smw397

I can't verify this yet but rumors started flying this morning that Patrick Byrne will be on The Daily Show tonight. http://www.deepcapture.com/what-we-should-learn-from-jim-cramer-vs-the-daily-shows-jon-stewart/#comment-148294 http://www.nowpublic.com/tech-biz/jim-cramers-nemesis-patrick-byrne-daily-show-tonight-11pm The official Daily Show website shows a different guest, but sometimes he'll have someone else out for a short segment in the middle third of the show before the main interview at the end. I always watch it anyway but thought some here might appreciate a heads up just in case.

I've been forced to sell off a small sliver of my meager FFH holdings over the last couple weeks but it has definitely been with regret and only because I needed the cash. Were anything else different about my situation I'd be buying every share I could get my hand on right now.

I know I'm well off in tinfoil hat territory here, but the more I look into this the more convinced I become that there's much more at work here than just Mr. Market and concerns about CR or declines in the equities portfolio. Hedge funds are hurting and have been since last fall. We're told to anticipate that Madoff and Stanford are just the tip of the iceberg as far as indictments to come for various forms of fraud. Massive equity declines coupled with massive redemptions mean hedgies have an extreme need to generate cash quickly. They're already heavily into shorting, and depending on who you believe, a lot of them likely naked shorting. And finally, there's the FFH lawsuit that threatens to expose just exactly that. But as far as the SEC is concerned, ineffectual temporary short term short selling bans and supposed efforts to step up enforcement against naked shorting aside, there has been not one single effective effort to reign it in that I'm aware of. Even worse, it's becoming clear that Reg SHO, contrary to its supposed intent, has not only not curbed naked shorting but has in fact given abusive naked short sellers yet more cover to mask what they're doing. Nothing's black and white and I can't say I understand all the machinations, but I do know what a rat does when it's cornered. If I put myself in the position of someone who's on the hook for a whole lot of money and I'm looking at going down hard if I don't do something drastic, well now I'm probably going to do something drastic. The path of least resistance for now would appear to be taking advantage of the relationship many hedgies enjoy with market makers and the DTCC to just sell sell sell all the while never bothering to deliver what they're selling. Get enough of these guys working together and they can continually roll over the so called 'security entitlements' that masquerade as shares from one party to another such that for purposes of gaming Reg SHO there is an appearance of delivery having occurred; or at least that failure to deliver has not. Millions of counterfeit shares can be generated without ever making it onto the list. Innocent buyers think they're buying legitimate stock certificates and have no idea that the float is being artificially inflated with each and every buy where these miscreants are party to the sale. Because the current construct of the system is based on collateralization vs. payment rather than delivery vs. payment, and the selling party only needs to maintain 102% collateral on a daily marked-to-market basis, if I keep hitting the bid (no uptick rule!!) and drive the price down each day, my maintenance requirement keeps dropping thus freeing up the cash I generated by selling that which I don't have, didn't borrow, and have no intention of delivering. Best of all, if I'm a very powerful hedgie named in a lawsuit by a certain company and threatened with exposure for these criminal but not easily enforceable infractions, I can at least temporarily solve my cash flow problem while at the same time doing considerable damage to the biggest threat against my existence. If I'm really good and drunk on power and this works for a few weeks at a stretch, I may even become delusional enough to believe I can drive the share price all the way into oblivion so that I never have to cover. Hell, I've done it to enough penny stocks, why not some Canadian whatever it is they do company? Who's going to even notice? You think Fortune or the WSJ are going to write about it? Well sure they are, but I own the writers so that's not really a problem is it? Sorry for the rant. I'm not one of those who is sitting on 50% cash and able to scoop up a bunch of shares at these prices. Thanks to FFH I survived most of the carnage the last six months, but this last few weeks has been devastating. I can see no rational reason for what's happening here in the absence of the kind of illegal gaming I describe above. I had so much hope for a new enforcement framework with the new administration but to see Shapiro replace Cox has shattered that hope. This guy Dr. Jim DeCosta who comments a lot at the Deep Capture blog has filed a paper with the SEC that explains the mechanics of it all much better than I ever could and I highly recommend reading it: http://www.sec.gov/comments/s7-30-08/s73008-78.pdf

I'd have to see not only the timestamps on any email communications but phone records indicating the time of any conversations that occurred that day before I'd believe Kynicos' claims about when the trades occurred relative to when the information about the negative report became known to them. I know we're supposed to presume innocence until guilt is proven and all that, but frankly if I were James Chanos and I were innocent of these charges and held material information proving that innocence, I'd be pretty quick to provide it.

Do investors who've done their due diligence and believe that they are buying real shares bare any responsibility when the system in which they are participating instead gives them ownership of nothing more than phantom shares? If the Deep Capture guys are correct in their premise, that's exactly what's been happening to millions of investors who even now don't realize they are among Madoff's victims. The thing that's got me more upset than anything lately is the very idea that the RegSHO threshold list is worthless, that even during the short selling ban last fall nearly a billion shares were sold short naked, all quasi-legally through the market maker exception, which was WRITTEN BY BERNARD FREAKING MADOFF! The MM's are only supposed to be pulling this stunt as a means to provide that wonderful wonderful liquidity they tell us we need so badly, but they're supposed to cover at the earliest opportunity. But in reality the only thing they have to do is maintain collateral on a mark-to-market basis, so if they continue selling naked short into the bid, the collateral they must maintain is reduced, even as they get to sit on their clients' money earning the interest on it. We have no idea how many counterfeit shares make up what percentage of trading over the last decade, and it looks more and more every day like Madoff is right at the center of it all. FFH is one of the very rare ones to overcome this. How many more companies never stood a chance?