May 12, 2011
Shorting has ceased to be a legitimate function and has become a tool by which companies are attacked on a regular basis, not because they are bad companies but because a Goldman Sachs or their hedge fund cronies decide to take them down, It has nothing to do with company performance anymore, just whether the company can withstand such an assault. Much of this takes the form of naked shorting, illegal but widely done. A recent government reports stated they believe that both Lehman and Bear Sterns were taken down largely by naked shorting, stating that as much as 40% of the total short positions were naked. The only markets in the world that allow this type of predatory and destructive behavior are US markets. And, there is no penalty. It was recently revealed that Morgan Stanley holds billions of dollars in naked short positions in silver. Rather than force them to cover, these positions were "grandfathered". Translation - there is NO PENALTY FOR ILLEGAL BEHAVIOR BY HEDGE FUNDS AND BANK from our government agencies. They are above the rules, above the law, and out of control using market makers who are not subject to naked shorting restrictions, dark pools that mask their positions and trades, etc. Disclosure will force number of things. It will be far easier to tally up cumulative short positions if they are disclosed. Regulators will find it much easier to find illegal trading. This will hopefully bring a level of credibility back to the markets, which, by a recent study, US citizens largely believe is "rigged". In addition, it will show who the participants are in the "wolf packs" of hedge funds and banks that commit RICO violations by collaborating on short attacks and are able to easily hide them from view.