Tuesday, December 20, 2005

Update! - Bob O'Brien - The Easter Bunny - Speaks, Live On CFRN

Note: Day 3 (Dec. 23) Interview should be up by 7:30 EST


I completed a series of interviews on CFRN today, and if you want to hear the Easter Bunny go off about everything from the SEC to the history of Wall Street to comparisons to the S&L crisis to an in-depth description of the clearing and settlement system to a breakdown of the Byrne email exchange to a blow by blow dissertation on the scope of the problems impacting our markets, this is for you. All 3 are located on the lower right hand side of the page. If you can get past the filters, mild distortion and the pitch shift that makes me sound like an angry débutante, it is a fun and informative series. The high points:

1) Naked Short Selling - nothing more than sales transactions effected by the system for which no shares are delivered. Because Wall Street divorces clearing from settling, everyone gets paid upon the sale, and delivery is left as an afterthought, often winding up with no delivery.

2) Wall Street History - Cockroaches have abounded on the Street for time immemorial, stock manipulation pools are well documented, and today's manipulations are nothing more than those manipulations updated with modern technology.

3) The SEC - Chartered with "Restoring investor confidence in the system", but never chartered with ensuring there is a fair playing field, or for creating a good reason for the investor confidence. A paper tiger with no prosecution capacity. Worse than useless.

4) S&L Crisis - The current naked short selling crisis resembles the S&L crisis in that a relatively small group of crooks are stealing untold billions from the system, while Wall Street makes a fortune and the regulators/elected officials/press pretend there is no problem, and leaving Joe taxpayer to pick up the bill when it is all over.

5) The DTCC and ex-clearing - "Ex-Clearing" FTDs are likely orders of magnitude larger than the FTDs memorialized on the Reg SHO list, and pose the biggest challenge to the system. Because of the leverage involved, this could be the body blow the system cannot withstand. Ex-clearing is simply sales transactions for which delivery occurs outside of the DTCC system, on the honor system, between brokers.

6) Hedge Funds - Hedge funds are nothing more than unregulated, anonymous pools of money. 8000 in number, most are honest and legit, but a small percentage, maybe 2%, aren't. They represent most of the trading on Wall Street now, and the system is beholden to them for its profits.

7) Voting Rights - Wall Street has an elaborate system designed to trick investors into believing that they still own shares, rather than broker IOUs, and issues proxies to the IOU holders to keep them from asking questions. Legitimate shareholders are diluted, and investors are tricked.

8) NCANS.net - Created the Wall of Letters to document complaints to the system, is a place where concerned investors can rally and contribute to raising visibility.

9) Solutions - Shareholders' only protection from being defrauded is holding paper certificates. Investors need to write letters, support organizations like NCANS, and sue the brokers via class actions suits. Regulators need to make the system transparent, withhold money from sales until delivery is made, and create penalties with real financial teeth for failing to deliver.

The series was fun, and has amusing moments, as well as depressing commentary. The takeaway from show 3 is to compartmentalize the problem in such a way that it is bite-sized, and solvable. The shows aren't perfect by any stretch, but they give you some insights into the world of the bunny, and make a good starting point for discussion of the problem.

48 Comments:

Blogger n-tres-ted said...

I didn't get to hear a lot of the show today, but I did hear some of it and I thought you sounded fine. Sounded younger than I recall your voice when you called in to speak with PB some time ago. In any event, I have a small inquiry re the blog operation (and as luck would have it, it has to be on the shortest post in history on this site). Is is possible to put a link at the top of the original post that allows "Go To Comments," and possibly another link at the beginnining of the comments that allows "Go To End of Comments?" Since some of the posts and comments are quite long, after it has been read once, it takes a lot of scrolling to check on updates. Thanks again for your efforts.

5:47 PM  
Blogger mfairview said...

Put the latest post at the top.

6:23 PM  
Anonymous Anonymous said...

Bob,

This guy has a pretty big audience.
Google Ben Dover if the link doesn't come up. It is up his alley.
http://www.bendover.com/default.asp

6:41 PM  
Blogger Jer. 9:24 said...

Bob,

A minor suggestion for tomorrow's interview: If possible, take a minute to encourage listeners to contact their senators and congressmen and demand that congressional action be taken immediately.

Perhaps ask those listeners whose Senators are on the Banking Committee why they are not taking up this issue, and lay into Sen. Shelby of AL who is fully aware of but unwilling to do anything about this mess. He needs to be shamed into action.

Also, perhaps take a minute or two to give suggestions as to how this mess can be resolved; for example, perhaps tell people to demand paper certificates, no matter how few shares they have, and not accept the bullshit excuses their brokers will throw in attempts to talk them out of getting paper.

You have done and I know will do a great job telling these listeners about the problem; it will be a good opportunity to give out some "marching orders."

For this audience, you could mention that in the Psalms (and elsewhere) the Bible says that "the LORD works righteousness and justice for all the oppressed" and suggest that those who believe in Him should pray that He will intervene and end the corruption in the securities markets.

I can't wait to see what soon coming developments Dr. Byrne was talking about in his interview. Any idea about what those are, that you can hint to us?

7:00 PM  
Blogger bob obrien said...

I unfortunately don't have the ability to do much with the layout. I'm talking with the technical guys at NCANS.net about relocating the blog there so that we can have a better layout. Stay tuned.

As far as tomorrow, I'll slow it down a little (I tend to speak quickly) and focus more on a contiguous stream, with a call to action towards the end.

I'm new at the radio thing. Maybe it will get easier over time. Bear with me on the learning curve.

10:00 PM  
Blogger dracula said...

Bob,

Excellent job on Tuesday. It's a start and one long overdue. Finally a forum where we can talk about Naked Shorting and this crime against the American people without being labeled a crazy or interference from the media.

Keep up the great work!

3:01 AM  
Blogger dracula said...

On a sidenote, I thought you should investigate something that you touched briefly on yesterday. It was the picture of Ameritrade painting the rosy picture of all the riches that can be made in the markets for a low, low commission. More and more evidence is coming to mine, and many people's attention, that the likes of Ameritrade and E-trade etal have their books open daily for the hedgies. More overwhelming than you can imagine.

3:08 AM  
Anonymous Anonymous said...

You guys keep talking about the hedge funds as the culprits, but what if it's the Broker/Dealers themselves? Let me describe a scenario that seems way more likely to me than just helping the hedge funds for a transaction fee.

Let's look at some history first. In 1999, the B/Ds analysts were pumping dot coms to the high heavens. Qualcomm was supposed to go to $1000/share. Yahoo was about $350/share. Ebay, Amazon, Priceline, and a host of other companies were selling at huge valuations and the B/D analysts just kept pumping them as strong buys no matter what price they were going for. Why would they care to do this? Could it be that the B/Ds were the ones who were naked shorting with no intention of ever actually buying back, or borrowing the shares in the first place? Think about it. Isn't this the perfect money printing press? Sell something that you don't own, collect the money, and never deliver what you sold to the customer. If the customer wants to sell the bogus shares you sold them, no problem you can just resell those bogus shares to someone else. You hold all the records of the shares since the investor isn't asking for stock certificates. You even own the transaction clearing centers (DTCC) so it's not like anyone is going to be the wiser.

Wouldn't this explain the protectionist attitude of the DTCC since it is owned by the B/Ds? Why would the DTCC want to expose the fraud that their owners have committed over the past number of years?

Now let's look at the SEC. The SEC imo is in a no win situation. If they know that this fraud has taken place and want to disclose it, they will dump a huge burden on the SIPC as all these naked short shares will have to be exposed and investors will need to be compensated for the fraud that was portrayed on them. They would also likely have to shut down the offenders which would include the DTCC, the B/Ds, and the exchanges themselves. Not a pretty picture. If they didn't know what was going on, then those who rely on them for protection have got to ask themselves what the SEC actually does do then.

Don't you think that this scenario makes more sense than protecting some hedge funds because they want to continue collecting those transaction fees? I'd love to hear your thoughts on this.

7:01 AM  
Blogger settlements said...

I called the SIPC previously and they are not at all concerned about this and here is why.

The SIPC has conducted a study that indicates that they could handle several major firms going insolvent at the same time. There analysis is based on the simple principle of how they operate.

For a firm - lets say Goldman - to tap into SIPC bailout of clients Goldman first has to sell off their assetts to cover any liabilities.

If all of Goldman's fails in the system were forced to cover all at once - run on the bank - than Goldman would have to sell off assetts to continue to settle the cost liabilities. The SIPC only covers what Goldman's business cannot.

The SIPC believes that these major firms carry enough insurance in their own assetts to minimize their overall commitment here.

I believe that the total collapse of the entire financial system is extreme. Based on the fines we have seen to date that are absorbed, the Industry as a whole could handle a $1 Trillion or more buy in liability and still survive. It can because the money would be coming from so many different pockets (Thousands of Broker-dealers, Clearing firms, hedge Funds, etc...) and while these firms will be on the down side in some investments they would also be on the upside to others.

The collapse of the financial markets is more an issue about investor sentiment. If every small investor were to pull out of teh markets because they felt it was too rigged the Industry would have a problem.

7:34 AM  
Blogger settlements said...

BTW..Bob,

Great job on the radio.

Suggestion: See if you can work in how the market makers are making all this money for their firms at the expense of guys like Byrne. MM's are holding exemptions that allow them to sell what they do not own and only cover when it is profitable.

Ex: Byrne paid $1.8 Million for his 50,000 shares in a price range of $37 - $38. They have not yet settled and the price range is now $33 - $34. The MM will now slowly, without disturbing the market, acquire 50,000 shares down here pulling in a profit of $4 - $5/share ($200,000). Nice days work. The profit was based solely on selling what never existed to sell.

7:41 AM  
Blogger bob obrien said...

anonymous:

Like minds think alike. The problem is that at some point you sound crazy, even if you are telling the truth. Better to simply stick to what the history books and the numbers tell us.

The problem is that Wall Street invites larcenous players. And there is no shortage of cockroaches.

That's always been the problem...

8:55 AM  
Anonymous Anonymous said...

Bob,

The part that is really disturbing is that IRAs, 401ks, and potentially the proposed social security accounts would make paper certificates a non-viable option for investors. If the B/Ds were commiting the fraud, this would just give them more money to play with and totally siphon off everyone's retirement funds. The only time it would be exposed is when everyone was ready to retire and were interested in taking money out of there accounts.

The other problem I see is that many of these B/Ds are also into banking activity. If they were to be closed up, this would not only be an issue for the SIPC, but also potentially for the FDIC, and other financial areas of our economy. Let me give an example of what I mean.

Take Lehman Brothers for instance. Not only are they a B/D, but they also have a mortgage division. If they are using naked shorting to supply their mortgage division with cash to loan out to consumers to purchase property, this might explain why interest rates are still very low even though the fed has been pumping up short term rates. If you are getting free money, who cares what interest rates you charge on it right? So what might be the consequences if a bunch of these B/Ds are closed up? Many banks, mortgage companies, or other financial institutions may be closed up as well. I think this is the financial meltdown that you and PB are talking about. Am I close?

9:26 AM  
Blogger bob obrien said...

You are very very close. Starting to get an idea of why secrecy isn't such a good idea in the market when it comes to the behavior of the clearing system and such?

9:30 AM  
Anonymous Anonymous said...

Well, probably like most investors I never really had an interest in seeing exactly how the system was set up. But with this SHO list I'm seeing some of my own stocks show up on it with some regularity, and it's pretty obvious that they are getting manipulated (hence my interest). To answer your question though, yes I do see a problem with the lack of full disclosure, and the potential conflicts of interest between the B/Ds and the transaction clearing centers. The more I read about the conflicts, the more I see how another Great Depression could happen as things ripple through our economy. Either way though, the longer it happens the more damage will be done.

9:41 AM  
Anonymous Anonymous said...

You sound like a bunch of cry-babies who lost some money and now want Mommy to give it back.

Why dont you simply buy some shares, take delivery and if the broker fails, make a big fuss? Of course, if the broker delivers, case closed, isnt it?

Put your own money at risk, or, are you scared you're wrong?

1:21 PM  
Blogger mfairview said...

oohhh Make a big fuss. That's your solution? Can we TP his house also? That would teach them once and for all.

Back to reality...

Anyone know how much "slop" they allow in the banking business? With Billions (Trillions?) going each day through the system, you would think 10M here 100M there wouldn't make a difference. Why do I get the feeling they're able to resolve down to the penny in a timely manner.

1:37 PM  
Anonymous Anonymous said...

I wonder if the broker dealer's insurance companies KNOW that they are exposed to this huge undisclosed contingent liability.

Maybe we should write letters to the auditors and insurance companies of the broker dealers to make sure they know about this risk.

1:38 PM  
Anonymous Anonymous said...

http://www.sec.gov/rules/sro/nasd/nasd2004044/sia121405.pdf

Go to page 4 - the industry is quite concerned that a short squeeze will hurt the average investor as they might buy at an artificially high price.

It's good that the industry is putting in comment letters to look out for our interests.

3:32 PM  
Blogger bob obrien said...

Ha ha ha ha aaaahhhhh ha ha haha.

Thank goodness we won't be confronted by buying at an "artificially high" number.

Because that is what the SEC is supposed to do, right? Decide what company valuations "should" be?

I missed that in the code. I thought the code said that they had to make sure delivery occured in a timely manner, not that they got to play God on valuations.

Huh. Who knew that a bunch of attorneys that had never run a business in their life, Governement employees working at the SEC, were qualified to make those decisions?

You learn something new every day.

Maybe the DMV can decide what diamonds are worth next...

3:43 PM  
Blogger Wicked World said...

This comment has been removed by a blog administrator.

5:27 PM  
Anonymous Anonymous said...

use this link for today's interview:

http://heavensembrace.org/robertobrien2.mp3

6:03 PM  
Blogger Wicked World said...

This comment has been removed by a blog administrator.

6:09 PM  
Anonymous Anonymous said...

Assuming that the B/Ds have something to do with the naked shorting on the market (yet to be proved, but evidence points that way), any bets on whether Google (GOOG) isn't next on the attack list?

I'm sure that Google's dutch auction made a lot of friends on Wall Street. Since it started to run up, analysts are sounding like 1999 with their price targets (and I'm not questioning Google's business model here as they are a profitable company). Numerous Brokerages have been calling for a $500+/share price target (sound familiar?). I've also notice that recent trading is showing a very persistant seller every time the stock got to or above $427/share. The trading patterns look very similar to the peaks put in on dot coms in 1999 and ealy 2000. To get onto the SHO list they'll need to naked short them for about 1.5 million shares and it will show up on the list 5 days later. It's going to be tough to ignore the temptation of minting $400 shares. Does anyone else see this as a likely target as well?

5:30 AM  
Anonymous Anonymous said...

Google's Earth software hasn't generated anything to speak of yet and that's going to be used by every municipality, developer, military unit, etc. This is big money.

Also, their ads are being purchased by the early adopters still. Just wait until the ads go mainstream (cell phones, etc.)

They are beginning to go after Microsoft businesses and are going to give them a run for their money.

I don't own one share of google and don't disagree that it is overvalued for today's earnings, but this goes to show that many of the shorts may be rich, but they are stupid.

I have no doubt they will naked short google, then they will get trapped as google's earnings begin to rise.

They will complain to the regulator that there is no way for them to cover without creating upside volatility as evil Google won't issue any more shares and the supply is limited.

The regulator will of course grandfather past fails to ensure that investors don't accidently pay more than the company is worth because of a short squeeze.

8:28 AM  
Blogger settlements said...

I suggest that people go in and read this file closely:


http://www.sec.gov/litigation/complaints/comp19501.pdf

If you follow the example the SEC provided in this litigation you can see what the illegal shorting can do to a market.

1. Historical Pricing on Seagate (STX) Trading for the period in question moved from near $20.00/share to mid $18.00/share. While this is not substantial, the trading moved it [unless you believe in coincidences].

2. The trading changed the offering strike price and thus changed the shares in the offering causing irrepairable damage to the Company moving forward.

3. In this case, the company recovered in stock value directly [within a day] after the offering was consumated. How many of the other firms listed were not as lucky.

What has to be understood is that this was stock manipulation. The market cap of a company was altered by a trader looking to squeeze additional profits. Like Late Trading on Mutual funds, what looks like only pennies being stolen can actually add up to Tens to Hundreds of Billions.

The SEC just proved the impact of illegal shorting practices. Wall street accepted these trades as long sales with the shares being vouchered not existing at the time of the trade. I am sure this happens more frequently (Hilary Shane) with longer fail periods, and has larger ultimate ramifications.

It is ultimately stock fraud and manipulation created under a rigged system against investors and for the Wall Street Insiders.

9:47 AM  
Blogger settlements said...

That link above ends in .pdf as it looks like the blogger truncated it.

9:48 AM  
Blogger bob obrien said...

The link is now fixed at CFRN, and my second interview is now up.

I will be doing one more tomorrow at 10 AM.

Mainly questions and answers.

10:42 AM  
Blogger rvac106 said...

Care to comment on the notion that getting certificates in hand will not protect an individual investor? There seem to be at least two schools of thought on this topic. One, of course, that holding certificated shares will protect you in certain circumstances, and the other, that it'll ultimately make no difference. Obviously, holding your shares in your hand will render them unavailable to the legal shorts, but......

At your earliest convenience, of course.....

11:26 AM  
Anonymous Anonymous said...

Bob,

Towards the end of interview two you mention the "shareholder meeting", and refer to the power of the group assembled.. but don't mention the company by name.

CMKX shareholders are who I believe that both yourself, and Bud are wishing to help build "synergies" with.. and I think that is a great idea.. but as a CMKX shareholder I have to wonder why you would not just mention the group by name.

What are your thoughts on CMKX, and the ongoing, and precedent setting certificate pull?

CMKX is believed by many to be in possession of the largest NS position in history.

www.cmkmtaskforce.com

Shareholders, and other interested parties can watch our progress as we pull in our certs, and stand to be counted.

Thanks for all of your hard work.. oh, one quick criticism.. the NCANS site is a wealth, and a great central area for this movement.. but it could use an artists touch before it starts to really move to center stage... it looks...well.... amateur, and I think it could use a facelift.

Keep up the fight.

12:42 PM  
Anonymous Anonymous said...

If you own your certificate, you are guaranteed one full vote and full dividend rights.

If you own the share in street form, you may share your vote with someone else or may not get a vote at all. They make you think you get a vote as they send you the proxy, but it may end up filed in the trash.

If the dividend is cash, the short will normally be required to come up with equivalent cash. If the dividend is non cash, then you will miss out on your dividend.

An example would be if a company like Microsoft spun Office into a new company and kept it private (technically public as it has more than 50 shareholders, but non trading). They might dividend shares in the private company to their shareholders so you would end up with a share in office, the pre-IPO company and a share in Microsoft.

If you don't own a real share, you don't get that dividend.

If a cert. is lost or stolen, it is trivial to contact the transfer agent and have it replaced.

If your brokerage goes under or has financial problems, have fund collecting. Refco, for example, declared that supposedly segregated client funds and shares would be liquidated to pay creditors.

If your shares are in an IRA, you can get a trust set up for a couple hundred bucks, then register the share certificate in the name of the trust.

12:58 PM  
Blogger bob obrien said...

RVAC: If you want to own shares of a company instead of a contractual fight with your broker (in the event of a blowup) paper shares are the only way to do that.

Anonymous: I have no opinion on the CMKX issue, haven't followed it closely enough. I didn't mention the name not because of a lack of interest, but because I had a brain fart and couldn't remember the letters, and didn't want to botch it on air. Truth.

I would celebrate some pro web design - that is not my forte.

1:15 PM  
Anonymous Anonymous said...

Part 3 not on cfrn page yet.

12:22 PM  
Blogger mfairview said...

Jeff Matthews has really lost it with this Byrne/Antisemtic angle. Including his latest blog entry for posterity. Only 2 comments on it as he claims to be blocking it as it’s not going in the direction he intends it to be (whatever that means).

—–

“To all: I am not going to publish further comments on this blog at this time. The comments this particular post has received are too inflammatory and go in a direction I do not want to go. The post speaks for itself.

Thanks and we will restart the commentary at a later date.”

—–

Well, it too me all of 30 seconds to find another reference to Byrne’s statement that wasn’t from a antisemitic source..

http://www.forward.com/issues/2001/01.01.19/news3.html

(first paragraph)
A celebrated mob informant’s trial on drug-distribution charges is opening a window on an aspect of the drug trade that many New Yorkers would rather ignore. According to federal and local law enforcement officials, Israeli criminals have cornered the market on the drug ecstasy, controlling by some accounts as much as 75% of the American market.

And he calls Byrne’s a loon? Hello pot?

Merry xmas all.

————–

Conspiracy of the Jews?—Part II

When I published “Conspiracy of the Jews?” two weeks ago, I was roundly criticized by many readers for going over the line.

In that piece I questioned why Overstock.com CEO Patrick Byrne had thought to slam the respected New York Times columnist Thomas Friedman, for having a pro-Israel bias in his editorials, in a Motley Fool rant about ace financial reporter Herb Greenberg and star “Mad Money” host Jim Cramer.

It was hard to imagine any CEO bringing up an issue in a manner smacking of anti-Semitism, and I was skeptical even Patrick Byrne would have written the following about Greenberg and Cramer:

“They resemble Thomas Friedman’s write-ups on the Arab-Israeli conflict: “Let’s see, Arabs, Israel, Arabs… Israel, Arabs…….. Israel…… okay, I gotta call this one for the Israeli’s.” In op-ed after op-ed.”

What on earth, I asked, did Tom Friedman’s supposed pro-Israel bias have to do with the subject of Byrne’s rant, other than that all Byrne’s target in the piece were Jewish?

Yet, while Byrne really did write that stuff, readers used the space below to call “Conspiracy of the Jews?” “hysterical” and “claptrap” and worse.

So in case you’re one of the hundreds of millions of Americans who do not listen to something called the Christian Financial Radio Network, let me “drill down,” as the analysts like to say, into the religious issue, by reporting here on an interview CFRN did with Overstock.com CEO Patrick Byrne, including a segment about who or what appears to be behind the naked shorting financial scandal he believes to be hurting his company.

The interview took place on Friday December 16th, and it lasted for an hour and a half. (You can listen to it at a speeded-up rate in far less time on the CFRN web site).

In the midst of the usual paranoid-sounding diatribe against the so-called naked short-selling scandal, Byrne is encouraged to get specific about the root causes of the problem. The host asks:

“Are we dealing with the traditional old-boy network or has organized crime gotten involved?”

To this, Patrick Byrne says the following, and I quote him:

“Every rabbit hole you go down leads to either [sic] the Italian mob, the Russian mob or the Israeli mob, and nobody’s ever asked about that, and I haven’t pressed the issue…but every rabbit hole you go down you end up in one of those three places….

“The Israeli mob and the Russian mob are the two ones [sic] who scare me.”

Those are the words of Patrick M. Byrne, CEO of Overstock.com. I am not making them up.

Byrne goes on to discuss, briefly, the “Russian mob” as a kind of band of marauders who perpetrate scams and then retreat to their “dachas” on the Caspian Sea for a break before the next scam.

He elaborates in far greater detail on the nefariousness of the so-called “Israeli mob”:

“If you Google ‘ecstasy Israeli mafia’ you’ll find articles that basically the Israeli mob…is thought to control 75% of the ecstasy trade in the United States.”

Now, as with Byrne’s bringing up Thomas Friedman’s supposed pro-Israel tendencies in a Motley Fool rant, I find it hard to understand how Israel’s supposed domination of the ecstasy trade in the United States relates to naked short-selling on the U.S. stock exchanges.

But let’s assume, for a minute, that it does.

And let’s do exactly what Patrick Byrne says: let’s Google ‘ecstasy Israeli mafia’ and see what we come up with.

Okay, I Googled the phrase and I got 30,600 results in 0.16 seconds.

Hmmm. Patrick Byrne appears to be right: when you type in those three words, you get articles that—this is incredible—accuse Israel of controlling the U.S. ecstasy trade!

The first two links are to the web site of an author touting a book he wrote about the rise and fall of an Israeli kingpin in the ecstasy trade, but he doesn’t particularly focus on the Israelis-as-uber-mobsters angles that Patrick says “scare me.”

The third listed link resulting from this Google search recommended by Patrick Byrne—and I am not making this up—is to the web site of Al Jazeera.

Yes, you have it right: that Al Jazeera.

For a moment, let’s skip the fourth and fifth links and go to the sixth link of the Google search results: it is a Lyndon LaRouche web site, and it contains what it calls “a contender for the story of the new century: the investigation of the connections between detained Israeli spies and the events of Sept. 11.”

The article explains that the 9/11 attacks were “a coup d’etat” attempt against George Bush involving—you guessed it—Israelis. I am not making that up.

The seventh link on the Google search is to the web site of “Radio Islam,” and the web page is headed: Jews and Crime.

The sub-headings read as follows:

—Jewish Gangsters
—Jewish Money Laundering and Counterfeiting
— Jews and Drugs
—Jews and Arms Sales
—Israel a Haven for Jewish Criminals
—Jews and Scandals
—Jews and Slave Trade
—Jews and the Sex Industry

There are more, but you get the picture.

Sick as this these are, it is the fourth and fifth links that are the most disturbing to me, for they lead to a web site for something called “The International Campaign for Real History.”

Recall that Patrick Byrne said, and I quote:

“If you Google ‘ecstasy Israeli mafia’ you’ll find articles that basically the Israeli mob…is thought to control 75% of the ecstasy trade in the United States.”

Well, the article that comes up on “Real History” is called “The agony of the Ecstasy” by one Nathan Guttman, and it starts out as follows:

The most commonly heard estimate is that Israeli criminals control no less than 75 percent of the Ecstasy market in the U.S.

I don’t know if this particular web site is the one where Patrick Byrne got his alleged facts about the so-called Israeli mafia. I certainly hope not. Because if the phrase “The International Campaign for Real History” makes your throat tighten a little and your mind start to hope it’s not about what you think it’s about—well, I’m sorry.

That’s exactly what it’s about.

The site is historian David Irving’s, and if you have never heard of David Irving, then the following quote from him, which you can find on the links to this site, explains what he means by ‘Real History’:

“Until the end of this tragic century there will always be incorrigible historians, statesmen, and publicists who are content to believe, or have no economically viable alternative but to believe, that the Nazis used ‘gas chambers’ at Auschwitz to kill human beings. But it is now up to them to explain to me as an intelligent and critical student of modern history why there is no significant trace of any cyanide compound in the building which they have always identified as the former gas chambers.”

I am truly sorry to have published this two days before both Christmas Day and the start of Hanukkah, but until yesterday I had not bothered to listen to yet another seemingly trivial rant by the CEO of Overstock.com.

Patrick Byrne is scheduled to be on Bloomberg TV this morning to talk about holiday sales results.

I hope they ask him tougher questions than that.

Jeff Matthews
I Am Not Making This Up

6:07 PM  
Blogger bob obrien said...

This comment has been removed by a blog administrator.

10:58 PM  
Blogger SECFOInfo said...

Is there any way we can get everyone back on the topic of Naked Short Selling.

Going off on these Mob theories and Israeli and DOJ and herion and sith lords and blah,bla,blah.

STICK TO FACTS

It is becoming an f-ing joke reading some of the commentary on these Boards and blogs. This is a serious issue, we need extraneous BS getting in way like we need a whole in our heads. It simply opens the door to charges of lunacy, paranoia and crazy. I am on the side of winning this battle but some of this crap is just that, CRAP.

Reign in the conspiracy and mob theories, Please. It is hurting any chance of legitimacy in the battle.

6:34 AM  
Blogger SECFOInfo said...

One other thing.

Since you speak to Patrick Byrne. Please tell him he is not a sympathetic figure to the media and average folks. It's not his fault that he was born into priveledge and then earned his own. The fact is he has it.

These stories about planted evidence and frivolous attacks and planned schemes fall deaf on the ears the media and people. WHY? Because he has the resources to defend himself and his company. He is not a sympathetic character.

Stick to the facts and prosecute this battle in the court of opinion on that basis. He deserves an enormous amount of credit for putting his neck on the line. Unfortunately he goes off on tangents that put that neck and the issue at risk like a thanksgiving turkey. It's unnecessary.

7:39 AM  
Anonymous Anonymous said...

My frustrated take at this issue:

Either Patrick uses his sword while he has the strength.
Or I see the Miscreants winning the battle.

What I see on Bob's blog and the Motley Fool, the very two platform this message has a chance to accumulate momentum, frightens me.

Cloggers under the names of dwanthem (created two months ago, hardly suspicious) or eurotrash gather recommendations abusing P. Byrne.

I can feel the Tide turning. patrick use your sword, time is on their side. I'm sorry for the analogy that might sound shocking -it best describes my feelings thoug- but you don't fight cancer being nice with infected cells.

Use your sword NOW!

Happy Xmas to those who invest so much of their time publicizing this fraud.

9:14 AM  
Anonymous Anonymous said...

Pat and whoever,

I am spending this Christmas having lost my entire savings of $30,000 on a Reg Sho stock. I have $25 in my checking account right now. Pat I hear your concern about ruining the economy. Well in my mind it is ruined already. If we have to go for ten years in an economic slump so be it. These people need to be exposed and in my opinion taken out and shot immediately....no trial. Hanging is to good for these scum. Expose it and let the cards fall where they may. Do not ever harbor guilt if an economic slump were to occur as it was not you that caused it but the crooks. The quickest way to recovery is 100% exposed and people to pay for this. I know that they will probably never pay but at least the fraud will end. It is such a travesty to live with this crap. I have lost every bit of respect for this country. I too have a friend in a high ranking Senators office. They know about this and are doing nothing. His claim to me was that it will be 5 years for it to be exposed and it will be at the tax payers expense. It is so wrong and goes against everything I was brought up to believe in. It is tragic.

12:25 PM  
Anonymous Anonymous said...

Too funny - Byrne and his pals' lives dont change if OSTK collapses tomorrow or ceases to exist. Those most at risk, YOU, are willing to abide by his agenda.

Thats exactly why this blog loses credibility every day. If someone ate your lunch, do you wait for the deli guy to act, or do YOU act?

Funny, funny...well, sad really.

2:05 PM  
Anonymous Anonymous said...

Something to be aware of...One of the tricky things about having a large unorganized crowd seeing the same travesty is that we all look to somebody else to step up and actually do something about it. This being the case often no one does anthing.

Seeing that there are 100 commments on some of these blogs the people are there. Imagine if these 100 people all worked for a business whose purpose was to end naked shorting. I don't think we'd sit around all day publishing "internal memos" like this blog to each other about how bad it is. I think we would be personally trying to contact people in the media that would be willing to publish this info. Places like PBS, Rolling Stone Mag, NPR, Euro*, etc. Gotta start somewhere. Hey if CFRN is the only station that will broadcast its a great start.

The other pyschological barrier I see is that many folks have concluded that the entire media system is corrupt. The problem I have with that is that if even if you are wrong it won't matter because you won't have tried to persuade a single journalist because you've already talked yourself out of it. Self fulfulling prophecy.

In fact, I think if we united and decided that we were each going to send a request for CNBC to do a segment on (for example, choose your own headline) "What could the bad debt at refco be?" and 100 of us all copied and pasted the 3 paragraph request template letter and emailed it seperately to a specific show (e.g. Ron Insana @ Power Lunch) email address it would be tough to ignore for an extended period of time.

In my book its not spam to overload someones inbox with a single specific subject so long as a single person sends a single email. Its "one email one vote" on the internet (unlike my share proxy apparently!).

Just putting an idea out there to accomplish more and beeatch less...

3:03 PM  
Blogger mfairview said...

Patrick's last message on TMF

----

"There is iron in your words of war. And there is iron in your words of peace. It shall be.... peace."

- The only bad, corny line in The Outlaw Josey Wales

(Do you Fools know this movie? Clint Eastwood made it before his talent was recognized. Orson Wells said of this movie something like, "If it had not been made by Clint Eastwood, it would have been recognized as the greatest movie in American history.)

Dear Fools ET, Retieff, UR, and all the rest of Fooldom,,

Many are asking me why I have taken the time to get in these debates on this board with some Fools who have an obvious agenda (and guys like Jeff) who want only to ensnare me in meaningless arguments. To them I say: you all have a point. In fact, I have been thinking for a month or two about hanging up my Fool credentials. Not in any protest, but just because I sense this experiment is a failure. At least, it has run its course. I'll get to that in a moment.

First, I have wondered for a long time whether I should debate these guys or just ignore them. The problem with debating them is that it becomes like that old saw about not wrestling in the mud with a pig: "You get muddy and the pig enjoys it" (note I am not alluding to O'Brien's twist on it, which was something like "Byrne should wrestle in the mud with Carol Remond and a pig: first he'll beat the vicious filthy swine... and next he'll beat the pig!")

The problem with ignoring them is that they can convince the gullible that this is a sign of the rightness of their cause.

I thought I was threading the needle by letting them go on just long enough, before occasionally answering them. Evidently I have failed, and these conversations have turned away from what I had originally intended, which was a collective colloquium where different folks would take the lead on different subjects, and matters of business could be discussed and developed. Instead, while some have been informative for me and I have even garnered some good ideas to take back to the executive council, often these threads have degenerated into bear-baiting and, alas, bear-bait-taking.

I have learned that there is generally no graceful way for the bear to respond when the hounds come. Either he fights (which observers think violent) or he gets shredded.

I do not say that to be disrespectful to those with whom I have debated. I believe that most of them have been reasonable, well-intentioned folks, and I hardly think I am beyond criticism (Lord knows). It feels like the debate on global warming: one side keeps saying, "Where's the proof?" to the point that the other side is convinced that their's is simply an agenda to muddle things (leaving the first side convinced the others are wooly-minded). Having been on both sides of that particular debate over the last 15 years or so, I recognize the sentiments.

There is also, of course, the Reg FD issue which arises every time a discussion gets meaningful here. I have in fact received complaints from people who do not want to buy Fool memberships but feel aggrieved that they have to wait for folks to repost my stuff on Yahoo.

Beyond all that, there was one other good reason for me to post here. I know people say all kinds of things about me, some dumb and some not so dumb, and I wanted to respond. I did not want to go to Yahoo to do it (that really is getting down into the muck), and certainly not Jeff's blog (which would be less like wrestling a pig in a mudpatch than it would be wrestling a turd in its own cesspool). So it has been nice to have a place to respond, knowing my posts would get replicated elsewhere.

That said, I take your points, Fools. If the argument is, "You should be running your business and not wrestling with these guys!" the same logic says I should not be here at all.

You know, it is not as though when I set out on this jihad I did not know what was going to happen. I knew that I was in for a tremendous amount of vilification. Fully expected. I could pretend that I agonized about it, but I really didn't. I have never really cared too much what people think of me.

That said, I know it would be easier to lay off, if only because it would shut up a lot of folks. It would make my life a lot easier with some around me, as well. Believe me, the last thing I need is more people telling me to lay off. I even consider it once in a while. In fact, some days I would love to!

Here is the problem:

* I am working with a former director of North American Securities Administrators Association (every state has a mini-SEC with its own boss: this is their association). He tells me he has watched small companies be destroyed for 20 years by this system I am fighting.

* I know a former SEC guy who says that he quit because he could no longer take watching hedge funds destroy small companies while the SEC stood by (he confirms the SEC institutional mind-set is heavily slanted in favor of the hedgies).

* One of my lawyer-friends is now gets a string of calls from small companies saying, "We are being destroyed by exactly the same thing Byrne is talking about. We see the same patterns. We are almost out of capital. What can we do? Can you help us?" He has to tell them there is nothing he can do. Maybe nothing they can do. He says it is like watching someone drown every day of the week.

* I get similar "Help us Obi-won Kenobi, you are our only hope!" messages all the time. Recently I spoke to a group of companies who are near-IPO stage. Folks came up and told me afterwards that their own lawyers, in places like San Diego, Houston, Chicago etc., are advising them against going public because of the risk of coming under a naked short attack and losing control of their destiny. (If this problem is now widely understood to the point that lawyers in the hinterland are advising their clients about it, how come Washington is standing by? How come New York financial journalists are all standing around pretending this is some crazy theory of Whacky Patrick?)

* I have friends, as folks here know, far, far up the Wall Street food chain (I am not referring to that Midwestern fellow I know, who is out of bounds in all discussions). I sent a message to one recently, saying in effect, "Hey, I'm sorry if I am embarrassing you with this fight. I did not mean it to get like this." The word I got back was, "Don't apologize. I have been watching these a******s do this for thirty years. It is about time someone stood up to them. I should have known it would be you, Byrne."

Does that give you guys a better sense of why I am standing my ground? Maybe I am crzy, but my worldview is that there are a lot of companies being destroyed by a trick of Wall Street. I didn't ride into town spoiling for a fight and in fact I know this fight is not my own. I'd love nothing more than to ride on. But there are a lot of folks counting on someone to do something. But the constable has been sitting on his ass and the most that comes out of him (when he pays attention at all) are some apologetics for the ruffians. So, I will get out of town as soon as I get a chance, as was my plan, but not until I see the sheriff show up, or some marshalls, or something.

Incidentally, since the new mantra of the shorts has become, "Byrne should resign" (what does it say that the shorts want me to resign? Are they getting desparate for ways out of this cul-de-sac?), and now that what I am about to tell you is not going to happen (and hence, is not material), I will mention something. Since July my hope has been to resign and take a different job at the end of January. It is a job I would far prefer, actually. It is one of the reasons I raised the stakes in August when I did: I did not want to leave the company with these leeches on it, so I figured I'd burn them off before I went. I thought we'd be through by now. Alas, I did not correctly calculate the lethargy of the SEC. Since this is still a pitched battle, and because we had some operational issues that blew up on me these last five months that will take some time to resolve, I am afraid I am afraid you guys are stuck with me. Sorry, miscreants.

I will close with some parting stories and points that some might find useful in evaluating whether I have taken the right approach.

First, I will mention that I ahve felt that I faced a bit of a double standard here. You know, obviously (or I hope it is obvious) I don't think that the title "CEO" makes me a bigshot. In fact, I avoid using that title because it sounds too big-shot to me (I only use it in legal documents when I must, or in places like, well, the open letter to the SEC I just posted). But when I try to engage detractors, and use what seems to me only a mild level of jocularity and humor, even at a lighter level than they themselves employ, they react as though I am being a big-shot-CEO-bully. They direct it at me, but when even a mild version of it is returned, they cry foul.

It reminds me of how when I was a kid, and became a wrestler. I moved around schools a lot (11th grade was the first time I repeated a school since 4th grade). I'd go into new schools, and the local toughs would bully me, as kids do. I'd ignore it for as long as I could, until long past the time when even my new friends were saying I was a wimp. And then one day when I had had had enough I would start whipping people (by the way, fathers, get your kids to wrestle: wrestlers can take anybody). And what happened more often than not is that the same people who had been telling me I was a wimp started complaining that I was too aggressive.

Hmans are wired with a circuit I am missing. It is the one that says, when a predator threatens you, raise your hackles and hiss until they go away. I lack that. I prefer Kung Fu'sKwai Chang Kane approach: be pacifist, pacifist, pacifist, until the blackguards are way way way over the line, and then go thermonuclear on them.

Two of the most important books in my life were from Ken Kesey: One Flew Over the Cuckoo's Nest and his real masterpiece, Sometimes a Great Notion. Both concern men fighting social pressure, the first, pressure from authority, the second, pressure from those around him. I do not know if the theme of a man refusing to knuckle under made such a deep impression on me, or if I was already wired a bit oddly and so it just resonated more strongly with me than other things I read. But I really took it to heart, and they reinforced my typical adolescent desire to eschew conformity.

Most adolescents express this by all getting the same rebellious haircut, but mine took a different turn. By the time I got to college, I promised myself I would never step into a church, a party, or a fraternity while I was at college: the principle was that I wanted to avoid any room where all people were thinking the same thing. It is not as though I disliked people: in fact, I learned the names of a few of the guys on the football team, and they were fine guys. But I never had a beer with anyone, never stepped into a fraternity, nor a church, never had tea with anyone, nor went to a party (with the exception of one sorority party I went to, because the girl who asked me seemed shy). It would surprise me if more than 5 people from my class at Dartmouth even knew who I was. No slight on anyone there (nor on church-going, about which I changed my stance after college): it was just a phase in my life where I got comfortable with how I was wired.

Six years ago, while the dot-com boom was still on, I starting meeting reporters. Sometimes they would bring to lunch financials of Internet companies they wished to discuss. I would show them how to calculate a quick ratio and a current ratio, and show them how to predict when a firm would run out of cash. There in the winter of 2000, their reaction was, "Come on, if it were that easy, why can't everyone see it!" I would tell them, "Look, I promise this is all going to end in tears. These firms will be broke in 2-4 quarters." I do not remember any of them believing me at first. I learned then how comformist reporters are by temperament. Not bad people, but they just don't think for themselves. There is too much fear of being wrong about something.

So OK, the same folks think I am a loon now. A bunch of Ivy-League-frat-boy-turned-Wharton-MBA-turned-Wall-Street-a******* now say I am an idiot or a bad guy, and a bunch of financial reporters believe them. Am I supposed to care? When I was 18 I had the intestinal fortitude to dismiss what that crowd thought.

All that said, I agree that this little hobby of mine is not serving anyone in its present incarnation. I have other plans.

I really, really wish to thank all who have engaged with me here. Even opponents, to the extent they have been sincere ones. I got a chance to check my thinking against reality, to hear what others thought. I even picked up a few new ideas for the business.

In return, I have tried to engage you as I would with the money managers I meet on the road. You know, Reg FD has done something, but still it is the case that the big shots have an advantage over you retail investors. One-on-one meetings, and even investor conferences, are conducted with a tone of, "Now that the public cannot hear, what can you tell us about this and that?" Wildly inappropriate questions are asked when they have to know my answering would violate Reg FD. The sense I get is that it is the custom for CEO's to respond in those settings, and people treat me as a bit unsporting not to do so. In this board, which I have treated as "the public" (though admittedly it is not quite that), I have tried to reverse things, and be open and forthcoming with you folks, and then expect it all to be reposted later on Yahoo so, for once, the professional money managers would find out about thigns after you, the public (I did it on weekends and after hours, however, so as to eliminate any trading advantage). I am not sure I have succeeded, or if I strayed to close to the line even by considering this "the public," or if I went astray by following too many people into too many rabbit-holes. And to the extent that this has turned from a discussion of business into less-than-civil mono-issue shooting gallery, I regret the role my own participation played in the change. But I still do hope I gave a good flavor of the decisions I struggle with in my professional life.

Well, for whatever the reasons, my sense of things is that it is time to resign my Fool credentials. You can always write me at patrick@overstock.com.

Good trades to all Fools,

Patrick

PS There has been one additional modest reason I have been coming on these boards. I feel that the Fool has been as good an antidote to the conformist and duplicitous thinking of the Wall Street elite as this society is likely to see. I hoped that by coming here I could, in my own meager way, serve as a kind of draw to the Fool. I do hope I have sold some ice cream here for Mann and the Brothers G.

PPS Here is another tidbit on that movie: Forrest Carter, the Native American who wrote the book, which was named Gone to Texas, also wrote a book called, The Education of Little Tree. It is an autobiographical work that concerns the world as viewed through the eyes of a young Cherokee. Apparently the PC crowd is big on it, and it is used in schools a lot.

It turns out, however, that Carter's real name was not "Forrest" but "Asa", he was not Cherokee but White, and in fact, was an abject racist. He was a member of the Ku Klux Klan of the Confederacy. He wrote speeches for George Wallace at the height of his reactionary "segregation now, segregation tomorrow, and segregation
forever!" period (in fact, those famous words may have been written by Carter for all I know). I recall reading somewhere that Carter abandoned Wallace when he "went soft" (which is, incidentally, quite an amazing story, and in my view illustrates the way African-American culture retains a capacity for redemption and forgiveness that has been lost in White culture), and then went on to write Gone to Texas (which, while a great work, displays his pro-Confederate sympathies,)and The Education of Little Tree, which is seeped in racist condescension.

Somehow, the crowd missed that

3:25 PM  
Blogger mfairview said...

Patrick's open letter to the SEC

----

Sirs and Madams,

I am sorry I called the SEC a "lapdog" on Bloomberg yesterday. That was unkind of me.

If you check your files, you will see that whoever was the regulator who approved our S-1 (it was a woman) received a dozen roses from me after our successful Dutch auction IPO. That is because I sat around in a closing dinner with a bunch of high-priced lawyers and bankers, and realized that the real hero was some anonymous lawyer toiling away for about 1/5 of what the lowest paid guy in the room was making. I wanted to thank her, and do something to disrupt the normal antagonism that exists between business and the SEC, to show you folks that here is one businessman who understands the value you bring to society, and deeply appreciates it.

You know, most businesspeople dread the SEC. For them, getting a letter from the SEC is like getting one from the IRS: you know no good will come of it. My attitude, however, is completely different. As I have said in various interviewers, I was raised on the idea that there are three sacred things: the Church, the Constitution, and shareholders. You guys are like priests to me, or professors: your role in society is sacred. And from all I hear, the new guy at the top, Cox, is a good man (I have that on the authority of people whom I trust: however, they are all fellow libertarians, and I feel this may not be the time for a libertarian regulator). And from what I can figure out from the outside the folks in the trenches come in to work and want to do their jobs.

But something has happened in the middle and upper reaches in DC. No one on the outside understands it, but we do see it the SEC as captured. And neither you nor I want that.

I have three ways of calculating the failures to deliver in our stock(the following numbers are beyond the 7+ million legitimate shorts reported in OSTK).

1) The first and most obvious way to me tells me that we have 10 to 15 million counterfeit shares in our stock trading.

2) The second way to calculate it tells me there are 30 to 35 million counterfeit shares.

3) The third and not very credible source of information I have on the subject tells me there are 3.8 million counterfeit shares.

I have duties to shareholders. Do I have a duty to people who think they are shareholders but who have only counterfeit shares? Is it even the case that some people are real shareholders and some people are not? (Well, I suppose the people who hold paper are real shareholders, right? But is it the case of those who don't, that some are real and some are putative? Or is it the case that all of these non-cert-holding shareholders are equally part-legit and part-putative shareholders?)

It is kind of hard to be a CEO trying to do the right thing, but facing questions like that.

Now I know you folks have said, "This naked shorting thing isn't a problem." But you also say on your website FAQ's ( http://sec.gov/spotlight/keyregshoissues.htm ) that you had to grandfather all the failures to deliver that existed on January 3, 2005 because: "The grandfathering provisions of Regulation SHO were adopted because the Commission was concerned about creating volatility where there were large pre-existing open positions."

As far as what that means for Overstock, I think it means, "If we the SEC had not grandfathered the fails, then OSTK might have gone up."

Well, OK, I'll drop the grandfathering thing. Just tell us how many fails-to-deliver there are, then. To that your website says, "The fails statistics of individual firms and customers is proprietary information and may reflect firms' trading strategies. The release of this information could be used to engage in unlawful upward manipulation of the price of the securities in order to 'squeeze' the firms improperly."

Do you realize that you are saying of the people who are breaking the law, that if you simply told the world how much the law had been broken you would be revealing the strategies of.... the people who are breaking the law? And that letting the world know the truth might result in those people who had been breaking the law... losing money?


Do you understand the consequences of this for our economy? Take Overstock. Let me assume that OSTK is at least as bad as the median of your cases that made you say, "... the Commission was concerned about creating volatility where there were large pre-existing open positions." Since we have been on the Reg SHO Threshold list for 11 months, I think that is a safe bet.

Suppose you made the people who had failed-to-deliver, well, deliver. If I am right and there are 10 million FTD's, or even 4 million, then it is likely that in the process of covering our stock might experience some of the "volatility" to which you refer. Let us say that means.... it goes up. Let us say it went up to, for example, $75 (about where it was, I think, when the clock started ticking on the Reg SHO Threshold list). Then it is likely that the company might sell a million shares, put the money in the bank, and continue in our quest to catch Amazon North America in a couple-few years. To do that, we'd start by doubling the size of our warehouses, hire another 1,000 - 2,000 people in Utah and Indiana, buy more inventory, employ more people making the inventory, employ (at a distance) more UPS truck drivers to deliver it, and so on and so forth. Sounds good, right? Good for America? Multiply that somewhere between a few dozen and a couple of hundred times to imagine the effect forcing all firms' FTD's to settle might have on America (and many of the other companies would use the capital to fund research for drugs, or write software, or something more useful to the world even than selling toasters).

And no response from you guys.

I am doing it because I think this is having an extraordinarily pernicious effect on American entrepreneurship. I have been willing to subject myself to a ridiculous amount of public ridicule ("He's just mad his stock went down!" "Stick to your business Byrne!") in order to fight this issue.

Other than the fact that in recent weeks the SEC is taking steps to smear the name of my Utah lawyer and friend who gave you 14 years of service, I have no evidence that anyone at the SEC notices that I have been somewhat public on this issue.

The world says I am crazy. OK, SEC, most respectfully, tell them how crazy I am. Tell them how crazy I am by telling them how many FTD's there are in OSTK, every day back to the time this began sometime in 2003. My hunch is you won't do it. Because you fear "volatility."

So who is crazy?

Most respectfully, when you did folks start thinking you were in the business of deciding the price for which stock should sell? Refereeing the bulls and bears, but deciding it is OK for bears to print millions of counterfeit shares?

If you have noticed my public crusade, you may wonder, like many others, just how crazy I am, for it is widely thought that the SEC is a thin-skinned and vindictive organization, and publicly attacking the SEC is generally thought to be business suicide. Let me explain it this way: I have a good friend, Gary Kennedy (one of the original board members of OSTK), who just fought a five year fight $30 million fight with the SEC rather than sign a piece of paper that would have implied to the world he was guilty. Gary told me at the start that on principle he would never, ever concede by signing that paper, because he knew he was not guilty. A couple weeks ago, the SEC dropped the whole case and walked away. Gary spent $30 million and five years standing his ground. Some think that crazy. So let me put it this way: I'm so fanatic, Gary Kennedy thinks I'm crazy.

So let's settle the trades, or just tell the world how big the FTD's are, and we'll find out who was crazy.

I know there are smart people there who have probably guessed my strategy. I have been criticizing you and, admittedly, flouting some CEO-conventions (though not, I believe, any laws) hoping you would respond as is your custom. And then we could end up in court, and I would be able to get to the truth through discovery. I seem unable to get you to respond and, alas, I am not willing actually to break the law in order to get you to come after me.

However, the guys I am fighting are now bragging around Wall Street that they are prodding you into an investigation of Overstock. That is, of course, their modus operandus, (I wonder, do you know how short sellers often brag about having the SEC under their thumb, and their ability to spur you guys to do investigations of companies when they need it?) Incidentally, they also are bragging around Wall Street that they are going to get the DOJ to come after me. That was the source off my comment on Bloomberg about someone finding heroin or a body in my trunk (Mark Cuban now flatters himself, I hear, by pretending that I implied he is somehow involved: Cuban is a wannabee hedgie, and the hedgies he wannabees with are krill many steps removed from the mobsters who are, I think, the deepest stratum of this game). I said that simply so that if someone does find a body or a bag of heroin in my car, or some variant thereon, I will have been on record that it was going to happen.

Anyway, as you will see in my next post, I am tossing in the towel on this message board thing. It is not going where I hoped it might. But anytime you folks want to talk to me, or have suspicions about anything I have done, feel free to call collect. I am an open book, and would be most happy to let you examine anything you wish.

Please feel free to bring OSTK fails information when you come, too. Let's show the world who's crazy.

Until then, I do remain,

Most respectfully, and appreciative of the work you do,

Patrick M. Byrne
CEO, Overstock.com

3:28 PM  
Blogger smokyjoe said...

Insurance & CAMEL Coverage:
The talk of "enough" or Adequate" SIPC or other types of coverage Broker-Dealers/DTCC/NSCC,etc may have is erroneous at best.
The Deposits of customers are the institutions' Liabilities, not assets. They are 'Assets under management' but not the B/D's assets.
Furthermore, A security paid-for but not yet delivered is not only a Liability to the institution, but an OPEN-ENDED liability at that. Meaning the actual dollar amount of the liability is only determined upon delivery of that asset to the Buyer for whom you are entrusted to attain it for so the rightful owner does so free & clear.
Fraud is not covered by most insurers. The capitalreserve and retained earnings of the institution are the only assets you can look to with certainty when these deals go south on them.
Most institutions use as much leverage & hold as little Capital reserves as required by law in their trading units. This maximizes ROI and Minimizes (ROA ) Risk of Assets.
The companies are broken down and capitalized accordibg to Function & risk allocation. That way, should XYZ Capital Markets take a hit beyond their capital plu insurance it it BK'D. tHE WRITE OFF CAN BE COSOLIDATED INT THE PARENT'S or other subsidiaries' books without affecting their own rsepective capital. Refco is a prime example. The trading unit's liabilities won't be a burden to the fixed income or other subsidiaries' books unless a valid reason exists to pierce the corporate shield of another arm.
Look at the exhibit on the NCANS under the DTC/NSCC disclosures. The actual amount avail, Capital+retained earnings (none of such as the profits are divided among the member firms) plus insurance. The number is alarmingly null and void. The one ability thee DTC can claim is it's ability to "Call" for , or demand additional deposits pro rate from the membership. Now if the snowball gathers any speed and the right type of snow the ball grows exponentially. That event would e when the majors started taking BK in their tradig units,
That is when Uncle Sam (you & I)take the hit.
The document is a MUST READ!
By either the OCC & SEC dramatically increasing B/D Deposits $/or linking a parent company's assets across it's subsidiary liabilities much better protection would be avaiable for investors.
In business school one learns that the only real reason for incorporation is "Limited Liability!" This is also why the only creditors at Refco who stand a chance of meaningful recovery are secured Bondholders. No one who's claim is directly against the Capital Markets Trading firm has a prayer. SIPC won't be liable for this fraud.

11:56 PM  
Anonymous Anonymous said...

Would be nice if someone at the SEC or DTCC would spill their guts. Would "whistle blower protection" extend to them? Maybe a newspaper ad asking them to come forward.

7:16 AM  
Blogger mfairview said...

It seems Lesli Boni did spill some guts in her research. However, this information somehow got lost.

7:54 AM  
Anonymous cutty said...

I have now listened to all three interviews,I agree with whoever said that the third was the best. Bob O' you're slowly becoming a pro at this.
One thing that stood out for me, was the question about the bad guy's plan to exit the game. I though, hey, this is exactly what I have been asking myself for some time. Could it be that there is NO plan really? That they think this can go on until hell freezes? If there is a plan, what is it? I mean, can they for example, plan to let the USS Wall Street sink, after escaping in the lifeboats. What else can it be if the magnitude of the problem is as big as discussed recently. You cannot just slowly deflate something that big: it has to pop with a bang. This starts to be really scary.

12:30 PM  
Anonymous Anonymous said...

Cutty,

The plan is actually quite simple.

First, the regulators have sided with the bad guys and have set up a system [grandfather clause] where they will be capable of exiting these fails gracefully over time and with profit.

Second, if you look at what is happening with SHO companies, many are seeing trade volumes increase as stocks tank and short positions are decreased. Wall Street is 'working' out the fails by raiding the stocks. According to teh WSJ David Rocker went from a net 60% short in January 2005 to a net 10% short in December 2005 and profited handsomely in doing so. Ironically he held many SHO companies short and was covering into a falling stock.

Finally, the SEC will eventually get rid of the 'grandfather clause' as it was only a means for a graceful fall. They too know it is stupid, and know that it will be removed, but in the interim it bought time for the bad guys to get out gracefully.

I believe that that is the exit strategy negotiated by the SEC and the Industry. The investing public is unwittingly the 'bail out' programn to the industry and financial ruin for those people is called collateral damage.

8:52 AM  
Blogger Candice B. said...

Hey - Cool blog, nice layout! Checkout my cell phone numbers blog if you can.

12:23 PM  

Post a Comment

<< Home