Monday, November 21, 2005

Amazing Powers of Invisibility Available For Limited Use, Special Today Only...

(NOTE: This Just In. * SEC Probes Research Tied To Naked Shorting: Report * The Securities and Exchange Commission is investigating a financial research firm over allegations it conspired with a hedge fund to drive down the share prices of online retailer Overstock.com, according to a published report. http://www.seclawbulletin.com/Secure/ViewArticle.aspx?id=4552
Interested parties can sign up for a free trial. So here is the independent confirmation from at least one media outlet that the story has been picked up and verified - but not by anyone in the mainstream financial media.)


Overstock.com is up over 20% in 3 trading days, and if you aren't following the stock closely you would never know it.

The SEC is investigating the defendants in Overstock's lawsuit against Gradient and Rocker Partners, and the only way you would have heard about it is if you read the SLC paper, or this blog.

A former FBI agent, notorious for his role in the Sirhan Sirhan investigation, is going around intimidating Overstock employees, and nary a word is heard anywhere but at the Easter Bunny's little holiday den.

Apparently the mainstream NY financial press doesn't have the slightest interest in reporting some stories - specifically stories that paint OSTK in a favorable light, or the shorts accused of damaging OSTK's reputation and share price in a negative light.

One might well wonder aloud how that could be. It's not every day that we see internet retailers running up in price as though they just successfully completed phase 3 clinical trials for the cure for cancer, especially in today's lackluster market. It's not every day that the SEC opens formal investigations into what amounts to a who's who of the short selling hedge fund world.

And yet this entire episode is as invisible as if it was the Emperor on parade, nude as a newborn, shielded only by the hubris and collusion of a compromised media that believes that the US investing public is stupid enough to believe whatever it is told - or more specifically, whatever it is fed through a self-serving, selective filter.

If one reads the WSJ, or the NY Post, or tunes into CNBC, or happens across Barrons, one hears nothing. See no evil, speak no evil. Well, that isn't quite completely true, as the NY Post devoted much ink over the weekend to regaling that fine publication's readership with a story denigrating Overstock, from the perspective of the defendant in the lawsuit; and apparently the fact that the SEC is investigating that side of the conflict didn't merit a mention - you know, it just wasn't news.

Odd, you are thinking? Nah. On Friday, I wrote a Sanity Check that counseled readers to consider how these publications treat companies shorted by these turds, when an SEC investigation is launched into one of them - usually we read 10 Yahoo news items on the feed referencing full page articles expressing shock and outrage, and fanning the flames of any selloff that results.

But when the bad guys are the recipients of the scrutiny, it is dead silence.

I wasn't much of a conspiracy guy when I started my shareholder activist role a few years ago. I figured a couple of lowlife opportunists were gaming a stock I was involved in, and that I could combat their actions by disseminating accurate information about the company.

As I learned more about Wall Street's history, and connected the dots of how inter-penetrated many of the relationships on the Street are, I began to realize that what to the outside world could look like an impossibly complex and implausible conspiracy, was in actuality a dozen bent reporters and their compromised editors, a few co-opted regulators at the right levels in the right agencies, a few politicians and want-to-be politicians, and a group of scumbags small enough to fit into a medium-sized Holiday Inn banquet room.

The problem is that the group of scumbags had so gamed the system as to give it a terminal illness, and had made so much money doing so that they could literally buy favorable treatment at every level of the political and media spectrum.

The other problem is that Wall Street will kill its young for a buck, and the smug conceit that is the pervasive tone of those princes of finance lucky enough to be in the upper reaches of the financial system oligopoly forgives virtually any action, no matter how base or criminal, as long as big money is made. Because that is the name of the game.

I've written about the cult of socio-pathology that is the mindset for a certain segment of Wall Street. I've heard countless stories of coke fiend deci-millionaire 30 and 40-somethings who believe that because they have cheated the system for years, that they are above the law, are minor deities cut from a distinctly different bolt of cloth than the rest of we human refuse. We are viewed as bumpkins, slow, dim-witted sheep to be fleeced at their leisure, where there is no shame to stealing our retirements, and in fact a certain pride is evinced in being smart enough to realize that rules were meant to be broken, and that restrictions or ethics are for losers and peasants. The sheer amount of money to be had by cheating us, and the ease with which it can be had if one knows the right people, affords a society of spoiled sociopaths the ability to thrive at our expense.

No wildly implausible "Sith Lord" conspiracy is really required (although if one reviews Dr. Byrne's schematic one sees that what was actually described was fairly mundane and predictably structured). Rather, a deliberately engineered and orchestrated stock manipulation scheme the likes of which were common in the 1900's-1930's is what we are seeing, with the impact considerably larger due to the highly centralized nature of the modern financial media apparatus in the US (concentrated in just a few offices in Manhattan, really), coupled with the economics of out-of-control leverage which an industry struggling with ever-slimmer margins is willing to allow, in the interests of generating more almighty bucks. Toss in a seasoning of some international cheats and money launderers, and you have the components of the meal.

The same 5 editors and ten reporters (or so) can mold public opinion, the same few bent regulators can structure rules to maximum advantage of the crooks, the same compromised class action attorneys can bludgeon whatever the target of the day is, and the sheep, who represent everything West of NJ, are handily fleeced.

Doubtful? Skeptical? Open a newspaper or tune in CNBC, and pay attention to how invisible this story has become now that OSTK is climbing, and the SEC is finally embarrassed enough to have to investigate the perpetrators.

It is really and truly shocking how effective the cone of silence is once it has been lowered.

Figure it out, people. This is Jesse Livermore, circa 2005. Nothing more mysterious or original.

There really are no new ideas.

7 Comments:

Blogger mfairview said...

Hadn't read Remond's piece until now. A bit dated but didn't see this posted anywhere and thought to share. The self pump at the end is something to behold.

---

=DJ Rocker Partners, Gradient Move To Strike Overstock Suit


By Carol S. Remond
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Hedge fund Rocker Partners L.P asked a California judge Tuesday to throw out a suit accusing it of conspiring with a research firm to drive down the stock price of Internet retailer Overstock.com (OSTK).

Salt Lake City-based Overstock.com sued Rocker Partners, its managers and research firm Gradient Analytics Inc. and its officers in August, alleging that they all conspired to denigrate the company's business for profit. The suit was filed in the Superior Court of the State of California in Marin County.

In a motion filed in answer to Overstock.com's claim, Rocker Partners said that the company's suit is an attempt to "chill others from exercising their rights of free speech" and asked the judge to strike the complaint.

Also on Tuesday, Gradient Analytics filed its own motion asking for the dismissal of Overstock's claims.

Both Rocker Partners' and Gradient Analytics' motions to strike were filed under California's anti-SLAPP statute, or Strategic Lawsuit Against Public Participation statute.

"Gradient's reports constitute First Amendment protected speech, and are therefore squarely covered by" the Anti-SLAPP statute, the research firm said in a press release.

Overstock.com has until Dec. 1 to respond to the motions to strike. Under California law, if a defendant that filed a SLAPP motion is able to convince the court that its actions were taken in furtherance of its rights to free speech, the burden shifts onto the plaintiff, which must demonstrate that its case has merits.

Overstock.com alleged in its suit that Rocker Partners, a hedge fund which often takes bets that stock prices will go down, engaged in unfair practices and colluded with Gradient Analytics to produce negative reports with the aim of pressuring Overstock.com's stock price to profit.

Short sellers typically borrow securities and sell them in anticipation that prices will fall and that they will be able to buy back the stock at a lower level.

In a press conference to announce the suit in August, Overstock.com's president Patrick Byrne alleged that Rocker Partners and other hedge funds, in cahoots with financial reporters, are working with a nefarious business figure, which Byrne dubbed the Sith Lord, to weaken his company.

Following that conference call, Byrne circulated to various media outfits three affidavits by former Gradient employees alleging improper relationships between Rocker Partners and the research firm. The affidavits are posted on Overstock.com's Web site but were not filed in court with the company's complaint and amended complaint.

Rocker Partners and Gradient Analytics have denied any wrongdoing and said they would file countersuits against Overstock.com.

Illegal short selling isn't alleged in Overstock.com's case against Rocker Partners and Gradient Analytics. But Overstock.com president Byrne has been very vocal in claiming that his company's stock has been pressured by illegal short selling, dubbed naked short selling, or selling short without first borrowing stock as typically required. Earlier this year, Byrne largely financed an advertisement in the Washington Post to raise awareness about the evils of illegal short selling. Byrne also financed an infomercial to denounce the practice. Mary Helburn, one of two former shareholders who joined Overstock.com in its complaint against Rocker Partners and Gradient Analytics, is the executive director of the National Coalition Against Naked Shorting or NCANS, an organization alleging a massive short selling conspiracy on Wall Street. Byrne has said he has been a major contributor to NCANS.

The other complainant in the case against Rocker Partners and Gradient Analytics is Hugh D. Barron. Barron is listed as Latin American sales agent for Centricut LLC on that company's Web site. Byrne was chairman, president and chief executive of Centricut from 1995 to 1999.

The defendants in the complaint filed by Overstock.com are: Rocker Management LLC, Rocker Partners LP, Rocker Offshore Management Co. Inc., David Rocker, Marc Cohodes, Gradient Analytics Inc., James Carr Bettis, Donn Vickrey, and Matthew Kliber.

(Carol S. Remond is an award-winning columnist and one of four who write the "In The Money" feature. Most recently, she won a 2005 Gerald Loeb Award for best news service content with "Exposing Small-Cap fraud," a series of articles that described how three small companies unscrupulously pumped up their stocks.)

-By Carol S. Remond, Dow Jones Newswires; 201 938 2074; carol.remond@dowjones.com

(END) Dow Jones Newswires

November 16, 2005 11:58 ET (16:58 GMT)

1:15 AM  
Blogger mfairview said...

Big shocker. Greenberg slams OSTK in light of everything else going wrong on their side.

---

Underwhelmed by Overstock - the saga continues: Just as almost everything else with Overstock CEO Patrick Byrne doesn't make sense, neither does his company's press release last week about illegal short-selling. "I feel obliged to remind shareholders that the only prophylactic against hedge fund counterfeiting is for shareholders to obtain their actual physical certificates from their brokers," Byrne said. Of course, what he doesn't say is that physical delivery is irrelevant if shares are going to be created out of thin air. Yet another attempt to confuse the issue.

6:44 AM  
Blogger bob obrien said...

I'm not sure I understand what the hell Herb is trying to blurt out here. Is it just me?

Is he agreeing that there is counterfeiting going on, and that paper is hard to counterfeit, or is he saying that he thinks that paper is being counterfeited thus all efforts are in vain? Or is he simply so befuddled that he doesn't understand why having posession of the genuine article would be desirable when the poop hits the fan over all the fakes?

I wanna be a financial journalist when I grow up, but I will have to dramatically increase my tequila and darvocet intake...

9:00 AM  
Blogger n-tres-ted said...

Bob,

I think his slant is that if the shares you bought are imaginary, meaning just an electronic entry rather than shares previously owned by the seller, then getting a certificate from the issuer won't help. It's a real concern, although I imagine a lawyer would say having a certificate from the issuer (or its share manager) would put a shareholder in a better position than one with only the electronic entry.`````````````````````````````````````````````````````````````````````````````````````````````````````````````````

9:24 AM  
Blogger Wicked World said...

I think he's simply talkin' out of his ass so that he can write SOMETHING about Overstock. At most, he is taking one of Patrick's advisements to shareholders and poorly twisting it into conflicted nonsense.

If, in fact, we do have a scenario involving fake shares then the prudent move is to get the certs. At least in this particular scenario where the heat is on and the usual outcome favoring the counterfeiters won't be realized.

Assume that Pat and the longs are right and their wildest dreams come true. Ya know, short squeeze, gap back to $75 and all that. Well if that happens then someone WILL hear these words: "We're only redeeming actual certificates right now on this stock because it's been heavily counterfeited".

10:02 AM  
Blogger roddyb said...

Phil,
im not sure what's invisible here. most reporters dont write stories when stocks go up or down too much, especially stocks that are known for volatility, like OSTK.

plenty have written on OSTK; some have even tried to break news on naked shorting.

OSTK is a medium cap online retailer and receives steady national and regional press, largely because of Patrick Byrne's flamboyant behavior. Companies 5x the size of OSTK, with profits, do not get the publicity OSTK does.

besides your tiresome conspiracy mongering--remember when you used to call me trolling the idea that Cuban worked at Drexel...or that Mike Milken is involved somehow in naked shorting--what is your point here?

mfairview--i view the tag as ugly as well. DJ editors put it there; she has no control over it. For what its worth, Greenberg is a columnist whose livlihood depends on generating controversy. Think: Ann Coulter or Frank Rich.

Again, his opinion, not mine, but he smells blood here. He argues that OSTK's continued failures operationally, which are very many, speak to the fact that this company is in trouble. he has a pretty good track record with Aremissoft.

me--i think things will probably be fine. But i cant agree that he's the bum on this issue you guys say he is.

Roddy Boyd

8:45 AM  
Blogger bob obrien said...

Roddy - Herb wrote 32 articles about how crummy NFI is in one year - this, for a tiny MREIT who has never done anything noteworthy except turn a profit, and is about as flamboyant as beige is. He has now been wrong about them being bad, and crooks, for over 3 years, and yet he grades himself an incomplete - is that honest, in your opinion? Or accurate?

Yeah, he got one right with Aremisoft - but the majority that he slags he's actually incorrect on, from what I can see - but I confess I don't read him except if someone sends me one of his epistles.

The test of any rhetoric is does it match reality. Your postulate vis a vis Herb doesn't.

And when smart guys take the time to advance provably false ideas, I wonder aloud, "why is that?"

As for your characterizations as to what has occurred in our private discussions, you mis-state much, so again, I ask, to what end did he write that? What was the goal, the objective?

What is your objective, Roddy? I don't share your communications with the world - does that make me classier, or just more naive, than you? I'm sure I could find some way to twist your words or characterize them negatively, but again, to what end? What would be my objective, my "payoff?"

That's always the question, no?

Always nice to have you drop by - the blog has an amazingly rich and diverse following now. I wish I could share with you some of the names that email me as a result of reading these, but that would breach confidentiality.

And as far as my "tiresome conspiracy theories", did you note that Time Magazine just ran a three page article about the naked short selling "conspiracy" - you know, the one that everyone is so intent to characterize as residing largely in my head? Can I take your appearance here as a signal that the agenda to vilify me is going to pick up some steam again?

And you can call me whatever you like, just not late for dinner. I actually prefer the Easter Bunny - but Phil or Bob or Tom or Tigerdrawers works too.

As long as it keeps the relationship fresh and spontaneous.

8:13 AM  

Post a Comment

<< Home