Part 2 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX
I will start where I got cut off. Caution contains some x rated language.
(See Part 1 - http://www.nowpublic.com/world/naked-shorts-75-000-cracking-wall-street-cover)
Now when I say the SEC I know there are a lot of good, hard working people at the SEC that are trying to do their jobs properly, like Gary Aguirre, before the SEC canned him, I mean it sincerely. I am referring to the crooks at the top who are in bed with the naked shorting thieves.
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What’s wrong with this picture?
Does anybody have the option of investing in 401K’s that short companies. I don’t know of any. Big traders are allowed to short stocks, and naked short stocks. Little guys don’t have the same options. When was the last time Cramer told you to go short? He won’t. You throw your money in long, and they will suck it out from under you. So the working class stiffs get to put their money into 401k’s and the crooks who have billions in ill gotten gains are allowed to short everything, naked short it, carpet bomb the stocks, take the money out, buy Van Goghs, and leave Joe Schmoo living in his car eating dog food from a can in his “golden” years. They have so much money they can sit on a stock and keep the price down naked shorting it for years if they have to, and just wait for one bad quarter, and then it’s “bombs away”, and suddenly your money is theirs.
As the Easter Bunny says,
“As to who is sucking out all the money being gained by gaming the system, how do you think so many hedge fund managers are making close to a billion a year, or more, without generating anything? No new drugs, no shoelaces, no intellectual property….nothing. Just pulling the money out of the market. They win. You lose. You pay, they collect.”
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For a while we cheered when we read the news. Then the shoes began dropping.
Curbing Short-Selling Abuse
Liz Moyer, 07.15.08, 5:42 PM ET
Naked short-sellers are diving for their drawers.
What could be the beginning of a broad crackdown on short-sale abuses came Tuesday, when Securities and Exchange Commission Chairman Christopher Cox told a Senate committee the agency was moving swiftly to prevent mischief in the trading of shares of Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ), the battered mortgage finance companies.
. . .
Many hedge fund managers deny naked shorting occurs, but a growing number of company executives, from bigger and bigger companies no less, have complained that short-sellers have used manipulation to drive their shares down. Clearly, the SEC was concerned enough about it (and probably got an earful about it from enough constituents) that it decided emergency action was needed.
Plenty are angry about not being included in the emergency club, however. Patrick Byrne, chief executive of Overstock.com (nasdaq: OSTK - news - people ), who has campaigned for three years for the SEC to tighten the locate requirements for short-sellers, says the fact that only a few big financial companies benefit from the special rules means there is a regulatory “apartheid system.”
“It’s the theater of the absurd,” Byrne says.
Critics say the SEC has been dragging its feet on tighter rules on short-selling. Last year it controversially removed the rule that short sales could only be made on an uptick in a stock. Also, the agency recently extended a comment period on rules that would eliminate option market makers’ exemption from the locate requirement. Critics say the option market makers’ exemption, together with the SEC’s elimination of the uptick rule last year, has exacerbated the downward pressure on heavily shorted stocks.
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NOT SO FAST! DON’T CELEBRATE YET!
SOME ANIMALS ARE MORE EQUAL THAN OTHERS.
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SEC to grant exemptions….
The charade is complete.
UPDATE 2-SEC to grant market makers leniency on short sales
Fri Jul 18, 2008 2:49am BST
(Recasts, adds SEC statement and comments from hedge fund lobby group’s head)
By Svea Herbst-Bayliss and Rachelle Younglai
BOSTON/WASHINGTON, July 17 (Reuters) - U.S. regulators said they would grant some leniency to certain market makers who sell stocks short, responding to pressure from fund managers and brokerages to clarify how new restrictions on the practice would work.
The guidance came from the Securities and Exchange Commission late on Thursday after it stunned financial markets by announcing unprecedented restrictions on short-selling two days before.
The rule, which takes effect on Monday and is expected to last at least 30 days, is designed to restrict improper short selling of shares in 19 financial firms, including recently battered Fannie Mae (FNM.N: Quote, Profile, Research), Freddie Mac (FRE.N: Quote, Profile, Research) and Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research).
“The staff is recommending exceptions to the short sale order for market makers of the 19 stocks and their derivatives from arranging to borrow in advance for short sales in their marketmaking and related hedging activities, to avoid constraining the market makers’ provision of liquidity,” SEC spokesman John Nester said by e-mail.
. . . . .
Because naked short selling is not considered to be widespread, hedge fund managers and the Managed Funds Association, one of the $2 trillion industry’s trade lobby groups, called the move unnecessary as well as confusing.
SEC staff met with representatives from the MFA on Wednesday to discuss the logistics, said Richard Baker, a former congressman and the group’s new chairman and CEO.
“Short selling is a legitimate and valuable trading strategy as well as a vital component of providing price discovery and promoting efficient markets,” Baker said by e-mail, adding that since regulations already stipulate a three-day settlement, “it is not clear why this extreme measure is warranted.”
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SEC Enhances Investor Protections Against Naked Short Selling
FOR IMMEDIATE RELEASE
Washington, D.C., July 15, 2008 - The Securities and Exchange Commission today issued an emergency order to enhance investor protections against “naked” short selling in the securities of Fannie Mae, Freddie Mac, and primary dealers at commercial and investment banks.
The SEC’s order will require that anyone effecting a short sale in these securities arrange beforehand to borrow the securities and deliver them at settlement. The order will take effect at 12:01 a.m. ET on Monday, July 21. In addition to this emergency order, the SEC will undertake a rulemaking to address these issues across the entire market.
“The SEC’s mission to protect investors, maintain orderly markets, and promote capital formation is more important now than it has ever been,” said SEC Chairman Christopher Cox. “Today’s Commission action aims to stop unlawful manipulation through ‘naked’ short selling that threatens the stability of financial institutions. We will continue our vigorous commitment to investors by working within the SEC and in close cooperation with our regulatory counterparts to promote the continued health and vibrancy of our markets.”
The Commission’s emergency order, pursuant to its authority under Section 12(k)(2) of the Securities Exchange Act of 1934, will be effective at 12:01 a.m. ET on July 21, 2008 and will terminate at 11:59 p.m. ET on July 29, 2008. The Commission may extend the order to continue it in effect thereafter if the Commission determines that the continuation of the order is necessary in the public interest and for the protection of investors, but for no more than 30 calendar days in total duration.
The securities identified in the Commission’s order:
Company Ticker Symbol(s)
BNP Paribas Securities Corp. BNPQF or BNPQY
Bank of America Corporation BAC
Barclays PLC BCS
Citigroup Inc. C
Credit Suisse Group CS
Daiwa Securities Group Inc. DSECY
Deutsche Bank Group AG DB
Allianz SE AZ
Goldman, Sachs Group Inc GS
Royal Bank ADS RBS
HSBC Holdings PLC ADS HBC and HSI
J. P. Morgan Chase & Co. JPM
Lehman Brothers Holdings Inc. LEH
Merrill Lynch & Co., Inc. MER
Mizuho Financial Group, Inc. MFG
Morgan Stanley MS
UBS AG UBS
Freddie Mac FRE
Fannie Mae FNM
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Here is an excerpt from David Patch’s, of Investigate the SEC, latest letter to the SEC where he brings up the rest of us who continue to watch our retirement money go into death spirals.
SEC Executive Order to Protect Facilitators of Fraud - July 16, 2008
The abuse to these thinly traded companies takes place through a network of abusers but in the end the network can only be facilitated with the aid of the very institutions Chairman Cox just threw the lifeline to.
When the trade fails settlement it is the Goldman Sachs, the Lehman’s, the Merrill Lynch’s, the Morgan Stanley’s, and all the other prime brokerage houses who hold these fails on their books indefinitely. Each colludes with each other to dismiss the settlement responsibilities associated with the contract to settle they agreed upon. The 3-day settlement periods are ignored for trade commissions, liquidity, and the rights to future business from those who sold what did not exist.
If any company in the US Capital Market deserves an umbrella of protection it is a company publicly recognized as over-burdened with settlement failures. These companies are not hard to find, the list is published daily by the major market centers, it is called the Regulation SHO threshold security list and there are 591 public companies identified today.
Taking a closer look at the SEC’s special list of protected entities none are SHO threshold securities. By choosing non-SHO companies put protecting such against naked short sales falling below 0.5% the SEC is making admissions that in highly capitalized companies it does not take 0.5% of the shares outstanding to fail to achieve manipulation levels. What exactly does that say about the threshold levels defined?
The real solution lies with a division of the SEC that has yet to accept that this abuse exists.
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Oh, did I mention that Gary Weiss, Overstock basher extraordinaire, has allegedly used the computers inside the The Depository Trust & Clearing Corporation (DTCC), which is the United States stock settlement house.
DTCC, through its subsidiaries, provides clearing, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and over-the-counter derivatives. In addition, DTCC is a leading processor of mutual funds and insurance transactions, linking funds and carriers with their distribution networks.
DTCC’s depository provides custody and asset servicing for 3.5 million securities issues from the United States and 110 other countries and territories, valued at $40 trillion. In 2007, DTCC settled more than $1.86 quadrillion in securities transactions.
DTCC operates through six subsidiaries - each of which serves a specific segment and risk profile within the securities industry:
* National Securities Clearing Corporation (NSCC)
* The Depository Trust Company (DTC)
* Fixed Income Clearing Corporation (FICC)
* DTCC Deriv/SERV LLC
* DTCC Solutions LLC
* EuroCCP Ltd.
DTCC’s joint venture company, Omgeo, has over 6,000 customers in 45 countries and plays a critical role in institutional post-trade processing, acting as a central information management and processing hub for brokers, investment managers and custodian banks.
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Judd Bagley of AntisocialMedia.net writes
Gary Weiss: his DTCC ties and lies
Possibly the biggest single “a-ha!” moment I’ve had while writing this blog came in late January of 2007, when I discovered that one week earlier, Gary Weiss had edited Wikipedia while logged in to a computer on the network of the Depository Trust & Clearing Corporation (DTCC).
The basis for that conclusion is explained here.
This may not seem like a big deal to most, but it turned out to be a huge deal to those of us who had spent a full year enduring Weiss’s attacks without any clear understanding of his motivation.
We knew his aim was to discredit and marginalize high profile opponents of illegal naked short selling. Yet his book, which seemed to be the launch pad of Weiss’s campaign, was quite critical of both hedge fund and prime broker culture: the two obvious sides of the naked shorting equation.
So who was paying Weiss to spend all day, most every day, publishing his attacks via his blog, message boards, and Wikipedia?
Nobody had ever considered the DTCC.
But once we knew Weiss had used a DTCC computer – given the uniquely Fort Knox-like nature of the institution, and the fact that it could not have happened unless Weiss had official access – everything fell into place.
Suddenly, we noticed a very striking set of coincidences, commencing January 22, 2006.
On that date:
1. Roddy Boyd, then business writer at the New York Post, published his review of Weiss’s book Wall Street Versus America (an unheard-of six weeks before the book would be available in print). In his review, Boyd writes:
“The most provocative argument in Weiss’ book is that naked shorting — or short-selling a company’s stock without being able to borrow it first, per long standing rules — is not only a good idea, but a necessary one…This is guaranteed to send Overstock CEO Patrick Byrne and the other disciples of his “stop naked short-selling crusade” — Weiss dismisses the lot of them as the “Baloney Brigade” — into further spasms.”
2. Weiss published the first naked short selling-related post on his week-old blog.
3. Weiss Yahoo! Finance message board IDs lamborghini751, cupandsaucerwithsugar, and baloneysmasher were created and immediately put to use attacking opponents of illegal naked short selling.
4. One day later, DTCC issued the first of what would be eight naked short selling-related media releases over the next seven months. By way of comparison, during the seven months prior to January 23, 2006, DTCC issued zero releases on the topic.
Further examination made it clear that Weiss had an unusual relationship with those DTCC media releases, in that Weiss would promote them via his blog, stock message boards and Wikipedia articles in a rather systematic way, often long before anybody else was even aware of them.
Here’s an example:
* 1/27/2006 at 17:08 DTCC issued a media release
* 1/27/2006 at 23:55 Weiss published a blog item about the DTCC release
* 1/28/2006 at 09:22 Weiss adds DTCC release to Wikipedia article on naked short selling
* 1/28/2006 at 09:49 Weiss promotes DTCC release on Yahoo message board
Taking all these factors together, I’ve concluded that January 22, 2006 represents the beginning of an aggressive public relations campaign by DTCC, aimed at countering a growing perception that the organization is a key enabler of illegal naked short selling. I further conclude that a that time, Gary Weiss was operating in support of that effort and likely remains so today.
I requested a comment of DTCC spokesman Stuart Z. Goldstein – the likely architect of the above-mentioned PR campaign – but received only two strange responses, neither of which addressed my question.
When I persisted in asking Goldstein for comment, his came – and I cannot overstate how shocked I remain by this even today – from reporter Roddy Boyd, then of the New York Post.
From: Boyd, Roddy
Date: Feb 09 2007 - 1:03pm
I spoke to corp comm at DTCC and they told me, on the record, that weiss is not, nor has he ever, been employed or used by DTCC in any capacity, formally or informally. They categorically reject it and tell me that none of them have any recollection of ever talking to him, meeting with him or having any dealings with him.
categorically rejects it.
thats a big hump for a real reporter to get over.
let me put this politely:
As an investigative reporter, laughably per PB, you really,really are a much better PR person
In case you’ve forgotten, it was Roddy Boyd’s six week premature review of Weiss’s book, published January 22, 2006, that seems to have been the launching point of the DTCC’s PR campaign, described above.
For his part, Weiss called my conclusions of a relationship between him and DTCC a “malicious lie” and “absolute crap.”
At that point, I had a ton of circumstantial evidence pointing to DTCC as Weiss’s patron, and direct proof that Weiss had used a computer on DTCC’s network.
I also had the strangest denial, on the part Stuart Goldstein at DTCC, that I’ve ever seen.
But most importantly, I had the benefit of an extremely low-set hurdle to cross in order to prove that Weiss, Boyd and Goldstein were all engaged in a ridiculous lie.
After all, as Goldstein said through Boyd, nobody at DTCC has “any recollection of ever talking to [Gary Weiss], meeting with [Gary Weiss] or having any dealings with [Gary Weiss].”
What follows is the story of how we’ve sailed over that particular hurdle, thanks to some emails from Gary Weiss to paid stock message board basher Floyd Schneider. (Read this to learn how I came to posses these emails).
In addition to being the month in which DTCC launched its PR campaign against opponents of naked short selling, January of 2006 is also a significant time in that Mark Mitchell, then assistant managing editor of the Columbia Journalism Review, started work on what would go on to become The Story of Deep Capture.
Back then, as now, Gary Weiss seemed to be about the only non-pseudonymous person willing to go on the record in defense of naked short selling, which naturally made him a frequent point of contact for Mitchell.
Mitchell recalls as many as a dozen conversations with Gary Weiss in the first couple of months working on the story. In several of those conversations, Mitchell remembers Weiss awkwardly seeking to gauge Mitchell’s opinion of any recently-published DTCC media releases.
Among the topics Mitchell discussed with Weiss was Dr. Susan Trimbath, a former DTCC employee turned outspoken critic of that organization’s role in enabling illegal naked short selling. Mitchell recalls being surprised by how much the subject of Trimbath seemed to bother Weiss.
Given that bit of background, consider the following email exchange between Gary Weiss and Floyd Schneider.
It starts on March 13 at 9:41 AM, when Floyd emails Weiss a reference to a speech Dr. Trimbath had given a few months earlier.
To this, Weiss replies:
Subject: Re: (no subject)
Date: Mon, 13 Mar 2006 09:49:27 -0500
Received: from unknown (HELO maincomputer) (email@example.com@188.8.131.52 with login) by smtp101.vzn.mail.dcn.yahoo.com with SMTP; 13 Mar 2006 14:49:22 -0000
Say, what is with this Trimbath? I ask because a particularly dimwitted reporter for Columbia Journalism Review is doing a story on media coverage that is widely expected to lean toward the balonies, and he is relying heavily on her.
Floyd immediately begins to pepper Weiss with every googled reference to Trimbath he can find – all of them quite positive – to which Weiss replies:
Subject: Re: (no subject)
Date: Mon, 13 Mar 2006 10:49:12 -0500
Received: from unknown (HELO maincomputer) (firstname.lastname@example.org@184.108.40.206 with login) by smtp103.vzn.mail.dcn.yahoo.com with SMTP; 13 Mar 2006 15:49:08 -0000
Yeah, all pretty innocuous, which is she is a perfect front woman. I presume she expects to cash in as an expert witness or somesuch for the balonies.
The next day, DTCC issued a media release attacking Trimbath’s expert status and minimizing the importance of the position she held there.
The day after that, Weiss places a standing order with Floyd for any negative information on Dr. Trimbath he can find (searching for this sort of information is how Floyd spends an alarming portion of his days, by the way):
Subject: Re: Aha!
Date: Wed, 15 Mar 2006 13:38:35 -0500
Received: from unknown (HELO maincomputer (email@example.com@220.127.116.11 with login) by smtp101.vzn.mail.dcn.yahoo.com with SMTP; 15 Mar 2006 18:38:29 -0000
Incidentally this Susanne Trimbath is the primary source of info on nekkid shorting for a complete idiot who is wriiting a story for the Col. Journalism Review. If you can think of anything particularly wacky that she has said, let me know.
A few minutes later, Floyd responds with something fairly unremarkable, to which Weiss replies:
Subject: Re: Aha!
Date: Wed, 15 Mar 2006 13:47:54 -0500
Received: from unknown (HELO maincomputer) (firstname.lastname@example.org@18.104.22.168 with login) by smtp103.vzn.mail.dcn.yahoo.com with SMTP; 15 Mar 2006 18:47:49 -0000
You know, the thing that is bad is that this statement below would not be considered extreme by the doofus doing this article for CJR. Several of us are concerned that it is going to be a total baloney-piece. He is a real ham bone.
After Floyd sends still more non-scandalous Trimbath references, Weiss replies:
Subject: Re: Aha!
Date: Wed, 15 Mar 2006 14:00:54 -0500
Received: from unknown (HELO maincomputer) (email@example.com@22.214.171.124 with login) by smtp103.vzn.mail.dcn.yahoo.com with SMTP; 15 Mar 2006 19:00:49 -0000
It has to be something fairly extreme. This guy really has me (and others of us a lot more than me) worried. I’ve drummed into this nitwit’s head about O’Baloney and it all just bounced off his concrete skull.
About an hour later, Floyd sends the prior day’s DTCC media release to Weiss, prompting this reply:
Subject: Re: the whole article with link
Date: Wed, 15 Mar 2006 15:09:17 -0500
Received: from unknown (HELO maincomputer) (firstname.lastname@example.org@126.96.36.199 with login) by smtp103.vzn.mail.dcn.yahoo.com with SMTP; 15 Mar 2006 20:09:12 -0000
Yes I sent this to the bozo at CJR earlier today. The jerk emailed back indicating that he is chewing away at baloney. Very depressing.
In his emails to Floyd, Weiss makes it clear that he’s involved in active consultations with other individuals, who feel deeply concerned about the prospect of Dr. Trimbath’s influence on Mitchell’s story.
Because Dr. Trimbath addresses illegal naked short selling almost exclusively from the standpoint of the DTCC’s role, it’s very difficult to imagine that, when Weiss refers to “Several of us” and “others of us,” he’s not referencing officials at DTCC.
Armed with these emails as confirmation that Goldstein was not being honest, when he stated, through Roddy Boyd, that he “categorically rejects” the idea that anybody at DTCC has so much as spoken with Gary Weiss, I again asked Goldstein for a comment.
Goldstein refused to answer the question.
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Wrong Way Cramer
Great Don Harrold YouTube Video talks about the horror show that is Jim Cramer.
Cramer pulls a fast one again.
This guys got more lives than a cat on a hot tin roof. It is always amazing to see him reinvent himself. Now he is acting like he has been against naked short selling all along. If he was, he certainly kept it to himself until it came into fashion. Christopher Cox, Chairman of the SEC, is now going to give certain elitist companies a magic cloak from the crooked naked short sellers who sell stock without ever locating shares. The rest of the companies can go to hell. If the crooked naked shorters who counterfeit the shares can bring the little companies to bankruptcy, they get away without paying a dime in taxes. Taxes are for “the little people.”
Now that the heat is on, he is FINALLY speaking out against naked short sellers, even acting as if it is something he has been saying all along. Nothing could be further from the truth.
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This site gives Cramer the Tulip award, along with Abby Joseph Cohen from Goldman Sachs who was very bullish at the top of the tech bubble too, another “analyst” who has also reinvented herself, along with Bill Gross who predicted Dow 5000 in the year 2000 and all the other stock market pundits who CNBC paraded out before us to encourage to buy when they were likely selling and to sell when they were likely buying, helping investors lose millions as they themselves became even filthier rich, and then pretending they called it right all along.
Famous stock market bull James J. Cramer switches to bear camp after his readers lose their money
Chutzpah: The child who murders his mother and father and then pleads before the judge to be let off because he’s an orphan.
As you can see below, James has been telling his readers to buy Cisco and other tech stocks when the prices were high and to sell them when prices are low. Is that any way to make money? On January 8, 2001 he called “‘the bottom” in tech stocks. As recently as Feburary 2, 2001 he was telling his readers after the selloff that day that the downturn was just one of many “profit-taking pullbacks… They shake out the weak holders.” Now he’s telling us “I have been pretty negative on tech for a long time.”
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Here is a little history on James J Cramer, now Jim Cramer, stock rumor mongerer extraordinaire.
Nick Maier, who worked for him when Cramer ran a hedgefund wrote a book about this slippery little devil.
Trading with the Enemy: Seduction and Betrayal on Jim Cramer’s Wall Street by Nicholas W. Maier (Hardcover - Mar 5, 2002)
In Trading With The Enemy, Seduction and Betrayal on Wall Street, the author, Nicholas W. Maier recounts on pages 124-125 ,” He talked about how close he was to Maria Bartiromo, in particular. …We were the first firm most brokerage houses told such news… Jim’s strategy was to put in his order to buy a stock with Mark and then dial Maria. As soon as she announce the news on television the stock would often jump . Jim then had Mark peel off whatever we had bought. Jim was essentially, both helping and using Maria. He’d give her the scoop, and before things settled down, she spread the news that was likely to get the stock running. We weren’t just using the news, but making it. No sooner would Maria be thanking us for the help than we’d be getting a payback-a quick hit thanks to our friend at CNBC. …..It was David Faber we were now instructed to call with any early tips after buying the stock. Things ended up working out quite well, as David soon proved to be an even more profitable friend to have.”
In 1994 Cramer hired Nicholas Maier as a favor to Marty Peretz, who was close with the Maier family. Maier worked for Cramer until 1998, then left and wrote a tell-all book about his years with Cramer: Trading with the Enemy: Seduction and Betrayal on Jim Cramer’s Wall Street (New York: HarperCollins, 2002) It contained detailed description of Cramer’s manic and abusive style. For example, Maier recounted the following scene after a trader at Cramer’s firm, Mark Kantor, executed a buy order at a price one-quarter point higher than what Cramer had expected, a total difference of $625:
“‘The broker fucked us, big time!’
“‘The eighth offering was fading when we called,’ Mark explained.
“Jim bit down on his lower lip as his hands clench into fists. He leaned forward to get closer to Mark, and started banging on the top of his monitors. The crown of his balding skull reddened as he yelled at the top of his lungs in a high-pitched whine.
“‘I told you they fucked us! Fucked us, fucked us, fucked us!’
“‘Listen to me.’ With piercing eyes Jim scanned our sober faces. ‘This is not some fucking joke!’ he screamed, spit flying from his mouth. ‘We are at war. We are in a foxhole.’ He flung out his hands. ‘Everyone out there is the enemy!’
“Mark nodded to show Jim that he understood. That wasn’t what Jim wanted. He started smashing his phone over and over on the desk in front of him. He lifted a monitor and heaved it like a shot put. After flying several feet, it shattered on the floor.” (Trading with the Enemy, page 29).
Maier also described Cramer’s questionable trading ethics. One passage noted a brush with naked short selling:
Jim turns toward his head trader. “Mark, sell ten thousand Bristol Myers.”
“We never bought any Bristol Myers,” Mark replies.
“We own the calls,” Jim corrects Mark impatiently, aggravated by the delay.
“So sell it short?” Mark asks for clarification. Mark knows that according to the SEC rule book, selling stock you don’t already own (even if you do own the call options) must be marked and executed as a short sale.
“You are confusing me with someone who gives a shit. Just sell it! I said hit the fucking bid!” adds Jim, not interested in wasting time over petty semantics. Skirting the “plus tick” rule in this case won’t necessarily make us a lot of extra money, but in Jim’s eyes, the rule is still an unenforceable annoyance. “And don’t ever ask me that again!” (Trading With the Enemy, pages 70-71).
Please put a pin in this expression of Jim Cramer’s concern for this somewhat obscure “plus tick” rule. I will return to it later.
Maier also describes Jim’s cozy yet perilous relationship with analysts at brokerage firms. When one unlucky analyst forgot to call Jim before he downgraded a stock, Jim screamed into the phone:
“All I pay you too much fucking money for is … to pick up the goddamn phone and call me—call me—before you call anyone else.” (Trading With the Enemy, page 86).
In Maier’s artful summary:
“Jim didn’t care whether an analyst was ultimately right in his or her opinion. He just wanted to take advantage of the closest thing to a sure bet in the stock market today: the short-term effect any commentary might have.” (Trading With the Enemy, page 86).
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Jim Cramer talks about how how hedge funds should manipulate the market
Jim Cramer on Market Manipulation: In his own words short sound bites with video
You can find the complete video interview on this page
Jim Cramer Channels DeepCapture
May 25th, 2008 by Patrick Byrne
By December 2006, the cover-up of widespread stock manipulation by favored hedge funds with friends in the financial press was starting to unravel among all thinking observers. Thus, Jim Cramer repositioned himself from a total skeptic who derided this as just some wacky theory of a malcontent CEO, to something Jim Cramer knew about all along and in which he had participated (because he is such a crucial part of the “smart money”). Which is, of course, precisely the claim I made about him in the Miscreants’ Ball.
* * * * *
What every trader needs to know about Jim Cramer
Talking Up His Own Book
Robert Lenzner and Victoria Murphy, 03.01.02, 7:10 PM ET
NEW YORK - Legendary hedge fund operator and confrontational television commentator James Cramer has been getting publicity from news that he’s working on a juicy Wall Street story: his own biography. But the real dirt might be elsewhere.
In a soon to be released tell-all tale, former Cramer & Company employee Nicholas Maier accuses TheStreet.com’s co-founder of using CNBC anchors, and his own television appearances, to promote stocks that he would promptly sell, making a quick gain on the upswing.
In Trading With the Enemy, to be published this month by Harper Business, Maier alleges that CNBC anchors Maria Bartiromo and David Faber were used like pawns to talk up stocks that Cramer’s hedge fund had purchased. He did this by giving them heads-up on analysts’ upgrades and downgrades in particular stocks.
Writes Maier: “We were the first firm most brokerage houses told such news [of upgrades and downgrades], and Jim decided to use this early-call status to help the reporters, who all wanted to break a story.”
Maier goes on to explain that after the stocks were touted on television, Cramer would promptly dump the firm’s position: “No sooner would Maria be thanking us for the help than we’d be getting a payback–a quick hit thanks to our friends at CNBC.”
In one case, recalls Maier, Faber called Cramer, and immediately Cramer demanded that the firm buy a hundred thousand shares of MCI Group (nasdaq: MCIT - news - people). “There will be news!” said Cramer’s colleague to the broker at Goldman Sachs, who also purchased shares. No more than an hour later, Faber went on the air with news that telecommunications giant MCI was rumored to be an acquisition target. Maier admits he does not know what Faber actually told Cramer during their conversation and writes, “Reporters often called us, asking if we could confirm a rumor in the marketplace.”
Cramer’s own television appearances also were used to intentionally sway the markets in his favor, Maier writes. For example, while Cramer was on CNBC promoting “a great investment for the long term,” Maier writes that Cramer’s firm was making quick gains: “Our real strategy, however, was all about taking profits now. Back at the office, we were supposed to dump stocks after a quick half-point gain. On TV, Jim would tout a stock we owned, but if it moved up, we would sell.”
“Jim would do the opposite of what he was saying on television,” Maier told Forbes. Cramer did this behind the scenes too, says Maier. “He would hear rumors, pass them on and then do the opposite,” adds the author, who insists that he has the trading documents to back up his claims. Maier worked under Cramer between 1994 and 1998.
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Here is James J Cramer….er…er…um…I mean Jim Cramer back in 2000 touting the tech stocks at the top of the bubble and telling people he was buying them everyday hand over fist. Some of these stocks were extemely overvalued, selling for hundreds of dollars. He later claimed he told everyone to get out, but this speech he gave at the Javits Center, which he charged people good money to attend, shows he is lying. Some of the companies he was screaming buy up, are no longer even in business.
I will put some excerpts in since they have removed links to this speech as they can continue to cover up that he even said it. It used to me right here. http://www.thestreet.com/_tscs/funds/smarter/891820.html
You can still find it here.
The Winners of the New World
By James J. Cramer
2/29/00 9:42 AM ET
“You want winners? You want me to put my Cramer Berkowitz hedge fund hat on and just discuss what my fund is buying today to try to make money tomorrow and the next day and the next? You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now.
OK. Here goes. Write them down — no handouts here!: 724 Solutions (SVNX:Nasdaq - news), Ariba (ARBA:Nasdaq - news), Digital Island (ISLD:Nasdaq - news), Exodus (EXDS:Nasdaq - news), InfoSpace.com (INSP:Nasdaq - news), Inktomi (INKT:Nasdaq - news), Mercury Interactive (MERQ:Nasdaq - news), Sonera (SNRA:Nasdaq - news), VeriSign (VRSN:Nasdaq - news) and Veritas Software (VRTS:Nasdaq - news).
We are buying some of every one of these this morning as I give this speech. We buy them every day, particularly if they are down, which, no surprise given what they do, is very rare. And we will keep doing so until this period is over — and it is very far from ending. Heck, people are just learning these stories on Wall Street, and the more they come to learn, the more they love and own! Most of these companies don’t even have earnings per share, so we won’t have to be constrained by that methodology for quarters to come.
We try to own every one of them. Every single one. And if I had my druthers, I wouldn’t own any other stocks in the year 2000. Because these are the only ones worth owning right now in this extremely difficult, extremely narrow stock market. They are the only ones that are going higher consistently in good days and bad. I love every one of them, just as I loathe the rest of the stock universe.
How did this stock market get like this, to where the only people who can make a dime in it are the people who are interested in the most arcane subject, the moving of data from one space to another, via strange new machines and software? How did it get to the point where nothing else matters, most particularly the 90% of the stock market I have studied for the last 20 years? How did all of that knowledge become totally irrelevant and the only stocks that work are the stocks of companies that didn’t exist five years ago and came public in the last two or three years?
A-ha, that just leaves us with tech. That’s why we keep coming back to it. That’s why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now. It is by that process of elimination that I have picked my top 10. And my next 10 and my next 10 after. Only those companies are worth owning. The rest?
You can have them.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long 724 Solutions, Ariba, Exodus, Digital Island, InfoSpace, Inktomi, Mercury Interactive, Sonera, VeriSign, Veritas Software, Oracle, TheStreet.com, Vignette, Motorola, Cisco, Intel, Nokia, Goldman Sachs, and Yahoo!, and Cramer was long TheStreet.com. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer’s writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at email@example.com.
Send letters to the editor to firstname.lastname@example.org.
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The Most Powerful Trader on Wall Street You’ve Never Heard Of
By Marcia Vickers
JULY 21, 2003
Meet Steve Cohen. Even his enemies admit he’s the best stock trader around, routinely trouncing the market with his $4 billion hedge fund. Just how does he do it?
A gunmetal-gray BMW 745 Li sedan slips out of Steven A. Cohen’s 14-acre walled estate. The chauffeured car races along the winding backcountry hills of ultrawealthy Greenwich, Conn. At around 8 a.m., it powers into the parking lot of SAC Capital Advisors. Cohen quickly emerges and darts into the front entrance of his gleaming steel and terra-cotta-slabbed Stamford (Conn.) headquarters. His driver swings the car around to the back and parks in a space with a simple reserved sign amid a sea of testosterone-exuding cars belonging to his traders: Mercedes S600s, Lexus sport-utility vehicles, and Porsche Carrera 4s. Cohen will soon be sitting at what one trader calls “command central” — his desk with its numerous screens, perched in the midst of a football field-length trading floor. In the next few hours he is likely to earn several million dollars.
Cohen, 47, is the most powerful trader on Wall Street you’ve never heard of. The founder of SAC Capital Advisors, a highly secretive and stupendously successful $4 billion group of hedge funds that bears his initials, is considered to be a market genius by even his harshest critics. His firm routinely accounts for as much as 3% of the New York Stock Exchange’s average daily trading, plus up to 1% of the NASDAQ’s — a total of at least 20 million shares a day. And while most of his rivals struggle to keep their trading costs down, “Stevie,” as he’s known on Wall Street, is one of the few to pay full freight. He hands over about $150 million a year in commissions to Wall Street, making him one of its 10-largest customers.
The payments grease the superpowerful information machine that Cohen has built at SAC. The firm’s credo, says a former SAC trader, is to “try to get the information before anyone else.” The torrent of commissions wins Cohen the clout that often makes him privy to trading and analyst information ahead of rivals. Says one analyst: “I call Stevie personally when I have any insight or news tidbit on a company. I know he’ll put the info to use and actually trade off it.” Cohen expects to get the first call when an analyst upgrades or downgrades a stock, and if he doesn’t, offenders have been known to get a tongue-lashing from SAC traders. Brokers lavish plenty of other privileges on him. For instance, SAC was a big beneficiary of allocations of red-hot initial public offering shares during the Internet boom, according to several former SAC traders.
. . .
“Cohen manages less money than hedge-fund titans such as George Soros or Julian Robertson did at the height of their powers, but his sheer trading prowess leaves them in the dust. At the heart of his empire are 40 “portfolios.” Each has between one and 15 traders and analysts who execute various strategies. The primary focus is a long-short equity strategy, but more recently the firm has branched out into convertible and statistical arbitrage, quantitative strategies, and big bets on interest rates. Investors’ money is channeled through seven different “portfolio companies” or funds — including a core fund, a global diversified fund, and a health-care fund, each with an offshore counterpart. One fund, Sigma, consists mainly of his personal money, say insiders.
But Cohen’s reach, and power, extend well beyond the seven funds. The billionaire, who earned an estimated $128 million last year and $428 million in 2001, according to Institutional Investor, has a finger in funds other than his own. Top SAC traders have contracts that contain provisions giving Cohen the right to fund up to half their capital if they leave to start their own funds, as many have done. He sometimes gets more favorable terms than other investors, such as being able to pull out his money early. Says a former SAC trader: “Cohen’s presence, and market-moving capability, is probably the largest of anyone on the Street.””
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Sacked SAC Trader Alleges Boss Made Him Girlie-Man
“Steven Cohen’s hedge fund, SAC Capital Management, is weird. With the combination of the founder’s Svengali-like persona (super-traders are “totally committed to their own particular style and demonstrate complete conviction when trading,” he once wrote), over-the-top richness (fun things at his Greenwich mansion include Damien Hirst’s shark in formaldehyde and a skating rink in the backyard), and Pentagon-level of secrecy, it’s always seemed like the kind of place where the employees probably get all Eyes Wide Shut after hours. “
Tong apparently alleges that his boss, star trader Ping Jiang, encouraged him to take female hormones as part of a method Jiang uses in order to make his traders “less aggressive.” According to CNBC, Tong is saying that hormones caused him to start wearing dresses and, eventually, to begin a sexual relationship with Jiang.
Watch the video on the site too.
* After being hired at SAC, Tong alleges that Jiang came to him and told him he had a trading method in which his traders must not be too aggressive; that traders must be more effeminate and to do so, he directed Tong to begin taking female hormones.
* Tong says he then took the female hormones that he bought on the black market.
* Tong then alleges he suffered emotional and physical distress. The hormones, he says, caused him to begin wearing women’s clothes. He also could not perform sexually with his wife, who wanted to have a baby.
* Tong says the sexual harassment included sexual relations between the two men.
SAC Capital and Jiang vehemently denying the charges, saying in a statement that: “SAC conducted a thorough investigation and found these scurrilous accusations to be false. We will vigorously defend ourselves and are confident that these claims will be swiftly rejected in arbitration.”
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Cohen’s home in Greenwich, which is located on a 14-acre walled estate, is a 31,642-square-foot, nine-bedroom palace, complete with a beauty salon, indoor pool, 20-seat movie theater, and full-size basketball court. He paid $14.8 million for the mammoth abode in 1998 and has since added a 12,000-square-foot-wing to it. The property also features a 6,734-square-foot ice skating rink (as well as a separate structure to house Cohen’s very own Zamboni), two-hole golf course, and organic vegetable plot. In 2007, he purchased a weekend home on Further Lane in the Hamptons for $19 million. He later said the 9,000-square-foot, 10-bedroom property would only be a temporary abode until he found a more lavish estate on the ocean.
Cohen was set to buy Picasso’s La Reve from casino mogul Steve Wynn for $139 million in 2006. Just before shipment, Wynn put his elbow through the painting and the sale was canceled.
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Something Smells Rotten In the Hedge Fund World
Here is a photo a preserved dead shark Stevie purchased. They recently remade it from scratch, since the original fish rotted.
Keeping an $8 million pickled fish looking tasty.
The whole point of Damien Hirst’s sculpture The Physical Impossibility of Death in the Mind of Someone Living would seem to be preservation. Billionaire hedge-fund manager Steve Cohen recently bought it for a reported $12 million. Though a source close to Cohen says the price was actually only $8 million, that’s still a hefty profit for art mogul Charles Saatchi—who bought it in 1992 for $93,000—and a confident sign of the investment value of shocking contemporary art. Except the fourteen-foot tiger shark, which Hirst cut in half and displayed in formaldehyde, has been showing signs of deterioration.
“Ultimately I think it’s a piece that needs to be put in a major museum,’’ he said. “I’ve had discussions with some, but I can’t say which ones, and nothing has been decided.’’
More generally his long-term plans include building a private museum on his property in Greenwich to display his art collection, from a Manet self-portrait to Monet’s “Water Lilies’’ to a Jackson Pollock drip painting to Pop Art by Warhol and Lichtenstein. He also owns Mr. Hirst’s “Away From the Flock,’’ a whole lamb floating in a formaldehyde solution, as well as several paintings by Mr. Hirst, among them examples of his signature butterflies, pills and a skull.
As for the future of the new shark, Mr. Hirst isn’t worried, he said.
“As long as it lasts my lifetime, I’m happy,’’ he said. After a pause, he added: “It’s got a 200-year guarantee. Or your money back.’’
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Don’t forget to watch Deep Capture, the movie.
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Here is an excerpt from the dndn Investor Village message board from a letter written by a Dendreon investor asking the SEC to stop the illegal naked shorting. Dendreon investors have written tens of thousands of letters to the SEC, Congress, the FDA, the media (everybody and their brother). We are just trying to get men with end stage prostate cancer a safe and effective immunotherapy. They have no other options. Wall Street and big money put the kabosh on it. Visit us at http://www.CareToLive.com/
“I believe we are faced with an unprecedented level of market abuse through illegal naked short selling, and many companies have and will be bankrupted because of this hedge fund practice. While I agree that it is particularly important to protect the banking sector from this illegal practice, it is also important to protect small companies who will not survive these withering naked short selling attacks. Dendreon is just one company that is trying to do something very important for the world i.e. create breakthrough medicines for cancer sufferers. But unless this illegal practice of naked short selling is prevented by stronger enforcement at the SEC, then Dendreon and many other small biotechnology companies will never succeed in finding cures for cancers and other diseases.”
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Hundreds of letters have been written to the SEC concerning the illegal trading in Dendreon, that takes place on a daily basis. The SEC to date has done NOTHING. We have been on the reg sho list
according to this list for 81 days. It is really much longer. They take you off for a day and then start counting all over again. The reg sho rule said they had to close out the dndn illegal naked shorts 13 in days. That was over a year ago. Besides that we have 31,175,281 LEGAL shorts in the stock. There are only 90,000,000 million shares issued. 1/3 of them legally shorted. 10’s of millions of them illegally naked shorted. Are they going to stop approval again? They are not privy to the additional trial data the FDA requested. The original trial data showed survival in a disease there are no options. 1 in 6 men will get prostate cancer in their lifetime. We are currently in the process of making a full length movie about the travesty that took place in the FDA delay of Provenge. I will keep you posted when it comes out.
Settlement Date Short Interest
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Living in the US. Here are ways to contact your Congressmen.
Contact Your Elected Officials
by zipcode http://www.visi.com/juan/congress/index.html
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Now they are going to play the shell game with the uptick rule and rumor mongering on Wall Street. This is just another diversionary tactic. Trust me when I tell you that even prior to them changing the uptick rule to make it easier to naked short stocks, and talking about enforcing the rumor rule, the “traders” pretty much did whatever the hell they wanted to anyway. And they will continue to until the Government takes action to stop this. Will that ever happen? I doubt it. They seem to have a lot of “friends” in high places.
Cramer spread so many rumors about dndn and we wrote to the SEC and we wrote to Congress, but it all fell on deaf ears.
Is the problem that our Government is greased by Wall Street. Here are a few links to get you started. Click around for an eyeful. This is only the reported money and does not count the bags full of cash, trips, presents and “extras”.
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There is more and I will update as time and space permits. And don't forget to enter the Deep Capture contest to expose the naked shorts.
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If this gets cut off I will save it for Part 3.
Here is a post by a friend of mine.
CNBC can defend itself with its long, used car sales type disclaimer and say they didn’t make people buy or sell just because Crameball told them to. But what bothers me is, new people happen upon Dendreon and they hear this and it can keep them out of the stock which Crameball has always tried to do.
What is the motive behind Crameball saying Dendreon is a dog? What is the goal? Why does he do it? To keep new buyers out and encourage current holders to get out? Is there any other reaon?
I agree, this call was staged. It was just like when someone called in to talk about Dendreon in the past and they were told to talk about Coca-Cola instead.
Yes, the definite shame is the way Crameball and others get FDA info so they can position themselves and try persuade others. By way of review:
March 29, 2007 Provenge gets great panel vote. Huckman says stock will skyrocket and it did. At the time there were 24 million short shares
April 13, 2007 Scher’s letter, which he signed so he took ownership, gets leaked by the FDA. The same day Nasdaq says there were at 32 million short shares.
May 9, 2007 The FDA CR Letter becomes public knowledge, the stock plunges before the market opens and the short shares are at 41 million shares.
Wouldn’t you like to be able to invest with important governmental information like this? Instead of medical journals and food journals in the lobby of the Rockville FDA Building, visitors and employees are greeted with a stack of Wall Street Journals. The FDA is busy with Wall Street, no wonder it can’t get the medicine and food right.
Can someone tell me if a suit against Crameball and CNBC can be filed that is similar to what Overstock has done against Gradient Analytics?
Actual Case: Overstock filed its case against Gradient Analytics, Inc, and Copper River and their respective principals, alleging a scheme by which Gradient Analytics published false information supplied by Copper River about Overstock.
Possible Case: Dendreon &/or shareholders file a case against Jim Cramer, and CNBC, and their respective principals, alleging a scheme by which Jim Cramer broadcast false information supplied by WHO??? about Dendreon and continued to tarnish Dendreon’s reputation on his public broadcast for three years to the detriment of the company and its investors. Cramer went so far as to insult the investors on national public television.
I know, I know, I go off the deep end sometimes. That is because these people make me so very sick and angry. I am looking for any way to combat them and help them get their just desserts.
By way of further review:
Cramer lies about Dendreon on CNBC. He said Provenge failed FDA approval.
Mark Haines of CNBC apologizes on the morning show, Squawk Box, for Cramer’s error.
Cramer later that night apologized but then went on to lie by saying the problem with Provenge was survival. Survival was the reason the FDA called for an Advisory Committee.
On September 26, 2005, Mr. Cramer went on the air on national television and lied about Dendreon (DNDN). He said it did not get FDA approval. Dendreon was never that far along.
Mr. Mark Haines apologized for Mr. Cramer’s erroneous information the next morning on CNBC. Then Mr. Cramer attempted to correct his mistake later that evening but made it worse by saying Dendreon had a problem with survival which is also not true.
It was actually amazing that Cramer’s degrading rant on Monday’s show,9/26/05, was right before Dendreon’s CEO was presenting at UBS. It isimportant to note that UBS is the only company that downgraded Dendreon, not once, but four times in 12 months after Dendreon reportedgood steps of progress.
And then Mr. Cramer went into a disgusting berating of us shareholders, calling us drunken, carousing, gambling Falstaffs. He called Dendreon a battleground stock. I wish I could ask him, what makes a stock a battleground stock and who put himu p to saying that and spewing lies about Dendreon.
Cramer talks about the Games Hedge Funds Play. He talks about the amount of money it takes to drive down a stock, he talks about lying and fomenting to hurt a stock, especially if the company reports good news.
The night before the Provenge advisory panel hearing Cramer yells, “Sell, sell, sell!”
After the good panel vote Cramer said he confused it with the fictional drug from a 1993 movie, “The Fugitive,” in which Dr. Richard Kimble, played by Harrison Ford, tries to expose a fictitious pharmaceutical company, Devlin-MacGregor.
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It cut me off and I wi
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