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Blog Watch: Naked Shorting Will Cause U.S. Exchange Exodus

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-- Editorial Market Commentary --

August 5, 2010 (FinancialWire) (Investrend Forums Syndicate) (By Bud Burrell) -- Editor's note: Once again we are compelled to refer back to a history of greed-induced fiascos made possible by a severe lack of regulatory control. If anyone needs to be reminded, here's a short list for you: SEC chairman Christopher Cox invoked a one-month ban in July of 2008 against naked short selling in 19 battered financial stocks, including Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Citigroup (NYSE: C), Lehman Brothers (OTC: LEHMQ), Credit Suisse (NYSE: CS), Merrill Lynch (DOA, as in dead on arrival), Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Fannie Mae (NYSE: FNM), and Freddie Mac (NYSE: FRE), an eclectic "small group of thoughtful people" sounded the alarm about a financial system gone horribly wrong. Activist Dave Patch started in late 2003, and in early 2004 Mark Faulk began reporting on financial fraud on his website "The Faulking Truth". At around the same time, the late Gayle Essary began to utilize his own forums, Investrend and FinancialWire(tm), to bring greater exposure and an air of credibility to the cause. Others, including Bud Burrell, Bob O'Brien, Rod Young, DeWayne Reeves, Darren Saunders, Mary Helburn, and economists Suzanne Trimbath and Robert Shapiro, worked tirelessly to warn the country about the potential train wreck years before it happened. Efforts to reform our financial markets were further galvanized when Overstock (NASDAQ: OSTK) CEO Patrick Byrne, along with fellow crusaders Judd Bagley, Brent Baker, and Mark Mitchell, joined the rapidly escalating war. Forbes writer Elizabeth Moyer and Euromoney magazine's Helen Avery covered the scandal for the financial media, but the Wall Street controlled corporate media for the most part either ignored the issue or attempted to discredit those who exposed the corruption.

And, once again, FinancialWire(tm) contributor Bud Burrell implores us to take a hard look at what's happening right in front of our eyes:

This week, an important online news service released an article that should send shockwaves into our public markets. In very curt form, the article chronicles the many abuses of U.S. public companies by short selling manipulators, particularly through naked short selling and regular and derivative based synthetic shorting. By implication, the article recites the sheer embarrassing ineffectiveness of our regulators, who are engaged in a pattern of systematic conflicts of interest with revolving doors that are a major disgrace to our own government.

Note the following August 23, 2010, article from Live Trading News International:

aEUR~Naked Short Selling Dominates the Markets'

"Naked Short Selling now dominates the OTC markets, having been blamed by most for monument collapses during the financial crisis, the SEC attempted to, but failed to control the process.

"Naked Short Sellers focus in companies they feel are aEUR~destroyable' normally this is a company that uses their market to raise capital, the case of many Pink Sheet and OTC businesses, so it is no surprise to see that naked shorting is at an all time high.

"The Naked Short Sellers move in removing any chance of small companies gaining access to any form of reasonable funding by selling the stock short, effectively increasing the float, and using the basic rules of supply and demand changing the very nature of the company's market and market price.

"Many of the positive runs forward of small companies in the last 6 months have been destroyed by short sellers, when in the past the small companies could have taken advantage of improved market valuation, raised funds and moved their business models to the next level.

"The chances of a small company now making it out of the woods on to a main board are limited at best.

"Naked short selling was clearly the end of great companies like Lehman and Bear Stearns.

"If you have any doubts, you should take a look at websites such as FailsToDeiver ("

And I am not alone in this opinion.

U.S. companies are going to consider leaving the U.S. with the wholesale abuse.

Foreign exchanges with firm 3 day settlement or improved DVP procedures challenging manipulators are going to be rewarded with U.S. listings from U.S. listed companies withdrawing from U.S. markets. The conventional wisdom that only small companies without merit would be challenged has been proven grotesquely false.

If you could know that your purchase and sales would be cleared and settled in real time with no manipulation risk, would you settle for less? If U.S. companies leave the U.S. markets, how far away will it be before U.S. investors do the same? U.S. Courts have ruled that when an investor owns a share of stock, it does not reflect an actual equity ownership interest, but rather nothing more than a securities entitlement. That is the kind of arrogant disgrace that will drive U.S. investors to give up on U.S. brokers and U.S. exchanges.


Source: Investrend Weblogs (

(Go to for other recent commentaries by Bud Burrell.)

Bud Burrell's experience spans a diverse spectrum, including service with the U.S. Military in the Special Forces, as a Finance Officer and as a Project Finance & Accounting Officer. Burrell also pursued studies in fine arts, the Renaissance, Russian history, and Chinese culture. Following years of working on Wall Street, he worked with specialty and derivative money management consulting and research and development in IT and AI. Since then, Burrell has worked globally with major development stage companies from the IT, energy, alternative energy, bio-pharma, and general technology arenas, as well as on counterfeiting and financial fraud scandals.


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