he could naked short 1 share.
There are other variations, of course. Imagine that when the BD naked
shorts its shares, the buyer is XYZ. Now XYZ has matched puts and
shares. (What does he care that they were naked shorted to him? His
brokerage statement says he has them). Now he can sell them, loan
them to a friend who shorts them, etc. etc.This reminds me philosophically of Hannah Arendt’s book, Eichmann in Jerusalem: A Report on the Banality of Evil. Of course, that book concerns a much graver matter. But among the brilliant ideas developed
in that book was her analysis of the moral responsibility for the
Holocaust got distributed by a system across a bunch of civil servants:
was the guy who created the train schedules culpable? Yes, somewhat.
Was the guy who worked in the chemical factory making precursors to
the gas culpable? Yes, somewhat. The system spread the culpability
around so that a lot of Germans played tiny contributory roles, while
relatively few where completely monstrous. It was genocide conducted
not by so much by monsters as by civil servants: hence, the “banality”
of the evil.

Imagine a system such as the matched-put, broker-dealer exemption
loopholing system described above. Take it a step further, adn imagine
that it is one crooked broker-dealer in BVI doing a piece of it, then a
white shoe firm taking the shares thus created and loaning them out
again, etc. etc. The system would have no one in it with really unclean
hands, but a lot of people in it with an unclean thumb or finger or palm.
I’ll make a deal with you, Patrick. The next time you are in Washington,
I will be more than happy to go with you to the SEC and we can ask
them this question together.

What question? It sounds to me like the SEC has already taken an
interest: subpoenas, investigations, etc. I suggest all read about it at the
website run by the dangerous blowhard, . His
information about the DTCC, the formal investigation, and the
subpoenas going out to certian hedge funds, is true.
The volatility issue is garbage.

I disagree (do you know this via divine revelation, or is there an
argument?) In fact, it may be the one honest statement the SEC has
made. If just a fraction of the suspected naked short selling does occur,
then we are headed for a market-wide game of musical chairs. That is
not me saying that, it is the SEC saying it. The SEC may not want to be
the one to stop the music.

This, by the way, is why I think that the impact of naked shorting is
relatively minor, as compared to the vast number of pump and dump
scams that take place in the microcap universe of the public markets.
Why the SEC allows these capital-destroying cesspools to operate
without real oversight is something that is beyond my comprehension.
Let’s take the 500,000 number presented in the FOIA request.
Obviously, now that we know Rocker & Associates are the 9th largest
shareholders, at 590,000 shares. I use that particular item because we
are reasonably certain that Rocker is short shares as well. So we thus
know some details of the short and failed positions as of Aug 1 (which
preceded the Rocker disclosure of an increased stake, but the numbers
aren’t the issue here — the scale is.)

Remember, the 550,000 was the number of failed short sales. It was not
the number of failed long sales. Read the SEC FOIA letter closely: they
make that distinction. Why might that be important? Because on
November 30 I bought 50,000 shares in 150 transactions. None settled
for a month. I have the trading data on 144 of those trades. Every single
one was marked a long sale. Not a single one was marked as a short
sale, though it turned out in retrospect that they were (that is, they
were short sales which could not settle, hence no good locate had been
made, hence they were naked short sales).

Takeaway #1: 97% of the sales that day were naked short.
Takeaway #2: None of those unsettled trades would have shown up in
that SEC FOIA response.

For the record, I believe the unsettled trades in our stock now number in
the millions, easily.

1. This short interest number is gross, not net. It doesn’t build in the
amount of shares that people are long in contra accounts.
2. It also counts all of the clearinghouse shares — the ones that the big
wirehouses will naked short in order to keep an orderly market — which
is both legal and what they are supposed to do. It additionally counts
the shares that these clearing houses have in order to clear any options
positions of their customers.

Bill – Respectfully, this is all words words words. The market maker
exemption is a good faith, keep-liquidity-in-the-market exemption, not a
sell-and-don’t-deliver-for-a-year exemption. Come on.

3. And in Overstock’s, and many other companies’ cases, the short
interest will be pumped up as a result of a hedge against other financial
instruments issued by the companies themselves. With an $86 million
convertible, Overstock has, if you believe that the amount is fully deltahedged,
some 2 million shares shorted that aren’t really shorted. But
each one of these shorted shares increases the float, regardless of the
rationale for their origin.

Respectfully, this is just more hand-waving. First, the right number is
$77 million and about 400,000 shares delta hedged. Second, that gives
a reason why someone would short shares: it does not speak to the
issue of unsettled trades. I am sure there are all kinds of reasons people
might short our shares, including buying our converts and hedging
them, as you suggest: this is unrelated to the question of the existence
and magnitude of unsettled trades in our stock.

So that’s it in a nutshell — the system is corrupt, but the protected
parties are the brokers, who have a license to hold onto securities they
have no intention of clearing — because they’re the equivalent of options
without expiry.

Agree—it’s the brokers. You got it.

But then there are other elements that simply don’t make sense to me
about the short conspiracy, beyond the lack of a barking dog for past
transactions where there were large short interests.

1. Capital is lazy. Overstock (specifically) to my mind is a hardened
target. It’s also huge, with a fairly liquid security. (My shares, btw,
cleared in 2 days.) Why would a conspiracy target THIS company. It
makes no sense.

First, “conspiracy” is your word, not mine. For one who has objected to
others exaggerating Seth’s positions then attacking them as straw men,
I would hope you would be more careful.

Second, folks tell me that the miscreants came after
when we were a smaller company, just before a big push in revenue.
Perhaps they thought we would require more secondaries to sustain
such growth, guaranteeing an egress. Perhaps the plan was to leverage
the dot-com stigma and tank this with an SEC investigation or Class
Action suit and barrage of Herb articles, as has been done so many
times in the past. I upped the ante so that they can’t get out, thus the
only option is to throw the kitchen sink at me and this company. But it
wasn’t a hardened target when Herb first started hitting it and the SI
climbed significantly, so there’s your first clue.

2. Why, if there are a list of thousands of companies that have been
destroyed by naked shorting, is the list confined by name to Sedona,
which, once again, took on death spiral financing? That’s not exactly the
stuff of a large scale conspiracy. Oh, sure, there’s JAG Media,
Nanopierce, and others that point to naked shorts. The fact that these
companies were penniless capital destroyers has to be relevant. Those
are the kinds of companies I’d like to short.

We just watched DAL get crushed. They had a lousy economic issue, but
they also were a huge company on the SHO list until they dropped off
and went bankrupt. I imagine that many of the companies that are
destroyed by the practice have other issues; the miscreants are clever
and there is generally plausible deniability. If your agenda is to maintain
it is NEVER naked short selling that contributed to a company’s
destruction, then you can ALWAYS find other reasons for the
destruction. The miscreants would be insane to pick companies that
were not already vulnerable–it’s one thing to not be a strong swimmer
when your boat goes down, quite another to throw the victim an anvil
rather than a life vest, quite another to shoot him as he swims for shore
and say, “He would not have made it anyway.”

Nothing is ever black and white. There are lists of companies that have
been badly damaged and have been on the SHO list for months if not a
year (recall that there was no way of even proving any naked short
selling until the last 12 months or so). A year and a half ago, the mantra
was still that it didn’t exist. Hard to prove that something for which all
evidence is kept secret, caused the destruction of a company, isn’t it?
Perhaps if all the data were made available then we wouldn’t have to
engage in these angels on the head of a pin discussion–we could just
pull up the total FTDs for a given company and end the discussion. By
design we cannot, and that is problem. And we cannot because the SEC
says that if they made the information public it would cause too much
“volatility.” Hard to square that with your sense that this must be minor.
3. In many countries, naked shorting is quite legal — most notably
Canada. Why is there not a vast swath of destroyed Canadian
companies? If the conspiracy works in a market with trillions of invested
capital, it would work much better in less liquid markets. Again, capital
is lazy, and it is fungible. If naked shorting companies to death in
Germany were profitable, there would be tons of pools of money doing
this very thing.

Again, there you go with your “conspiracy” again.

I am not aware of anyone claiming that naked short selling companies in
Germany is profitable. Using Germany as an international arbitrage
pretence for not delivering your shares in the US is, on the other hand,
quite profitable. Did you know that one broker listed all the companies in
Berlin, and paid $12K per company for the privilege? And yet most never
trade more than a handful of shares every couple of months. What do
YOU think the financial incentive was?

By the way, the broker that did that used to own 10% of Ladenburg
Thalman, who was big in toxic convertibles. Isn’t that a coincidence. Ha.
Incidentally, there is another big name from teh Den of Thieves days
with a significant tie to Ladenburg: any guesses?

As to why doesn’t it happen more in Canada, I do not know, but I can
guess. One explanation is that the grass is much greener here in the US;
there are far more companies to savage and, as the case of Elgindy
proved, there are highly organized networks that do it here. Why bother
with some illiquid Vancouver penny stock when you can take down a
$100 million dollar biotech here? There is way more cash to be had
doing that than taking down some $3 million mining company.
Another, more subtle, explanation made by an economist I know has to
do with a form of moral hazard. My friend argues that the pretense of
effective institutions is more dangerous than no institutions at all. In the
case of naked short selling, the public assumes the SEC/DTCC are doing
their job of regulating securities markets and few question participation
in those markets, at least not for reasons connected to clearing and
settlement. As a result, capital is circulated blindly. Perhaps in Canada, if
one knows no cop is on the beat then one avoids dark alleys.

Incidentally, Canadian companies are not immune if they trade on US
markets. I know Fairfax Financial Holdings’ Prem Watsa. FFH has been
on the SHO list for over 100 days and attacked by the usual miscreants
in the public sphere (including Two weeks ago he let me
know that a suburban with black windows had pulled up in front of his
office, four men came out and harassed people, etc.

So sure, I think that the SEC is hiding something. I suspect that they’re
protecting someone. But I don’t think it’s what is being contemplated by
those who believe that this is a massive, massive scandal that is
destroying millions of lives.

Operation Bermuda Short gave us a glimpse of how it works, Elgindy
gave us more info, RYCO gave us some more. So is your position that
this goes on but can’t be that big a problem? I’d like for you to be right.
But we—myself included– don’t have enough data to know one way or
another. I’ve simply noticed that this giant pink elephant has wandered
into the room and certain people are doing everything they can to
convince others that it is anything but a pink elephant. It has reached a
rather insane degree, in my view.

So in sum, my answer is, You might be right, or…. you might NOT be
right. Usually the best way to handle such forks in the road is to get
data. That is, after all, the whole Western tradition. We ned not take
things on faith: we can get facts. So let me ask you two simple
questions, sir:

1) What would you consider to be convincing proof of massive unsettled
trades in the system?
2) How do you propose we get that proof?

If you answer to #1 is a hurdle so high that your answer to #2 is, “We
cannot,” then you are tacitly admitting that yours is a position not open
to evidence or argument: it becomes merely, “To know this we’d have to
know X, we cannot get X so no discussion or argument can sway me.”
The position is not without its merits: like solipsim, it is internally
consistent, for example, but you cannot go anywhere with it.

Your humble servant,
Patrick Byrne

Posted: Wed May 31, 2006 8:50 pm
Post subject: Laying Waste to a Fool of a Shill 2/21/06

A shill appeared many months ago on trying to forever quibble
about the meaning of obvious words and evidence. He went by
“UsuallyReasonable”. I was responding to him here.


Congrats on getting through another post raising nothing but off-point
issues cleverly disguised as unrelated matters.

My claim about the Boni paper is that it confronts a strain of the Party
Line that runs, “No system is perfect, all systems have error, the FTD’s
in the system present the kind of random error that one would expect.”
Against this argument, Boni points out that the errors are not in fact
random, but correlate with stocks which are expensive to borrow. If the
dogs are eating the stock certificates, they must be very smart dogs who
know just to eat the ones that are for hard to borrow stocks. Since that
seems unlikely, the other explanation must be that the FTD’s are

That, in a hutshell, is the sum of Boni’s argument. It is precisely what I
presented Boni’s argument as saying.

To your credit, you get that much right, but then wave your hands
around while panting about the deeper implications.

Now look at what he does not say. Does he mention Boni’s conclusion,
which is contained right in the abstract, that the pattern of FTDs is
consistent with the hypothesis that they are being done to avoid the cost
of borrowing the stock? That THAT is the “deliberate intent”? No he does
not. Never does he mention the cost of borrowing, despite the fact that
Boni’s paper points directly to that cost as the reason for the “strategy”
in these strategic fails.

What you fail to mention is why any of this complaint is germane. I
claimed Boni used statistical methods to confirm that the FTD’s were
happening deliberately, and you admit that her methods do confirm it:
everything else is confused hand-waving.

Put differently, there are a lot of things that I do not mention: for
example, I do not mention that the stocks which are expensive to
borrow are likely to be stocks which have come under the kind of attack
which I am discussing, so Boni’s evidence supports both the hypothesis
that people FTD in order to avoid paying high rebate rates, and that they
FTD in stocks which are hard to borrow because they have run out of
room to bring shorting pressure on a company illegally. I did not bring
tha tup because it was not necessary to: all I needed from Boni’s work
was her conclusion, that the FTD’s were in fact strategic, and not

Readers, note that not every single line in which I spoke of Boni adheres
precisely to this point. Plese review the quote of mine that UR has typed
out, in his message, and please witness how it states precisely what I
claim it states.

UR, all you have done, once gain, is taken some minor point that is not
even a point, and then waved your hands a lot and thrown in a lot of
rhetoric and, I suppose, hope no one sees through it. Which, as far as I
can tell form the letters I get, rarely happens: the public is smarter than
you shills presume. It gets kind of funny, because while you guys will
quote me at length in some areas, you invariably avoid quoting me in
what should be the crux of your argument. You did it again in your
message. I’ll show you where, amidst the rhetoric:

Do you wonder why Byrne doesn’t mention this? He doesn’t mention it
because it does not support his argument — and he knows it.
More slime, no substance.

Some people would call that shading the truth; others would call it lying.
What would you call it, Grandson?

How about, “Using words precisely in reason and debate”?

Rather than give Boni’s actual conclusion, Byrne leaves open the strong
implication that Boni concurs with him that the failures are being done
“strategically” to defraud Grandma, because of evil intent, because of
the desire to run a company’s stock down to zero.

Does everyone see the clumsy sleight-of-hand here? “Byrne leaves open
the strong implication that the failures are done strategically to defraud
Grandma.” Now where exactly do I say that? Where exactly do I
attribute to Boni anything but a point of view regarding the statistical
distribution of FTD’s? Surely not in the lengthy quote UR included above.
Again, it is funny how these guys will quote me at length where it does
not matter, but will always gloss over what should be the crux of their
argument. That is because they deal in prevariaction and lies.
He implies that Boni concurs with his preceding assertions, which is so
far from being true as to be laughable.

Again, more assertion by divine revelation. I “imply”? It seems to me
that I presented Boni’s research concisely and accurately, as UR even
admits when he is not whining and waving his arms. (Incidentally, I
doubt very much that UR has any idea what Boni does in fact concur
with, judging from his post.)

Again, ask yourself — why did he not present her conclusion, if her
paper is so fundamental to the case?

Boni’s conclusion is that the distribution of fails shows that they are not
happening randomly, but show design. That and only that is the position
which I attirubte to her, and UR admits that this is the only position that
I attribute to her (the quote of mine that you included in your post
supports my position, UR: if you have some quote that belies this, UR,
feel free to post it, but try to avoid the clairvoyant “Byrne leaves open
the strong implication” and “Byrne implies” stuff).

To the general reader, I hope these examples are starting to add up to
something. Why is it we see the same hacks day after day coming back
and always missing the same salient points, always misquoting me, or
telling us what they think I must be implying? I simply think it is
because they are being instructed to do this. It could be that their are as
consistently foolish as they pretend, but it is easier to believe that they
are just compliant shills.


Posted: Wed May 31, 2006 8:51 pm
Post subject: And then burying the shill 2/22/06UR,

I would call this, “pettifogging,” but pettifogs usually have some molehill
of which they are trying to make a mountain, whereas you have nothing
but a string of words which you seem to hope will bore the reader into

This is really quite simple, and I will break it down for you. The chain of
reasoning went like this (Syntax: Party Line vs. reality):

1) The Party Line was that stock manipulation through failures-to-deliver
could not be going on in our capital markets, but Professor Finnerty has
prepared an elegant mathematical proof that it can occur within our
current regulatory regime.
2) The Party Line was that, if they do exist, the failures-to-deliver could
be explained as the result of random error in an imperfect system, but
Dr. Boni’s paper showed that the distribution of the FTD’s showed they
occurred “strategically” in patterns that were not consistent with random
3) The Party Line was that, if they exist and were not random, then the
failures-to-deliver are rare and appropriately handled by safeguards in
the system, but the paper by the four Wharton and UNC economists
showed they were “pervasive” and that in 99.8% of the cases the
safeguards did not kick in.
4) The Party Line was that, if they exist and are not random and are not
handled by the safeguards in the system, they are still not pervasive
enough to have a major impact on (or pose a significant risk to) the
system. But the letter by Dr. Shapiro discredits this thoroughly, as does
the SEC’s own website, where they explain their decision to grandfather
and refuse to disclose the size of the FTD’s out of a fear of the
“volatility” that would result.

That chain of reasoning is simple and straightforward. You have not
pointed out any place I misrepresented any of these sources, but
instead, have pointed out that one of the sources (Boni) posits an
explanation (avoidance of high cost of borrow) that is not my own (stock
manipulation). This point is misguided in two ways. First, nothing in my
argument drew upon Boni’s explanation for the behavior she observed,
but only upon the phenomenon whose existence she proved via
statistical analysis. Second, Boni’s explanation is not only consistent with
my explanation, it goes hand-in-glove with my explanation (miscreants
use FTD’s to manipulate a stock when the borrow is all used up, and
when the borrow is all used up you will find high rebates on the borrow).
In the fact of this line of reasoning, which is really quite simple and
direct and not beyond that average 16 year old, I think, you are simply
throwing around a lot of hoo-hah’s and what-for’s about what your
inferences were, what you think “any rational person” would think, etc.
None of it is germane. The chain of reasoning runs as above; you have
not said anything to dispute any of the links; you claim that I leave out
some of the conclusions and work of Boni’s paper whereas the truth is I
leave out most of the work of all the papers; you claim that this detail is
telling when in fact it is trivial; and you fail to see how even the portion
of Boni’s paper to which you draw attention not only does not
“contradict” me, but rather, it goes hand-in-glove with my own

So yes, sadly, this simply looks like more smokescreen to me. The fact
that your arguments generally run just like this one, with lots of handwaving
and stretching of claims over key points, inferences that you
receive in your psychic wisdom which somehow relieve you of making
precise, careful arguments and instead, gloss over all the key points
some more…. yes, these mark you in my mind as an ideologue. What is
your motivation as an ideologue? Could be money, or a dozen other
things, or simply laziness, but in my experience ideologues are that way
out of habit: they are ideologues because they lack motivations. Along
with courage and integrity, for that matter: they shill, toady, and suckup
to power because that is their nature. I’ve seen it since I was a child.
It does not take any grand conspiracy, and your futile attempts to
pretend that is the claim is just one more example of shilling.
Why don’t you do something interesting, and try to answer the questions
which Seth has been ducking for six months? I bet you’ll find some
excuse not to.


Posted: Wed May 31, 2006 8:51 pm
Post subject: Responding to Euotrash,. another Fool 3/12/06Trash,

Do you and your ilk really not understand yet that your simpering “Oh
my god people are laughing at you don’t you know what are you going
to do they’re laughing oh my god people are laughing” could never affect
a man like me? Has that really not sunk in on you guys yet? Have you
been paying attention at all? Have I shown any evidence of caring what
a poodle like you laughs at?

As far as the multiple-lending argument: the DTCC swears they do not
let it happen. They will not describe the mechanism that they would
need in place for it not to happen, and no one believes them when they
say it anyway, but just for the record, your whole multiple-lending
argument falls flat because it misses that point.

In fact, I should point out that it is my argument, not your argument:
though it is against the law and their stated rules, the whole NSS
movement takes one of its main points to be precisely that such multiplelending
does occur, and hence, the number of share entitlements can
grow far in excess of actual shares. The actual number, incidentally, is
not really, “infinite”: according to some, however, it is 15-20.
“Bed & breakfasting” shares: are you familiar with that term, ET?
Oh, by the way: you keep using the 19 million outstanding shares in
your arguments, which is one of the things I consider them so dumb I
do not respond normally (someone emailed me this tonight, with a
message that “ET sure seems to hate you”). In any case, returning to
the real world for the moment, the DTCC only has 8.7 million OSTK
shares in its vault. We now have a reported short interest of 8.9 million:
short interest is thus 103% of float. As far as the stated rules of the
DTCC are concerned, we have accelerated through the speed of light.
They have said that this situation is impossible. Now it has happened.
Now think up some more simpering statements about my math, Trash.
If any observer thinks there is one that is not bonehead enough that it
deserves a response from me, just let me know.


PS Incidentally, I don’t believe the 8.9 million either: I think that the
failed short sales plus the failed long sales + ex-clearing and overseas
fails bring our true short interest up to 22 million: some smart observers
say I am nuts, and that it really is 60-80 million. We’ll see if I can ever
get the DTCC to get in the ring with me.

PPS Big story breaking next 24 hours. Stay tuned.

Posted: Wed May 31, 2006 8:52 pm
Post subject: Telling People to Watch 60 Minutes, Fool 3/26/06Dear Fools,
For all who have not gotten the word, please watch 60 Minutes tonight. I
believe that it does not even mention “” However, the
facts it presents and the story it tells are well known to me, as are the
witnesses who will appear on camera. I expect the piece will tell
precisely the story of which I became aware in the autumn of 2004.
If my behavior has seemed a little strange since then, perhaps it will
appear a bit more explicable if you watch this and reflect on the wider
market ramifications of the behavior described. Ask yourself as you
watch it, “These guys are making money from someone: whose money
is being siphoned off?


PS Remember the story you see tonight is itself just a chunk of the issue
of the looting of the savings of Americans. But how do you get someone
to eat an elephant? One bite at a time.

Posted: Wed May 31, 2006 8:53 pm
Post subject: A Poll I put to Fooldom 3/27/06After 60 Minutes ran it was possible for me to ask Fools, had I been
doing the right thing? Here was the response I got in my poll:

Nine months ago I went public with a Miscreant’s Ball webcast outlining
a set of relationships among various hedge funds and reporters. Since
then I have been called every name under the sun. In itself that never
concerned me, but what did concern me was the complete silence of the
non-financial media, and the insistence of the financial media (most
notably, CNBC and WSJ) to frame the story as another, “CEO is ticked
off his stock went down” event. Nowhere would they print the simple
truth: that I was after a gang of thugs who I believe are robbing
Americans blind, and I understand how they worked and could not walk
on by any more than I could a purse snatcher. But this did not fit the
party line and so they could not even hear it.

Now that the story is getting unspinnable for them, and now that people
are getting a look at the story for themselves (and I promise you, you
have seen about 1/5 of what this is really about), I am curious to know
your thoughts on a question I have struggled with for nine months now.

That question is:
Have I done the right thing?
8% (8 Votes)
No: Byrne, you should quit Overstock and shut up.
7% (7 Votes)
No: Byrne, keep running Overstock but shut up about this now.
36% (36 Votes)
Yes: You did the right thing, Byrne, but now leave it to the pros.
49% (49 Votes)
Yes: You did your civic duty, now bury these guys.


Posted: Wed May 31, 2006 8:54 pm
Post subject: Poll I took on Fool corruption as I left, Fool 3/31/06More and more I came to feel that the Fool had been infiltrated by
representatives of the bad guys. Too many strangers showed up and
either quibbled over unimportant details, denied that even the most
patent facts coutned as evidence, or more often than not, simply
clogged (posted at high volumes) to wash out any real conversation.
So I decided to check out the other day and return here. As I did I
figured I would do a last poll to ask, how many others suspected that
the Fool had been corrupted as well? There were several shills on the
board at that time I posted the poll, adn they all immediately answered
that I was a nut (one of the possible poll responses). But as the evening
wore on, we got around to the point that well over 50% believed the
Fool had been cirrupted and my antagonists there were shills. Sometime
the next day, as I knew would happen, the shills were able to organize
getting as many of the shills to come vote against the propoisition that
the Fool board had been corrupted (the disparate voting by time of day
was astonishing and not statistically likely), but even with that, fully
36% of the Fools now believe their environment has been corrupted by

Not bad for just a little hobby of mine.




I have always considered the Fool and especially the Gardners and Bill
Mann decent and honorable. However, I believe the deletion of posts has
gotten out of hand, and reflects underlying bias at the I will
lay out my thinking, then ask your opinion.

I am aware that anytime paradigms collide it becomes possible to
question the other’s motives. So I have not beat this drum as hard as I
might have. But from his remarkably programmatic postings here, and
his history of bashing stocks that are on the Miscreant Shortlist, I
believe Seth Jayson is “bent” and has an agenda (I do not know whether
his shilling is from bribery or some other mechanism). I suspect
UsuallyReasonable is also co-opted, and has been assigned the task of
trying to win non-official Fools to his side as “just another interested
poster.” I wonder about Eurotrash: occasionally he seems reasonable,
but often it feels like his shtick is to play the, “Oh I’m really on your
side, but just quibble quibble quibble” game.

But I am not sure, I admit. So I wanted to ask carefully for the opinion
of the Fools, not to insult anyone, but just to know if I were paranoid. So
I posted a poll asking for other folks’ read on this issue, starting with
Seth. I think this was a legitimate question for me to wonder about, and
hence, a legitimate question for me to pose to the Fool community. Early
reads of the poll showed that most Fools strongly suspected Seth of
being compromised.

The poll was taken down. It got deleted, as I am sure any posts asking
for others’ opinions on the veracity of UR and ET would be deleted as

I think it was illegitimate of to remove my poll on Seth. I really
wanted to learn something, and would have learned something were it
not for this, as would we all have. I believe it is incredibly inappropriate
for the Fool to own the tool of discourse, mold the tool of discourse
through Seth, and then prohibit the one tool that would let the rest of us
Fools communicate our perceptions without risk of distortion. It takes
the marvelous invention that is Fooldom and opens the door to the
possibility of it turning into just another closed circle of corruption (like
Wall Street and its lapdog media show).

This impression has been exacerbated by discovering the
TeachMeSomthing is now having even fair and innocuous questions
being deleted in favor of Seth Jayson’s histrionics.

What do observers think?

22% (26 Votes)
I agree: now corruptly protects shills and suppresses dissent
14% (16 Votes)
I agree: Fool now protecting shills and kills dissent, but unwittingly
21% (25 Votes)
I disagree: they may be shills, but Fool just wants civilit
43% (51 Votes)
I disagree: they are not shills, Fool is right, Byrne is a nut

Posted: Wed May 31, 2006 8:54 pm
Post subject: Some last news treats I left for my friends at Fool, 3/31/06
Since I believe this place has been corrupted and lost its value, I think I
will be done with it. In parting, let me fill in a few squares for the honest
people here. You will be reading this in the news months or years from
now: remember, you read it here first.Herb is denying that he got access to the Gradient reports for two to
four weeks after they had published. But on February 14, 2005 he wrote
a report on NFI that quoted extensively from a Gradient report released
hours earlier. The truth is, at least until recently Herb had a log-on and
password at Gradient just like any client. This will come out in discovery.
(Want his password?)

Gradient’s shill Karen Hilton cannot make up her mind whether SAC
ordered the report in question or not. This situation is so non-unique,
the only question will be which of dozens if not hundreds of examples we
or Biovail wish to present to our respective juries. I can line up hedge
funds who will say that, Yes, we paid our money and for that we could
order two hatchet jobs per year. the notion that Gradient did anything
on their own is absurd: many of their “analysts” were hired straight out
of Burger King. They were recent college grads who had never held a
professional job before, and the content of the reports was largely
dictated to them. After hearing stories from the eight witnesses I think
Gradient’s assertion that these were self-generated will be as laughable
to the public as it is now to the witnesses.

Gradient had an employee answering one phone on his desk, “Gradient
Research,” and another on his desk, “Pinnacle Investments.” They were
trading on Pinnacle’s behalf out of Gradient’s office (eventually it got
moved across the hall). A screenshot of Pinnacle reveals their positions
were simply front-running Gradient’s research.

Cramer is saying that he never heard of Gradient until he got
subpoenaed. Becky Quick goes on the set every morning and says
nothing. He is lying, as is she (by omission). The truth is,
communications exist between Becky Quick and Gradient saying things
like, “Jim Cramer loves the Gradient hatchet jobs.” “Cramer is having
CEO XYZ on and says to get him the latest Gradient stuff on them.” Etc.
These date from over a year ago. I believe emails still exist on CNBC
computers confirming this. If CNBC investigates they will discover that
Cramer was lying repeatedly to his audience and that Becky kept her
mouth shut: presumably they would have to fire at least Cramer if this
happens. If they do not investigate, then when these emails are made
public and the world knows that CNBC was informed of this (through this
post) and chose not to investigate, it will be the end of CNBC as a news

Cramer and TSCM received subpoenas on February 7-9. Cramer told the
world about it on February 27th. Between those two dates Cramer and
the top three execs at TSCM sold $6 million of stock. Cramer had never
sold TSCM stock before. He did these sales pursuant to a 10b5 plan so
they show up as, “planned sales.” He filed his plan on February 14th.
These are just a handful of the nuggets that are going to come out in
discovery and trial. These guys can throw all the whitewash they want at
this, they can send all the shills on TV that they want to, they can clog
message boards and so on, but they cannot change trading records,
emails, phone bills, and reports (especially when they already know that
the good guys have many of them, and they don’t know which they can

As I sign off, I see that my last poll shows that 36% of Fools agree that
Fool has become corrupted. I sadly agree.



Posted: Wed May 31, 2006 8:55 pm
Post subject: My last thoughts on Fooldom, and it’s good to be back

For those of you who do not know, The Motley Fool was started by two
very good guys, the Gardner Brothers, who are both value investors
(think “Warren Buffett”) and who think investing should be something
that should be understood by all. They and the editor they hired, Bill
Mann, have done a wonderful job over the years of bringing good
investing principles to Main Street. They eschew the fancy lingo and
techniques of Wall Street, and they try to teach Main Street Americans
how to participate in the stock market intelligently. Tom Gardner had me
on his radio show a couple times, and even had me speak at a Fool

The Fool (as it is known) has pushed fo regulatory reform that levels the
playing field between Wall Street and Main Street. For example, they
ahd a lot to do with the passage of Reg FD (“Fair Disclosure”), an
excellent SEC rule change that prevents companies from tipping off Wall
Street analysts with information without sharing it with the public.
because of their ideological bent, I hoped they would join my crusade
regarding unsettled trades in our capital markets and collusive activity
among hedge funds, analysts, and journalists, but they have not. No
hard feelings: I do think they will come to regret their stance someday.
Who knows.

Nothing I ahve said here should be interpreted as an attempt to
disparage the Fool as an institution. I thought and still think it was a
great idea. I participated in an attempt to endorse it, and suck more
pwoer away from the New York establishment media. It followed me
there. I do think that Bill could have been a bit more on the spot to
recognize what is going on at the message boards there.

But in any case, it is a subscription service: people ahve to pay a fee to
access the boards there. Because of Reg FD, I could not post anything
material about the business there: if I did, some could claim that I was
not sharing information with the genreal public at the same time. So
while I tried to recognize that rule at all times, some could argue that
even the most general talk of the naked shorting issue facing Ameica
was really some backdoor way of talking about Overstock.

So I decided to come here, and bring all the more meaningful posts from
there and The SanityCheck with me.

It is good to be back.



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