I’m pretty sure that someone out there wants the finance system to crack.
Not that anyone’s wrong to suspect it might crack: I’m the last guy on the planet that can be accused of being Dr. Pangloss. Not that they are wrong to decry the regulatory and political oversight of our finance system in general and the shenanigans of Wall Street in particular: the name of this blog is, after all, “DeepCapture.com”.
But for four years I’ve been eagerly flushing the handle while watching these guys circle the bowl. In that time I’ve developed a sense of how they move. I’m pretty sure now that their orders are, quite simply, to crack the system.
We have Joe Nocera’s Sunday New York Times piece, “Propping Up a House of Cards“, that basically says AIG has the financial world by the throat and that as they die they’ll take the rest of the world with them. Maybe so. But one would think Nocera would be able to draw on better sources than Donn Vickrey. From what is publicly known about Donn Vickrey, from what has been publicly alleged (in these three affidavits) then publicly admitted, Nocera’s continued use of him as a source (and the New York Times‘ tolerance thereof) is a disgrace. That Nocera quotes shamelessly from him signals that the gang is back in town.
But more interesting to me are recent pieces on Warren Buffett. The hit parade has been led by Doug Kass, a kind of half-bright Jim Cramer-wannabee, but Jim himself has added his own special brand of empty insinuation. From the last four weeks alone:
January 27, 2009 “Kass: Is This the End of Warren Buffett?” This article reads (no kidding), “Reflecting some of the above concerns and since late September 2008, Berkshire’s shares have fallen from $145,000 a share to $85,000 a share. There is no apparent end to the decline in sight. All good things, it seems, in markets and life, must come to an end.” That is to say, the analysis that Doug Kass has to offer is that something has gone lower therefore there is no end in sight to its going lower. (Isn’t that the quintessential panic argument?)
February 18 “Cramer on BloggingStocks: Buffett sells America“.
February 18 “Kass – Buffett Watch: Questions for the Oracle of Omaha – Doug Kass says Warren Buffett’s changes to the Berkshire portfolio raise more questions than answers.”
February 20 “Kass – Buffett Watch: Holdings Getting Hammered – The Berkshire Hathaway investment debacle continues apace.”
February 23 “Cramer: Buffett Watch – Jim Cramer advises investors to look at Warren Buffet’s inconsistencies before following his investment strategy”. Interestingly, in this video Jim Cramer correctly predicts precisely what Kass is going to say on television later that night (not that there is coordination between them).
February 24, 2009 Kass – “What’s Hot and What’s Not in 2009?” (Berkshire is listed as a “Not” with a link to another Cramer hit piece)
February 24 Kass “Buffett Watch: Bad News for HOG – Despite the assist from Buffett, there is some bad stuff in Harley-Davidson’s 10-K.”
Then February 28, the New York Times published a lie. In his annual shareholders’ letter released that morning Buffett had written:
“We’re certain, for example, that the economy will be in shambles throughout 2009 – and, for that matter, probably well beyond – but that conclusion does not tell us whether the stock market will rise or fall” (page 3).
That evening, New York Times journalist David Segal published an article which states in the third paragraph:
“But he [Buffett] also needled regulators and an assortment of unnamed chief executives as he predicted that fallout from the credit crisis would leave the stock market a shambles through 2009.”
Regarding a figure whose every utterance is scrutinized for meaning that can rock markets, such sloppiness is at best careless editing. Going on my one experience with New York Times Business Editor Lawrence Ingrassia (cf. “Anti-Investigative Reporter Joe Nocera and The Newspaper of Non-Record“) careless editing of a crucial point is not something I would put past him. Nor would I, for that matter, ask the fellow to whip up a batch of jet fuel. But the consistent direction of such little liberties with the truth must give one pause.
As some readers may be aware, I have known Mr. Buffett since I was a lad, and after my parents, he has been perhaps my greatest teacher in life (which is certainly not to imply any endorsement from him on this Mitzvah of mine). However, I am not writing this article because of that connection, nor have I spoken to him of this, and I am sure he could give two hoots what these clowns write and say about him. Seeing a self-confessed criminal like Jim Cramer (“Jim Cramer is a Complicated Man“) attack Warren Buffett’s ethics is like seeing Ratso Rizzo (the Dustin Hoffman character in Midnight Cowboy) giving grooming lessons to Mr. Rogers, while seeing the New York Times using discredited sources and fabricating positions for Warren Buffett is nothing too unusual, as far as that goes.
Instead, I am writing this because there is a pattern to which we of the Market Reform Movement began calling attention in the last few years, a pattern that is amply described in Chapter 2 of my work here (“Journalists Tried to Be Players But Became Pawns“) and in Mark Mitchell’s many Deep Capture pieces (e.g., “Email Exposes Short Seller Plot to Destroy a Public Company“). These hedge fund squeegee boys got caught in a spotlight (and while mentioning DeepCapture is something they avoid like the plague, from reviewing the IP logs I know that every major news organization in America visits this site regularly and extensively, so I can promise you it is indeed in their spotlight). For a year or more, that pattern submerged itself. Tiny stabs were occasionally taken (see Bethany’s piece on me on her way out the door of Fortune and my response: “David Einhorn, Cheryl Strauss, and the ‘Unavailable’ Bethany McLean“). But by and large, these stumblebums have been on their heels.
Yet suddenly they return, quoting hedge fund choagies to support doomsday predictions while firing up an attack machine on Buffett, up to and including having the New York Times publish a fabrication regarding the single line in Buffett’s letter that will get more attention than any other. So in sum, it appears to me that certain folks have piled up a lot of favors in a favor bank, are short the market, and are using these HandiWipe journalists to crack it for them.
As I said, no one can claim that I am being Panglossian: few have been out there arguing as loud and long as I that the sky might fall.
But right at this moment, I smell skunk.
Errata: DeepCapture has been relocating its servers and this has created numerous issues. A draft of this essay that was inadvertently set live last night at midnight had several errors which have been corrected: a number of flagrant typos were still present (corrected); I misidentified a law professor with a good history with one of San Diego hedge fund choagies (corrected & apologies); and the comments were accidentally turned off (corrected). In addition, you will continue to notice various other glitches occuring in the site: most text is in italics, buttons are appearing where they should not be, and the new navigation format is somewhat stillborn. When the move is completed this week thes problems should get cleared up as well.
One word from Warren on this problem could be worth thousands of pager from all the rest fighting the good fight.
Let’s just short until there’s no financial system left–and no nice resorts, restaurants, etc., to enjoy our wonderful naked shorting profits.
No pun intended–but how short-sighted!
One guy on a forum said he could retire if the Dow hit 1000. What kind of country and world does he think he’ll “enjoy his retirement in” if we go that low?
Simply stop the “Patriotic Ameicans” from betting against America. Stop all shorting and if found to be done jail the offenders as traitors. Its just that simple, but it won’t happen. Who has the bully pulpit? Who has the masses brainwashed into thinking that shorting provides liquidity in the market? STOP ALL SHORTING NOW!!Just another way to steal money from hardworking people and companies that actually do something/make something, for a living. What do the guys on Wall Street actually produce other than economic bubbles?WHAT? Tell me please. All they do is think up of ways to steal money from gullible investors. Ask Madoff and Stanfornd if you don’t believe me. What have these guys ever done for society other than steal from it!!!
Another weirdness with the cracked settlement system is it is possible to take control of a company without owning any shares on a net basis.
Imagine a company with 1 million shares out, all owned by insiders. Simply naked short 3 million shares to yourself in another account. All you have to put up is 2%, temporarily, as the sale is a wash.
Each share is only worth 1/4 of a vote because there are 4 million entitlements outstanding.
You would own 3 million x .25 = .75 million votes and the insiders would only own 250,000 votes.
Use your votes for whatever evil you want, such as buying the company for a song, then reverse your trade and get your 2% back.
THE NSCC-THE “FORGIVING FRATERNITY”
Our DTCC administered clearance and settlement system utilizes a system involving the legal concept of “novation”. “Novation” means “to create anew”. When a trade is executed the selling party owes the buying party the delivery of the securities it sold. During “novation” the delivery obligation of the selling party is “discharged” and the NSCC as the “central counterparty” (CCP) to the trade “assumes” this delivery obligation and promises to “execute” on it EVENTUALLY. The original selling party now owes the NSCC (and no longer the party it sold the securities to) the delivery of that which it sold and the NSCC then promises as the CCP to forward those securities on to the buyer.
For 29 years I’ve been writing on how tricky “novation” can be especially if the selling party is a card carrying member of the party that “assumed” the delivery obligation it recently “discharged” and promised to “execute” on. If the CCP, the NSCC in this case, refuses to act in good faith in executing the delivery obligation it just “assumed” then the financial system supported by that clearance and settlement system is in deep trouble. Why?
In slow motion what happens in “novation” is that an NSCC “fraternity brother” sells securities to somebody half way around the world. Two seconds later it now owes the CCP (the NSCC) the delivery of those shares. The NSCC also just happens to act as the “fraternity headquarters”. The seller of securities all of a sudden now owes itself as a fraternity member and its fellow fraternity brothers the delivery of that which it just sold.
The NSCC just so happens to qualify as an extremely “forgiving fraternity”. A “forgiving fraternity” says to its fraternity brother debtors now that your debt is owed to yourself and your fraternity brothers you don’t have to deliver that which you sold previously as long as you at least collateralize the monetary amount of your failed delivery obligation. The clever part is that as all of these failures to deliver (FTDs) that give rise to readily sellable “securities entitlements” invisibly pile up in the share structure of the corporations targeted by fraternity brothers for destruction then the share price of the corporation predictably plummets. As the share price plummets so too do the collateralization requirements. Why? Because they are “marked to market” on a daily basis based upon the share price.
As the collateralization requirements plummet the money of the unknowing investor on the buy side of that trade involving a failure to deliver flows to the selling fraternity brother despite the fact that he still hasn’t delivered that which it sold. In fact in a system with a “forgiving fraternity” that which was sold never needed to exist in the first place.
Now how clever is that? You sell something that doesn’t exist and two seconds later you owe the debt to yourself and your extremely forgiving fraternity brothers. As if by magic this then automatically results in the investment proceeds of the investor getting duped to flow into the wallet of the fraternity brother that just has to merely refuse to deliver that which he sold. But don’t you have to worry about the fraternity headquarters forcing the fraternity brothers to deliver that which they sold so that they can “execute” on the delivery obligations it “assumed”? No, that’s part of the deal with a “forgiving fraternity”.
The fraternity headquarters (the NSCC management) will with 100% certainty pretend to be “powerless” to buy-in that debt even though it has all of the power in the world to do so. That’s all part of the “package”. In fact what’s really exciting is that when a fraternity brother absolutely refuses to deliver that which it sold the ONLY “cure” available is a “buy-in” and the fraternity headquarters thus bypasses the only solution available. That’s one of the services of a “forgiving fraternity”.
Does the “forgiving fraternity” charge interest on the monetary amount of the failed delivery obligation while it is owing like in the real business world? No, it’s just the opposite. As the share price predictably tanks the money flows the other way i.e. back to the fraternity brother refusing to deliver.
Another thing that is really helpful is that the “fraternity headquarters” is actually an SRO or “Self-Regulatory Organization” that is mandated to act as “the first line of defense against abusive naked short selling frauds” LIKE THE ONE THAT IT SPONSORS! Now how cool is that? The fraternity headquarters d
LOOK this isn’t any more complicated than what most of us have been doing all our lives. We do the right thing. IF PATRICK can easily understand how his company was attacked. And Warren understands how his Berkshire and HIS INVESTORS are being ATTACKED. YET neither can do ANYTHING about such then it’s clear that it’s being ALLOWED. Why is not known but one can have a gazillion guesses. However, one INTEGROUS man standing in front of microphones and demonstrating LEADERSHIP can stop this crap. And it is crap. ANY who have EVER been in the role of STROKE KNOW it’s not hard to do. However it does require DOING IT. Whose got the testes?
Warren GOT CARELESS and because of such has allowed his investors to be VICTIMIZED. NO they aren’t coming at him directly. They are coming at him indirectly and his mistake was to underestimate the enemy. So what to do? Pray someone acts versus LIP SERVICE.
Why is it being allowed? Follow the money.
Jim, that’s the sort of fraud one would expect from a person with the mind of a Bernie Madoff. The whole fraternity is a den of thieves.
No one is immune. No one.
BTW, you can ask Warren a question. He is appearing on Squawkbox Monday for 3 hours with Becky Quick.
I don’t think they’ll show him mine.
You should read the 4-page “comment letter” Bernie Madoff wrote to the SEC in order to enact the “Madoff exemption” from making market makers follow the then “uptick rule”. It was sheer brilliance.
So let me see, Kudlow runs his show this eve and they go after Warren again as he has KASS on. Previously during the day Ol KASS hammered Warren with some help from his side kick Cramer., Then OREILLY does his first 10 minutes going after GE and IMMELT. And while doing so he has a couple of fox bus reps doing their version of FACTS. I guess none of them has heard of ANSS. So let me see Warren has investments in GE. OREILLY goes after GE. GE sits in how many places and was used by how many to do what. YUP…this is like the OLD WESTERN with the BAD sheriff who is in deep with the crooks Where is JIMMY STUART..OR HECK AUDY MURPHY! I usually do the there ought to be a law and there is. Except no one is enforcing such. It would be nice though to see WARREN turn his guns on his naysayers and OL IMMELT turn his guns on OREILLY and NWS. I’d be so happy I’d probably fall out of my recliner. as I scream YES YES.
What is amazing to me is that if Obama simply put an end to settlement failures and forced the buy in of all failed trades and had a one year moratorium on short selling, would we even need a stimulus package????
Who is advising this guy? Bob Shapiro -speak up, man
There is no quit in these guys. None.
Lenofus. apparently this gang is doing their best to bring him and Berkshire and ALL that is within DOWN and at the same time ol Fox news as I stated is doing the same with GE.
It is so flagrant it approaches disgust. Yet no one is doing anything to stop it whether it be this admin or the companies involved. I continue to wait for someone to drop a hammer and when that occurs it will NOT be pretty. Tomorrow would be as good as any day. Yet I still hope for someone to spill their butts. What do you say Anonymous?
“One word from Warren on this problem could be worth thousands of pager from all the rest fighting the good fight.”
Look at it this way. Would you want Warren to tell you?
You seek Yoda.
Whatever happened to James Brigagliano, who used to make fun of the anti naked short selling crowd.
He’s the one who approved the Madoff Exemption.
Here’s a Madoff letter from 1998.
and an article about the start of NASD under him.
Funny, the same James Brigagliano who approved the Madoff exemption in 2001 was accused by Dave Patch of lying in 2005.
James Brigagliano, Asst. Director of Market Regulation and responsible for many of the gaffe’s pertaining to Regulation SHO submitted a document to Senator Paul Sarbanes in September 2005 in which he misrepresented the truth. He lied!
Huh, it deleted my post. James A Brigagliano approved the Madoff exemption and sent his buddy Bernie a letter on February 9, 2001 approving it.
The letter seems to be have scrubbed from the internet. I had found it online a couple months ago, but it seems to be gone now.
None of the bad ones in the SEC fear any thing blowing back at them except a huge signing bonus and paycheck from the ones they cover up for in the crooks corner.
And even worse, the elected ones seem to be just as bought off right across the board as well.
What has happened to our Country? Or has it ever been what we thought it was?
God help us!
I’ve been reading this site for awhile now and you gotta STOP all this bullshit.
WHY….becuase I’d rather take a chance and get fleeced by these operators then knowing , the government , including the CIA, IRS, FBI, HS, SEC, and the Media, are doing nothing about these accusations.
Look if you know about these things, I am sure they know more. So please STOP, you are freaking me out and i don’t want to go postal.
OUR COUNTRY STILL EXISTS. IT EXISTS IN YOU/PATRICK/MARK/JUDD/DAVE/DR JIM/SEAN/ANONYMOUS aka the new deep throat? and many others. Me included. It’s WE that have the fortitude to go the distance and when the time comes we WILL PREVAIL. MAKE NO MISTAKE ABOUT SUCH. Those who are corrupt have made a serious mistake. THEY have UNDERESTIMATED US. This is NOT new. It is a flaw of those who are disciples to wormwood
STUNNED.don’t be STUNNED. it is as many here had presented via real documention and based on FACTS. What to do. REMEMBER THEY WORK FOR US and it’s UP TO US to MAKE THEM DO THEIR JOBS. ALL we need to do is find THAT ONE OR TWO OR THREE that WILL LEAD.
I suppose God is the only one who can help us because the regulators, the politicians, the media, the one gOLDEN rULE:-Those who stole the gold under the WTC make the rules. When is someone going to ask/verify if we indeed have the gold to back up all those new green backs flying hot off the printing press? How about verification the gold we supposedly have or are holding for other countries is actually there? Lets see, the perfect storm…steal the gold, steal the money…..You can bet if they will take the money, they already took the gold…If you have gold certificates, chances are you are holding IOU’s just as you were holding IOU’s for shares in a company.
I hope each and every one involved in the financial destruction of the USA rot in Hell. May God pass up your soul.
Can you say Hedge fund whore?
The word is out. What we are witnessing in the total calculated crash of our markets and the destruction of America. It seems now that the Masses are getting it, there is an expedited and controlled crash in the making taking every last dime until it is all over. These crooks and the ones who have aided and abetted have had a good 10-15 year run. They have there millions and billions and the gig is up. Now comes the ending bankruptcy and complete cover-up before the curtains close and the crooks find another country to reside in. I am guessing the Swiss Alps because we don’t have the balls to go after the money. It is just about closing time.
Ok so what to do. Who here has sent Patricks lates to all they know included the enforcement agencies? Who here has sent Dr Jim DeCosta to all they know including media? who here is sending Mark and Judds links to all they know and media. If you haven’t then you should and should begin NOW. By doing so you will be taking away the excuses and exposing their butts with the WEIGHT OF EVIDENCE. Do it..DOCUMENT IT and then you have the EDGE. At some point you can reveal or add to who knew what and when. OH and YES I’m doing it..It’s all about knowing that at some point..SOMEONE is going to DO THEIR JOB and when they do..look out bad guys and girls. OH there is a caveat to all of this. The very same that are negligent will want you and me to fix it. OH that is occurring as they are letting come in so and use our tax money so they can lift em up. HOWEVER that won’t get them a free pass in the future. ASK COX..his mea copa will buy him nada nor will Mozillas giving back his bonuses buy him a free pass or Cramers FEIGNED sincerity. KEEP UP the pressure and don’t give up till they break.
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