In fact, they don’t understand enough about the basics of stock trading and short selling to understand what naked shorting really is.
To help, we’ve created a guide to short selling that will tell you everything you need to know.
Tim Geithner Is A Sniveling Scamster
by ilene - April 2nd, 2010 4:40 pm
Tim Geithner Is A Sniveling Scamster
Courtesy of Mike Whitney writing at the Market Oracle
Whew. That was fast. It didn’t take long for Wall Street to figure out how to game Obama’s new mortgage modification program, did it? The plan was hyped as help for "struggling homeowners", but it turns out, it’s just another stealth bailout for pudgy bank-execs. It’s funny, the program hasn’t even kicked in yet and, already, bigtime speculators are riffling through their filing cabinets looking any garbage paper they can find to dump on Uncle Sam. Take a look at this on today’s Bloomberg report:
Subprime-mortgage securities are rising at an accelerating pace as the U.S. begins to encourage reductions to homeowners’ balances, which may lead to fewer foreclosures and a quicker end to the housing slump….Senior-ranked bonds tied to borrowers with poor credit will mostly benefit after the Treasury Department said for the first time it would seek to cut the size of mortgages, reducing the likelihood that loan modifications will fail, according to JPMorgan Chase & Co., Morgan Stanley and Barclays Plc. (Bloomberg)
What does it mean? It means that Obama’s mortgage modification extravaganza has touched-off a gold rush in toxic paper. Subprime securitizations, which had been worth next to nothing, are now the hottest trade on Wall Street. It’s a subprime bonanza! The investment sharpies are scarfing up all the crummy MBS they can get their hands on, because they know they can trade it in for Triple A FHA-backed loans when the program get’s going. It’s another swindle cooked up by Treasury Secretary Timothy Geithner to keep the brokerage clan in the clover. Here’s how a Wall Street veteran explained it to me:
"It looks like the investors in securitizations will be swapping underwater real estate for govt-insured paper… I think the scam here is just to provide some cover so the hedge funds and other high net worth individuals can trade their low grade paper for Triple AAA mortgages insured by the FHA at the taxpayer expense."
That’s it, in a nutshell. The faux-foreclosure prevention program has nothing to do with helping homeowners. That’s just diversionary gibberish to confuse the public. The real objective is to create a government landfill (aka--FHA) where the banks and other financial institutions can dump their toxic MBS-sludge and walk away with gov-backed loans. Get a load of this:…
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Wall Street Panics In Wake Of Galleon Insider Trading Case
by ilene - October 16th, 2009 6:44 pm
Wall Street Panics In Wake Of Galleon Insider Trading Case
Traders at hedge funds and Wall Street trading desks are quaking over the news that the FBI tapped the phone lines of Galleon founder Raj Rajaratnam.
The news that the government is (finally) employing techniques typically used against organized crime or international drug cartels is raising fears about who might be next.
We spoke to traders at two prominent hedge funds who both described the feeling at their firms as “panicked.”
“Suddenly you are wondering about every conversation you’ve had about a public company, wondering if the Feds were listening in,” one trader said.
Traders spend a lot of time exchanging information with colleagues and reaching out to people in the industries they cover in hopes of gaining an edge. Rumors, gossip and loose talk are their bread and butter.
Even when traders learn inside information, there is usually little chance of getting caught. The SEC watches unusual trading activity but an active trader will usually get a pass if he’s buying or selling stocks that he usually trades in anyway.
Even those cases that do come up are hard to prosecute, especially if no one confesses. So occasional civil cases are brought but almost no criminal cases emerge involving traders.
This case shattered that pattern because the government used the tools it uses against hardcore drug criminals and terrorists to uncover the alleged insider trading.
Traders are now living in a very different world. Legally speaking, trading is far more dangerous than anyone knew.
Now see the scandal in photos >
See Also:
Raj Rajaratnam Funded Sri Lankan Terror Group
Galleon "Shocked" By Raj Rajaratnam Arrest
Will Raj Rajaratnam Spend 200 Years In Jail?
Previously, John Carney reporting:
Raj Rajaratnam, Founder of $3 Billion Galleon Group Hedge Fund, Arrested (GOOG, AMD, AKAM, CLWR)
Prosecutors and the FBI have announced that they have filed charges against several people involved with the Galleon Group hedge fund, including founder Raj Rajaratnam. Galleon is a major hedge hund player known for its investment in technology stocks…
Most notably, the government is filing criminal…
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Short Seller Fleckenstein: I’ll Start Selling AFTER Earnings Season
by ilene - October 8th, 2009 7:31 pm
Short Seller Fleckenstein: I’ll Start Selling AFTER Earnings Season
Courtesy of Vincent Fernando at Clusterstock
Fleckenstein Capital’s twelve-year-old short-selling fund that shut down last December is planning to start hunting around again for opportunities.
Yet they’re waiting until after earnings season, and could even wait until early next year.
For Fleckenstein Capital, while 2010 could be a very rough year for the market, 2009 could end strong. Even these shorts don’t want to step in front of earnings season right now.
Bloomberg: Future bets against U.S. stocks will “almost certainly” include technology companies, especially semiconductor makers, Fleckenstein said.
“They’re going to report good earnings, but a lot of it is a function of double- and triple-ordering, so their businesses are going to look better than they really are,” he said.
In a Bloomberg TV interview, Bill Fleckenstein said he expects weak businesses to run into trouble next year, especially if rates start rising. Nevertheless it appears he wants to see the economy’s "less worse" trend come to an end before he takes action.
What does he favor in the meantime? Shares in gold related companies.
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Everything You Ever Wanted To Know About Naked Shorting But Were Afraid To Ask
by ilene - October 1st, 2009 1:00 pm
Everything You Ever Wanted To Know About Naked Shorting But Were Afraid To Ask
Courtesy of John Carney at Clusterstock
One of the reasons people get worked up about naked short selling is that they don’t understand it.
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Madoff’s Gun-Toting, Drug Taking, Tax-Cheating CFO
by ilene - August 14th, 2009 12:17 pm
Madoff’s Gun-Toting, Drug Taking, Tax-Cheating CFO
So remember how we wondered whether Frank DiPascali was getting enough from the feds for his cooperation in the investigation in Bernie Madoff’s scam?
Well, it turns out that part of his deal is having the feds overlook his history of taking illegal drugs, carrying an illegal firearm right up until the time of his arrest and reporting that he had no income during a year when he earned $4 billion.
The New York Post’s Kaja Whitehouse reports:
According to documents released yesterday by federal prosecutors, DiPascali, the former CFO at Madoff’s investment firm, agreed to spill the beans about Madoff in part to guarantee the feds didn’t go after him on "use of controlled substances prior to 1992" and for possessing illegal firearms up until last Friday.
The 52-year-old Queens native, who is cooperating with prosecutors in the Madoff scandal, is also avoiding criminal prosecution for evading taxes, the documents show.
Indeed, DiPascali cheated Uncle Sam out of several million dollars between 2002 and 2007 through a number of shady schemes, including depositing his income into accounts under other names and filing false returns. In 2006, for example, DiPascali reported zero dollars in taxable income even though he actually earned $4 million that year. He also reported no income in 2002 and 2005.
See Also:
The Bernie Madoff Restaurant Index
Will Sending DiPascali To Jail Cripple The Madoff Investigation?
Harry Markopolos: CDS Fraud Will Make Madoff Look "Small-Time"
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The Latest Wall Street Trading Scam That Costs You Billions
by ilene - July 22nd, 2009 10:05 am
The Latest Wall Street Trading Scam That Costs You Billions
Courtesy of Henry Blodget at Clusterstock
The paper, Toxic Equity Trading On Wall Street, appears to have been published late last year by Sal Arnuk and Joseph Saluzzi from a firm called Themis Trading. (One word of caution: We have not yet verified a single assertion made in the paper, and we had not heard of Themis Trading. We would be grateful if those of you with insight into this would help us understand the real facts here.)
The paper is embedded below (you can also download it at Themis’s web site). Here, in brief, is the world it describes:
Many trading orders these days are executed by computers. Like human traders, the computers break big orders into small chunks (say, 100 or 500 shares) and then match them with orders on electronic stock exchanges. The reason the orders are broken into chunks is so they won’t move the market too much. Stock trading is relatively illiquid, and big orders can drive the price of a stock sharply up or down. Since the dawn of Wall Street time, clever traders have tried to hide the amount of stock they ultimately want to buy or sell to avoid having their own orders move the market sharply against them.
In recent years, such "algorithmic" electronic trading execution has grown in popularity, and a number of electronic trading strategies have sprung up to exploit it.
In one of these strategies, called "liquidity rebate trading," a program analyzes the incoming order flow on an electronic exchange to try to spot a big institutional order that is just hitting the market (apparently this is relatively easy to do). The program then front-runs the order by modestly outbidding the institution for the stock and then turning around and selling it to the institution at a higher price than the institution would have otherwise paid.
Front-running is an age-old cheating technique: A trading firm gets a big order from a client and, before it executes it, buys some of the same stock for itself. Front-running is, in fact, what many Wall Street insiders thought Bernie Madoff was doing before they discovered he…
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Madoff’s Sons: Unemployed, Broke And Just Hoping To Stay Out Of Jail
by ilene - June 3rd, 2009 4:27 pm
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Madoff’s Sons: Unemployed, Broke And Just Hoping To Stay Out Of Jail
Courtesy of John Carney at ClusterStocks
The upcoming issue of Vanity Fair portrays the lives of Bernard Madoff’s sons and asks "Did The Sons Know?" Mark and Andrew Madoff feel betrayed by their father, David Margolick writes for Vanity Fair. Page Six today highlights some of the juicier details:
- Blame mom as an enabler. Andrew and Mark Madoff aren’t speaking with their mother Ruth Madoff. They don’t suspect that she was involved with the scheme, but they believe her tendency to side with Bernie regardless of the the circumstances enabled his crimes.
- Avoding using the Madoff name. Andrew Madoff and his fiance Catherine Hooper (pictured with a fish, above) use her name when making restaurant reservation. Andrew’s estranged wife, Deborah, orders groceries from FreshDirect using her maiden name.
- Excessive self-pity. * Jeff Wilpon, whose family owns the Mets and lost hundreds of millions in Madoff’s scheme, remains friendly with Mark Madoff. But that is being strained by Mark’s "excessive self-pity. "
- Strained relations. Hooper gave Andrew a birthday card in April that said, "Hope you have a fun day doing all the things people in prison wish they could do." When Andrew told her that his real wish was to have his parents back, she shot back, "Yeah, they were a really nice idea."
When Andrew complained to an African American friend that he is unemployed, broke, and "just trying to stay out of jail — my name is mud," his friend replied: "Well, now you’re just like every black man in America."
There’s more at Page Six, including the shunning of the Madoff grandchildren by classmates at the New York City private school, Dalton. If this sampling is any indication, we really can’t wait to read Margolick’s full piece in Vanity Fair.
Reuters reveals that the article says Mark Madoff scrutinizes every story and blog on the scandal. Andew, on the other hand, appears to have detached himself emotionally. He calls the situations "a father-son betrayal of biblical proportions." Cue the violins!
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the site