Wall Street: Crime of the Century

[Rajiv]

Financial Sense Series on Wall Street Stock Manipulation

Long but well worth listening

[MEDIA]http://www.netcastdaily.com/broadcast/fsn2007-1222-3c.mp3[/MEDIA] Part-1 (49:17)


[MEDIA]http://www.netcastdaily.com/broadcast/fsn2008-0531-3b.mp3[/MEDIA] Part-2 (51:52)


[MEDIA]http://www.netcastdaily.com/broadcast/fsn2008-0607-3b.mp3[/MEDIA] Part-3 (1h00)


[MEDIA]http://www.netcastdaily.com/broadcast/fsn2008-0614-3b.mp3[/MEDIA] Part-4 (1h17)


[MEDIA]http://www.netcastdaily.com/broadcast/fsn2008-0621-3b.mp3[/MEDIA] Part-5 (1h02)

[Rajiv]

Re: Wall Street: Crime of the Century

The Bloomberg video Phantom Shares (25 min) referenced above

Also a good discussion at Elain Supkis' blog
Naked Short Traders In Red Hot Hell

A reader kindly sent me a new link, 'Deepcapture.com' which is a site run by a businessman who believes that the phantom financial world of naked short sellers in the hedge fund pirate/hell hound high seas has defrauded himself and other business people. To explore this story means plunging deep into the darker pools of finance, news reporting and downright demonic affairs with everyone pointing fingers at each other. There are no 'good' people in this story. But lots of lost souls and quite a few swindlers not to mention outright criminals, corrupt politicians and the many despicable follies and wild games of the people who are the bleeding heart at the center of our financial world. Like the DTCC, the organization originally set up to transfer ownership of stocks! All are now in this bizarre universe where there are many secret portals, secret chambers and invisible monsters that destroy or create wealth.


The easiest way to figure out what is going on is to first watch this Bloomberg TV story. Bloomberg is by far, one of the least biased or outright fraudulent of the mainstream business news services today. Now that Murdoch has bought the Wall Street Journal, even the little sanity there has vanished.

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Now, let us visit 'Deep Capture.com' and it is an interesting read from the time but very time consuming so I will talk about only one aspect of all this:
The Story of Deep Capture - by Mark Mitchell

It is also important to recognize the role of The Depository Trust and Clearing Corporation (DTCC), an organization headquartered in New York City. DTCC is where stock trades are processed — more than $1.5 quadrillion worth of them every year. That’s 30 times larger than the entire gross product of the entire planet. According to the Wikipedia entry on the DTCC, authored largely by Gary Weiss, the DTCC “streamlines processes that are critical to the safety and soundness of the world’s capital markets.” Indeed, the DTCC is one of the world’s most important financial institutions. But what the Wikipedia entry does not mention is that the DTCC is one of the least transparent organizations on earth. No joke: America’s founding fathers would take up arms if they knew that anything like the DTCC could exist in this country. There are funds exceeding 30 times global output flowing through a sealed black box that is not understood even by the SEC officials who are supposed to regulate it.
One former SEC official describes his colleagues visiting the DTCC and asking, “So, what is it you guys do here, again?” A former DTCC employee confirms that the SEC would occasionally send junior people, and summarizes their oversight as follows: “The SEC staffers would say, ‘What do you do?’ and ‘How do you do it?’ After we would explain to the SEC folks what the DTCC did, the SEC people would say, ‘OK, are you doing it?’” These meetings would occur about once per year, and take no more than two or three hours. That was the oversight provided by regulators to the sealed black box corporation through which 30 times the economic output of the entire world flows.
Because the DTCC processes every short sale, it knows which brokers have hedge fund clients that are selling stock and not delivering it. The organization also knows precisely how much phantom stock is circulating in at least one part of the system (additional phantom stock is created outside the DTCC, or “ex-clearing”). Yet, perhaps because it is “user owned” - that is, it is owned and operated by the very Wall Street brokerages that sell the phantom stock - the DTCC refuses to release any information.
Meanwhile, the organization leads an energetic public relations campaign denying that phantom stock is a problem. It sics lawyers and a pit bull flack named Stuart Z. Goldstein on journalists who attempt to report on the subject. The few journalists who have managed to secure an interview with a DTCC official describe having to pass through a security cordon of machine-gun wielding guards, X-ray machines, and written questionnaires.

So, what is the DTCC? A crypt! A hiding place for invisible things! The place where ALL THE DERIVATIVE CONTRACTS ARE PROCESSED! HAHAHA.
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Also See this presentation

Dr. Byrne's Businessjive.com Presentation - Dark Side Of The Looking Glass - Parts 1-4

This stunning series, created in conjunction with Businessjive.com, is narrated by Dr. Byrne, and is a fun and informative way to understand the problem from the perspective of a prominent CEO and academician.

[Rajiv]

Re: Wall Street: Crime of the Century

You may get more information at Sanity Check

Naked selling may be much more endemic than is it is thought to be.

Some pertinent historical facts

• The SEC's track record of action against Wall Street players is worse than abysmal.

• Broker/dealers have transitioned from owing their clients a fiduciary obligation of safekeeping, to a "customer" relationship, that is essentially adversarial – caveat emptor being the rule for customers.

• As commissions have dwindled to nothing (due to the advent of discount brokers, following deregulation) Wall Street is now beholden to the large money movers for their income, and stock lending is one of their biggest profit centers.

• Stock lending is exclusively an activity used by short sellers, who must borrow stock before selling it.

• Short selling is a bet on stock price declines. The short seller borrows stock, and then sells that borrowed stock, hoping to buy it back at a lower price later, when he returns it to the lender.

• Illegal "naked short selling" involves placing a sales transaction, but not borrowing the stock, and simply failing to deliver it on delivery day. It is also called "failing to deliver" or FTD – or delivery failure.

• Delivery failure is a significant problem nowadays, as it can be used to run stock prices down in a manipulative manner. Delivery failure in any other industry is called fraud. Hedge funds are the biggest culprits in this illegal trading strategy, with broker/dealers right behind them in the culpability queue.

• Hedge funds are now the largest players in the US equities markets, representing the majority of trading, with almost $2 trillion under management.

• Hedge funds are large, virtually unregulated pools of anonymous money, used to invest in any way the operator sees fit.

• Prime brokers allow their hedge fund customers leverage on their assets, meaning that for every dollar of asset, they could easily hold $10 of short positions.

• This over-leverage presents a systemic risk should positions in several larger funds go the wrong way, as there isn't enough collateral to cover the domino effect of multiple positions being forced to cover.

• This over-leverage creates an environment where the brokers are now pregnant with their hedge fund customers' liabilities, and have a vested interest in seeing depressed stock prices remain depressed – if the stocks go up, the hedge funds could easily fail, and the brokers are on the hook to buy-in and deliver the stock owed by the funds – resulting in brokerage failures.

• The DTCC is ultimately at risk for this domino effect, as brokerages fail.

• The DTCC is owned by the brokers, thus is the brokers.

• The DTCC processes over $1.2 quadrillion (million trillion) every year, and owns most of the stock American investors hold in their accounts - but most of the country has never heard of the company. The total GNP of the planet is about $20 trillion per year.

• 1% of all trades in dollar volume fail to settle (be delivered) every day, per the SEC.

• $130 billion to $150 billion of equities trade every day.

• $2 trillion of total trades are processed by the DTCC every day, including bonds.

• The SEC does not qualify whether they refer to total trades, or total equities, when referring to 1% failing to settle.

• The SEC keeps the total dollar value of trades that have failed to be delivered secret.

Why do you think Eliot Spitzer was entrapped and bought down?

[Jim Nickerson]

Re: Wall Street: Crime of the Century

You may get more information at Sanity Check

Naked selling may be much more endemic than is it is thought to be.

Some pertinent historical facts



Why do you think Eliot Spitzer was entrapped and bought down?

Rajiv,

Charles McKay brought this topic of naked short selling up here several years ago. I concluded Byrnes is not a crazy guy, and that there is a helluva lot going on in this area of FTD that are unfathomable. I asked a rep. at Schwab if the shares in my accounts are really there, and he gave me some bullshit answer which translated into "I could not find out." Ole Nervous Drake, who right or wrong seems to be one who thinks "truth" exists, should start focusing his nervous energies on this little problem.

[Rajiv]

Re: Wall Street: Crime of the Century

FTD? Jim, that did not jog any association -- what does that stand for?

Also, if you own shares, take delivery of the share certificates, and check with the corporation as to their authenticity, and make sure that you are the shareholder of record! Send the certificates to the broker only when you want to sell the shares!

[Jim Nickerson]

Re: Wall Street: Crime of the Century

FTD? Jim, that did not jog any association -- what does that stand for?

Rajiv, check your post #3 above. Tell me you are putting up stuff here you don't understand? I do it all the time, hoping to gain comments that aid my comprehension. Failure to Deliver stock that is borrowed to sell short. I "borrow stock" via the broker I guess, and sell it short. You buy it, and it shows up in your account that you own the position. But if the broker does not actually produce the stock I borrowed, then what you bought from me really isn't in your account. I think that is how I understand it.

Here is a link that supposedly gives information on stocks that have not been delivered, but is actually useless in that no serious numbers of how much is not delivered can be determined. It is a big scam, no telling how big, and no telling how it might someday play out.
http://www.nyse.com/regulation/membe...?date=20080627

[Jim Nickerson]

Re: Wall Street: Crime of the Century

FTD? Jim, that did not jog any association -- what does that stand for?

Also, if you own shares, take delivery of the share certificates, and check with the corporation as to their authenticity, and make sure that you are the shareholder of record! Send the certificates to the broker only when you want to sell the shares!

For me being inclined to trade, what you describe is safe and probably the answer to the super paranoid--which perhaps we all should be, but dealing with certificates would effectively stop me from trading.

[Rajiv]

Re: Wall Street: Crime of the Century

Sorry about that -- a blank moment! "Failure to Deliver" (duh!) -- the mental association to the acronym had just not been made! -- It is a new topic for me - though it tends to confirm some of the suspicions I had when I was more active in trading -- This was a few years ago.

[Rajiv]

Re: Wall Street: Crime of the Century

For me being inclined to trade, what you describe is safe and probably the answer to the super paranoid--which perhaps we all should be, but dealing with certificates would effectively stop me from trading.

Of course -- if you are an active trader -- the proferred advice would not work -- in that case make sure of your broker -- and consolidate your cash profits

[Jim Nickerson]

Re: Wall Street: Crime of the Century

Of course -- if you are an active trader -- the proferred advice would not work -- in that case make sure of your broker -- and consolidate your cash profits

Rajiv,

I believe it is a problem when it comes to "making sure of one's broker."

I tried to do that and it got me no assurance.

It would be interesting if a number of readers here would ask their beloved brokers if the broker's company can assure one that positions that show in one's account are actually not just some sort of entry that shows ownership versus representing actually delivered shares. Based on the information in the NYSE link I posted above, it seems absolute that some people who think they own certain shares do not in fact have anything other than a ledger entry into their accounts, because what these people bought was never delivered, or is yet to be delivered, and if one believes Byrnes contentions, some shares will never be delivered--and I think I agree about Byrnes's contention.

[Jim Nickerson]

Re: Wall Street: Crime of the Century

Of course -- if you are an active trader -- the proferred advice would not work -- in that case make sure of your broker -- and consolidate your cash profits

I guess one answer, until and if the music ever stops playing, is to trade. Whether one actually had the shares delivered or not, makes no difference once you sell them the position (whether real or just a ledger entry) and get the cash (assuming the cash is delivered).

Rajiv, what exactly did you mean "consolidate your cash profits"?

[Rajiv]

Re: Wall Street: Crime of the Century

If you are an active trader, the main aim is to get cash -- once a position has been cashed -- get the money out of the broker, and spread in a diversified manner into your less risky "Cash" investments -- of course, the "good as cash" (CDOs etc.) are no longer "good as cash" -- Look at your liquidity requirements and diversify accordingly.

Make sure that the active trading is a small part of your total assets -- if not, spread your trading between multiple brokers (another way of diversifying and hedging)

[Rajiv]

Re: Wall Street: Crime of the Century

I am embedding the presentation above
Dr. Byrne's Businessjive.com Presentation - Dark Side Of The Looking Glass - Parts 1-4

[Jim Nickerson]

Re: Wall Street: Crime of the Century

I am embedding the presentation above
Dr. Byrne's Businessjive.com Presentation - Dark Side Of The Looking Glass - Parts 1-4

Good, Rajiv, your link here is the same one I got to from whatever Charles MacKay put up earlier and which is now deep within the bowels of iTulip.

Though this is fairly long, I learned a good bit from it, and I assume Byrnes know of what he speaks. It does not offer comfort to anyone who gains more understanding about just how much the deck is stacked against us as individual investors.

I laugh when I read about how screwed up foreign markets are compared to how the US operates. If they exceed the crap that exists here, then for sure one should not be investing abroad.

[Rajiv]

Re: Wall Street: Crime of the Century

Here is another video

[MEDIA]mms://real.dwjtv.com/hosting/ncans2_999.wmv[/MEDIA]

I do believe that with the collusion of two or more brokers, stock prices can be manipulated in either direction -- up or down!