Raping Main Street:Wall Street's Greatest Con - The "Borrow"
By Anthony Elgindy
Ask anyone on Main Street what they know about "naked short selling", and you will hear about "phantom shares" and how greedy, rumor-mongering bastards use them to ruin and destroy innocent companies who have never hurt a fly. Ask any short seller what they think, and what they think of the anti-naked short selling movement that has swept the nation and you will hear a similarly common view:It's a crock, being propagated by lunatics, long on rhetoric and inflammatory innuendo, but short on hard data. Unfortunately for America, the medicine used for what ails both sides is more toxic than the disease.
For those who don't know me, my story began on Wall Street in 1988, at the tender age of 20, when I started working at the nation's most notorious brokerage firms, peddling junk and worthless paper. Thinking I was gaining legitimacy as an investment pro, I became an owner of a regional retail firm and then an Associated Director at Bear Stearns. After finally concluding that the deals my clients were getting were just as bad, I founded Key West Securities, a fully licensed NASDAQ market-maker which specialized in ferreting out scams, rather than promoting them.
But it was through my experience and association with the con-men that ripped Americans off and then the authorities who claimed they wanted to shut them down, that I became an internet celebrity and force to be reckoned with. My goal had been to try and take short selling out of the shadows and demonstrate that the only true friend the average Joe really ever had on Wall Street was the "naked short seller".
Like a financial superman, a "naked" short seller used to be able to identify a scam, take a position and expose it within hours. A short seller who doesn't have to worry about "borrows" or getting the permission of the people he is investigating, is the only person on Wall Street who is able to stop any fraud at any time - dead in its tracks. However, it wasn't long after being dubbed the "Mad Max of Wall Street" by Wired Magazine, that the tragedy of 9/11 rocked the globe.
Little did I know that because of a freak coincidence involving my attempt to place a sell order in my children's accounts on Sept 10th, that my ethnicity and heritage would invite an unethical, greedy, hate-mongering prosecutor who despised short-sellers to proclaim to the press that I "might have known about 9/11 before it happened and instead of reporting it, tried to profit from it". When an exhaustive investigation and surveillance of every imaginable detail of my life revealed no links to "terrorism", he fabricated a litany of short-selling related charges. Instead of evidence, he used 9/11 innuendo and suborned perjury to win a conviction and send me to prison.
So I speak here with a deep understanding of how this all works, especially since my case is often cited as the "perfect example" of such activity. Even a cursory examination of my prosecution severely undermines such a claim.
This case was billed as a former NASDAQ market-maker turned private trader, accused publicly of destroying "thousands" of companies and leading hundreds of alleged co-conspirators through the alleys of Wall Street, plundering and razing everything in our path. But having access to all the evidence (including thousands of classified FBI files through discovery), I have a unique and credible perspective to offer the truth on this topic.
However, as you will see below, the anti-short folks did manage to make one valid point. (This may come as a surprise to those who have ever heard my earlier views.) But first click HERE for the facts:
NEARLY THE ENDGAME:
In 2008 when the world's financial markets were rocked and destabilized by the unraveling of mountains of sub-prime mortgage paper packaged and re-sold by Wall Street firms, just about every financial firm in the country faced being wiped off the map.
Each firm in turn faced rumors of impending financial doom, usually founded on each firm's overexposure via excessive leverage to toxic paper and because their balance sheets were impenetrable (given the impossibility of valuing ANY of their portfolio assets in the midst of the constant down ticking of property values). Many of these firms were caught with billions in toxic paper. And to aggravate matters, management instead of de-leveraging and raising capital while they could, focused their attention on playing spin-meister and denying the obvious. And when you lying, cheating and stealing you're undoubtedly going to attract the attention of short-sellers.
Firms like Lehman, Bear and Merrill Lynch who were exceedingly active players in creating and peddling toxic paper, according to the numerous books, studies and historical accounts available now, had balance sheets that were overloaded with worthless paper and in many cases it was leveraged by ratios of 30 and 40 to 1. As a result any monkey with a pencil could figure out that any uptick in the foreclosure rate could easily put each and every single one of them under.
But short-sellers are not the ones who made the bad loans. They aren't the ones who lied on their loan applications, nor did they induce the wave of bogus appraisals and they aren't the ones who thought it would be a really nifty idea to give someone, whose payment will triple in 3 or 4 years, a loan for 125% of the unconfirmed value of a home in which he has no equity. And Short sellers didn't slice and dice stacks of this paper into "tranches", and give it AAA ratings. Short sellers didn't do any of that. The banks and mortgage companies and their accomplices did, and all of it was facilitated by, or ignored by, the Federal Government. And Congress enabled it by deregulating derivatives, and by repealing Glass Steagel.
So it really wasn't surprising that the government, now faced with an untenable situation, stepped in and rescued AIG which had sold the Credit Default Swaps (CDS) on itself as well as on an ocean's worth of toxic paper, boosting short-term profits while dooming itself into insolvency.
AIG was so large and so enmeshed with entire countries such as China that its failure had put US National and political security at risk. Shutter AIG, and the consequences were unimaginable. (Would the airlines stop flying ? Would China finally walk away from the US dollar? Would any countries fall to revolution or bankruptcy?)
Nor was it surprising when the government, which caught a huge toxic political backdraft over AIG, allowed Lehman to fail as an example that "moral risk" still existed. However, what the government didn't foresee was what the downside would be.
It didn't have to wait long. After Lehman's failure, the liquidity crisis quickly turned to a panic. Rumors began to spread that some money market funds had "broken the buck", meaning that because they held short-term Lehman paper, paper frozen in accounts because of it's collapse, money market funds were now at risk. Suddenly the world's banks woke up wondering which bank might be next, which one would be saved and which one would be allowed to fail. Nobody wanted to be a counterparty to a failed bank, especially since every one had balance sheets bloated with terminally ill paper that couldn't be priced, much less sold.
So, the anti-shorts did get one thing right. Had it not been for the government's intervention, short sellers could and most likely would have gone in and sold short the shares of each vulnerable financial institution sequentially and taken down one firm after another. And as panic ruled, I concede that they might have gone after banks that had little to no exposure. And it is also possible that, in some cases, more stock would have been sold than even existed. Regardless, it would have been a bloodbath like nothing ever seen before. The results could have been cataclysmic for the global economy.
But when the government stepped in and saved some while allowing others to fail, it effectively stopped this chain reaction of collapses. However, it was the government's intervention, and the government's intervention alone, that gets the credit.
And since, short sellers have been blamed for every catastrophe since the dawn of time, with a climate so perfect to rally Americans against an unseen and little understood segment of the market, the anti-shorts made their move. Seizing upon the fears of a nation in crisis the public was bombarded with fictitious stories of profiteering. No longer was AIG to blame for it's own predicament, no longer was Lehman responsible for its own cooked books: it was the shorts who were to blame. In response to the public outcry, the SEC took the unprecedented step of placing a temporary ban on all short selling of an ever growing list of banks, major companies and financial institutions, a list that companies like GM and IBM clamored to be included on.
However, by doing so it unwittingly eliminated a significant amount of the liquidity in each of those stocks, so they fell even faster. Furthermore the huge increase in popularity of ETF's effectively created a channel for an unlimited amount of capital to be deployed in an instant into ETF's representing long or short positions in US financials. By buying one of these ETF's, short positions could be taken without directly borrowing the underlying securities. Volume surged, and moreover, there were double-leveraged and triple leveraged ETF's which could be bought on margin, effectively intensifying the leverage in whatever direction by as much as 9 to 1.
In one of his rare moments of true candor, Chris Cox the former SEC Chairman who swallowed the anti-shorts arguments and implemented this now infamous ban on short-selling, described it as "an emotional response to political pressure" and the worst policy failure of his tenure at the SEC, which is saying a lot.
In hindsight, even as a short-seller, one still has to appreciate the government's intervention, which saved our idiot banks from themselves. Otherwise it's quite possible that we would all be currently enrolled in Mandarin 101. However, my appreciation ends there.
The anti "naked" short selling contingency which had previously pointed to my case and latched on to the financial meltdown as further supporting evidence to push through their real agenda, which is at it's heart is the total ban of all forms of short selling, has not done America any further favors. In fact they have created an incomprehensibly predatory "borrow" system that can cost you up to 100% or more of any money you might conceivably earn in a short sale and transformed our markets into the greatest Ponzi-scheme enabling system ever constructed, by requiring anyone who believes a company has a problem to get a shareholder's permission in order to make a bet against that company.
But having observed the events of 2008 and 2009 and the resulting regulation and restrictions the SEC, FINRA and Congress have pushed through in reaction to all the anti-short rhetoric, it is clear to me that they got only one issue right. Short sellers should not be able to sell an unlimited number of shares in a company. Yes, even if the company is an outright fraud. The potential for recklessness and irresponsibility needs to be contained.
THE NAKED TRUTH:
Their argument then, on it's face -- that "naked short selling", which they define as any sale made without shares being "borrowed" -- should be banned, may at first look valid. That is, of course until you are faced with the reality that companies running scams and shareholders knowingly promoting junk won't ever make their shares available to those who know better and want to put their money where their research is. This effectively transforms the argument into one of getting "permission" from those who are long - as opposed to this misleading term "borrow" that they like to hide behind.
What these people really want, isn't to be able to loan their shares and collect these enormous fees (which they meekly let the brokerage firms keep), what they really want is for a short seller to be forced to first get their permission before he can make a short sale, permission which can be rescinded at any moment as they orchestrate manipulative squeezes and permission that they know, in many cases, will never be forthcoming. At least not in the shaky and truly shady deals it won't.
It is precisely for this reason, because no permission was ever needed, that naked short selling, prior to the institution of Reg SHO and the absurdly contrived rules that flowed from it, was the only effective way to stop fraud and expose con-men instantly. However, in light of what "could have been" during the darkest moments of the melt down, my views have shifted somewhat.
The term "naked short selling" undeservedly conjures up images of "carpet bombing" innocent companies into the dust. I use it simply to define ANY short-sale that is NOT tied to a specific share or shareholder. And this separation is what we need.
Put simply, the notion that in order to make a bet against a stock that you feel is overvalued, a scam or whatever, you must first go to an owner of that stock and "borrow" that stock is patently absurd. It's no different than requiring a cop to secure a bank robber's permission before he can be arrested while he is in mid heist.
Scumbags running scams know they are running a scam, company officers who are cooking the books know they are cooking the books and, as a result, will never give you that "permission" or so-called "borrow" as they like to call it, on the huge blocks of stock they control, which they received free or at low cost. In fact, history has shown that many of these guys spend more time, money and energy making sure that none of their fellow shareholders loan out their shares and that their stock is all but impossible to locate, than they do actually trying to run a legitimate business.
After all, what shareholder in their right mind would ever want anyone else to use their own stock to make a bet against their own interests? It makes no sense. That is why the current system has created more fraud and let more crooks pilfer more money from the public than at any time in history.
Further examination requires we ask: "What is the point of 'borrowing' anyway?" If a share of stock is in the float and can be borrowed in the current system, than what would the difference be if that availability was simply a given? In other words, if a share trades and is shortable with the permission of a shareholder, what is the difference if that share is available to be shorted without his permission? What if that share were simply shortable because it's a free trading share in the float ?
What the market needs is not a system that allows unlimited "naked short-selling" per se, what it needs is to eliminate the current borrow system and replace it with a much simpler system that would give "equal access" to all traders to every stock that trades.
I propose a system that is constructed around the basic premise that if a share trades then it is available to be sold short, PERIOD. No permission needed. No running around looking for shares, no paying outrageous fees and no risk of having your stock loans cancelled at will without notice.
Such a system would provide Equal Access for all, equal access to IPO's, bulletin board stocks and every single stock you can buy. If a market-maker can act as a buffer and make short sales on opening day of an IPO because it is up 400% , you should be able to do the same. If you can legally put your entire life savings into a $3 fart-detection company run out of Bangladesh, someone else should be able to make a contrarian short sale of that same company.
And since we currently have the ability to determine the precise short interest of any stock in real-time, once the short interest in a stock equals the number of shares freely trading in the float, the gate would shut. No more shorting could take place until the next share was covered. And at no time would the short interest ever be greater than the float. Simple, easy, and very doable.
This gives every investor equal access to trade any stock they so desire, either long or short without fundamentally changing anything else in the current system. Why ?
Because the result is no different than if every shareholder had freely loaned their shares out and gave their "permission" in the first place. Because it recognizes that the optimist and skeptics' voices are both valuable components in reflecting a true company's worth.
For example, if a company has five million shares in the float and all five million shares are loaned out and then sold short, don't you now have ten million shares in the hands of "longs" and five million held short (shares which must be bought back at some time future)? And isn't this entirely legal under the current system ?
Well, what's the difference if the short interest were limited to the size of the float and you simply took away the ability for any of the shareholders to say "NO you can't borrow my stock"? Wouldn't you still end up with the same maximum short interest of five million shares? The only difference of course, is in one scenario the size of the short interest is determined by how effective the shareholders are in making their stock unavailable and in the other it's determined by how many investors believe it's a good short. In one example you're required to get the shareholders blessing and in the other you don't need it.
Limiting the short interest to the size of the float and eliminating the requirement to get a shareholder's permission takes away the manipulative tool of removing shares from the borrow pool - purposely to eliminate short selling, and would permanently destroy this inherent element of artificiality and manipulation.
NO BAD NEWS WANTED:
Furthermore, by giving those who own stock the kind of control that they currently enjoy, not only do we deprive average Americans from millions of opportunities to make money in the market that are now out of reach or accessible only to a select few, we deprive future investors from hearing any of the potentially negative yet accurate information that a skeptic can offer because has a financial incentive to be involved.
If publicly traded companies knew that every single press release could be scrutinized and at any moment someone could come in and investigate their claims, their numbers or their operations, take a position and disclose their truthful and accurate findings, everyone benefits. Except of course those who are up to no good.
The full-page ads taken out by shell companies and the shenanigans of Bulletin Board trashy stocks with no business prospects and, in many cases, no intention of running a business, would stop. No longer would being a non-marginable stock under $20 be a benefit. Chinese companies that hide behind an iron wall that prevents investor scrutiny would watch as their cohort companies get taken apart and be forced to tell the truth or have skeptics and critics as permanent fixtures in their business.
The SEC would have thousands of eyeballs that could focus on what IS and what IS NOT true.
What's even more notable is that even if the worst case scenario were to ever happen, and the short interest were to ever reach 100% of a stock's float, the shorts would still be outnumbered by a minimum of 2 to 1.
Providing all investors "equal access" to every stock that trades, immediately relieves the pressure of every short seller fighting over the few deals in which stock is available. You would relieve indiscriminate selling pressure across the board. Accuracy would become paramount, in order to be taken seriously. Real companies would be free to run their businesses and would end up being the greatest beneficiaries of all, as more money flows into the companies that hold up to scrutiny.
Such a system, in which nobody can, grant, deny and or rescind permission for a short sale, is exactly the same economically, financially and mechanically as our current system, in which every shareholder DOES loan their stock out.
DUTY TO THE PUBLIC:
If you are buying a car or a house or a business, aren't you entitled and wouldn't you expect to hear about everything that is wrong with that car, home or business? Won't you demand that you be able to inspect everything yourself, get appraisals, hire your own mechanic and have your own accountants go over the books? Isn't that what anyone would do?
Well, the SEC, FINRA, Congress and the stock exchanges know that it is neither possible nor practical for millions of investors to visit each of these businesses, conduct in depth interviews with employees, and inspect that day to day operations of each company, each and every time someone wants to buy 100 shares of Chevron. As a result, any company that wants access to the public and their money is required to make frequent and timely disclosure of all material events -- Good and Bad.
They are also required to make "accurate" financial disclosures every three months and have an independent auditor come in and verify annually whatever the company has said previously. It's this reliance on disclosure and these requirements that gives an investor in Kansas the confidence and ability to decide, in an instant, to buy $50,000 worth of some stock of a company that is based in Alaska or Germany or Hong Kong. It's this instantaneous access to all the information about a company that creates the instant liquidity that enables an investor to buy any stock at any time without ever having read a single thing. It is quite simply what makes our stock markets work. Without these disclosures and requirements and the belief that one has all the pertinent information about a company available at their finger tips, trading would stop.
This means that when a company goes public, raises money, has access to additional sources of capital and investors as well as expanded exposure to credit, it has a certain duty and responsibility to not only it's existing shareholders but to all investors as a whole. The exchanges that list these stocks also have a duty to allow "equal access" so that every potential investor knows that he is always getting both sides of the story on every company. And unless you have the ability to short any stock at any time, one side of the story is always going to be missing.
As an investor do I want to put my money into a stock in which the insiders and largest shareholders have succeeded in making a stock so difficult to short that the critical voices have no reason to speak ? Or do I want to put my money into a company's shares that are equally accessible to all traders who are constantly injecting the good as well as the bad ?
When you take away the financial incentive from a short seller and no one is talking about the risks or problems that only a short seller is willing to look for, it might work in the short term, but haven't you also given these insiders carte blanche to lie to your face? Unhindered? What does one do when the stock is suddenly halted or a story from Stockwatch or Bloomberg blind-sides the market without any warning whatsoever?
Each company by going public is now part of a system of checks and balances, it's what they signed up for. And in order for it to work, it requires the rapid and accurate injection of information into the market about all its securities. At the same time it's not surprising to see companies who beat their chests and talk up all the wonderful things they are doing, down playing the not so great. It's to be expected.
However, in order for this system to work properly, the skeptics and critics must be able speak out as to why the company got it wrong, what they conveniently left out, or what other factors should be considered . When a stock is unborrowable, or when loans are so prohibitively expensive that the incentive is negated, or when borrows are constantly being recalled and shorts are constantly being forced to buy-in positions, the information flow becomes one-sided. And when that happens, the price of that stock no longer accurately reflects it's true worth. This hurts all investors.
The bottom line is this: If I can short Company A, only if a guy who "owns" Company A lets me borrow it, that by definition is permission. I should be able to short Company A when the people who own Company A are saying "NO, you can't borrow my stock". History and experience has shown that it's in these companies primarily, the ones who attack naked short selling and then strive the hardest to make their stock unborrowable, in which the greatest problems can be found.
Moreover, each and every single trade, long or short, is in of itself also "information". When Carl Icahn buys a million shares of XYZ, the investors in XYZ just learned something positive about their stock, didn't they? Well, don't these investors also deserve to know that Jim Chanos thinks XYZ has been falsifying their receivables and would love to short it at the current price? But since he can't borrow any shares or take a position, he was forced to move on to something else, keeping everything he knows to himself.
Who is the winner here? The investor or the crooks cooking the books?
MY PROPERTY - MY RIGHT:
Of the many reasons used by shareholders to justify their reluctance and predictable refusal to loan their shares out, the one that seems to strike a chord amongst the majority is the claim that since it's their stock it is their right to decide who borrows it and who doesn't. However, owning a share of stock as explained above carries with it a greater responsibility. The issuers, the exchanges, the brokers and promoters who sell them, the SEC and FNRA, as well as the shareholders themselves have a duty to make sure that all the information about a share of stock is available. As a shareholder you may not be able to hand someone the keys to the company offices for them to inspect, but you do have a duty to make your shares available for inspection. And the only way those shares can be inspected, is for that ability to deny permission to those shares, be taken away. It is not your right to keep a future investor in the dark and certainly not, if you expect one to pay market price.
Moreover, when you buy a share of stock it is different from buying a gold brick or a truck. What you buy is an abstract sliver of a company in which you have no day-to-day control. It cannot be valued outside of the context of the market in which it is bought. And had it not been for the liquidity and the instantaneous access to information that this market is supposed to provide, you would never have been a shareholder in the first place.
In other words, the only real duty owed here, is that of each company, each exchange and each shareholder to future shareholders. And for that to happen each freely tradable share must be available, to all investors, for inspection. Anything else is nonsensical.
Unfortunately, our current system isn't geared towards protecting future investors, its structured to help those who want to sell stock at ever higher prices and those who have already spent their money. For them, there is no interest in hearing the negatives. They are already "in", they are already committed and "married" to the stock and no one wants to hear how ugly his bride is after the "I do's". And, any system that gives insiders and promoters the power to tell you or me that we can't inspect their shares, investigate their claims and make a bet against their company is the most un-American system of all.
PREDATORY LOANS AND BORROWS:
Why do some special hedge funds and market-makers seemingly have some privileges that no one else has? "Why did Goldman Sachs which recently brought YOKU shares public at $12, get to short YOKU to frantic investors, in the days that followed, at $48 and $49, making millions when it collapsed back to $29, but you and I are excluded from making the same trade ?
Why do some of these guys always seem to be the only ones who can "borrow" the worst of the stocks that are available, keeping them for their own trading departments or charging outrageous fees to those who did all the leg work and research? Why are the vast majority of individual investors forced to watch from the sidelines, unable to either take and or keep a position based on their own hard work and due-diligence?
This new world order of permission being granted and rescinded at will, has given rise to the most outrageous and predatory borrow system in our nation's history. Those who decide which shares to loan out and which to keep are now empowered to direct which stocks can be shorted and which can't, while creating for themselves the single greatest source of revenues they have ever seen. Don't believe me?
Here is just a tiny sampling from the stock Loan Desk of a Major Brokerage a few weeks back: (Note: Stock tickers have been redacted)
"ABCD Inc. (ABCD) - Demand jumped again for ABCD on news the US wants India to lift solar import restrictions...Stock is up over 12.5% this month and short interest remains elevated at 31.5% of float. Liquidity remains very thin at institutional lenders with the borrow trading as low as neg. 5.75%."
"XZY" (XYZ) - ...Supply on the street remains very difficult to source. Please note that the stock is single listed and cannot be created. Rates are still trading at around neg. 35%. Recalls and buy-ins are prevalent across the street. We can get small size still."
"YYYY Corp. (YYYY) -Demand continues to be significantly higher as the short interest (19.1% of float) and the price both sit at 52 week highs. The supply has dried up completely in the market, with shares trading as deep as neg. 100%. the street is experiencing constant recalls and buy-in pressure."
Here,three different stocks have three different charges being levied to borrow them. 'ABCD' with a short interest equal to 31.5% of it's float will cost you a little under 6% to borrow it, while'YYYY' which has a smaller short interest of 19.1% will cost you an incredible 100% of the value of any stock you borrow. With 80% of the float still available in 'YYYY', can anyone explain why "the street is experiencing constant recalls (loans being cancelled) and buy-in pressure" ? It makes no sense. In fact, it boldly underscores my point. With the stock at "52 week highs" and 80% of its float accounted for and safely in the hands of those who are long, shareholder's still aren't satisfied and are actively engaged in canceling whatever stock loans were made, in order to try and move the price even higher by forcing anyone who is short to buy-in their position. This blatant manipulation is then compounded by the predatory tactics, of those who control access to whatever few 'YYYY' shares that do exist, and gorge themselves on fees.
In a Dec 27, 2010 Bloomberg story highlighting "Unusual moves in U.S. Trading", reporter Nikolaj Gammeltoft wrote a routine story about several stocks that had significant moves that day. Most of the stocks were up or down because of a material event that affected either their business or prospects, except for one. The price action in shares of Education Management Corp.(EDMC), had nothing to do with how well or poorly the company was performing. He wrote.
" (EDMC US) rose 7.6 percent to $15.95, the highest intraday price since Aug. 2. The rally in the operator of the Art Institutes and other for-profit colleges was spurred by an increase in the cost of betting against its shares."
So not only does the current borrow system retard the injection of accurate negative information, it now gives a loan desk the power to move a stock's price simply by raising and lowering the fee to borrow that stock. This is classic manipulation and it simply boggles the mind that the SEC and FNRA stand by mute.
How would you react if you bought 1000 shares of IBM at $100 in a margin account and your broker charged you $100,000 per year to hold it? And what if that same broker only charged you $10 per year to own 100,000 shares of some $1 turd? Wouldn't you view this as a transparent attempt to artificially direct where your investment dollars go? Doesn't this prevent the average "Joe" from shorting MNKD while forcing him to instead consider FSLR, STP or some other issue that won't cost him his right leg?
NO FEE FOR ME:
And nothing announces to the world, how stupid Wall Street really thinks the public is, more loudly than the silence of shareholders regarding these loan fees that they are allowed to charge and keep for themselves. Imagine being able to get $2,000 or $5,000 or even $10,000 from a short seller who wants to borrow $10,000 worth of your stock? What does that do to your cost basis? If I could collect 20, 50 or 100% in loan fees on any stock I owned, loaning my stock suddenly makes sense.
Now, imagine taking that 2 or 5 or $10,000 and handing it over to your broker for no reason at all. If I, as the "owner" of a stock, have the right to decide who borrows and who doesn't borrow my stock, and short sellers are clearly willing to pay outrageous fees, why am I not participating in any part of this income stream? Why am I not demanding my fair share? How stupid am I? Well, according to Wall Street you're pretty darn stupid.
The borrow system by all definitions is a hidden tax, further dooming the public to constant losses, always forcing it to pay but never benefit. And that is why the current "borrow" system is the greatest Ponzi-scheme enabling system that Wall Street has ever been able to sell the investing world and it's brazenly displayed as the single biggest line item on their income statements.
We all want a level playing field. We all want the ability to trade and make money and benefit in the same ways that the richest, most powerful and best-connected firms and traders here in America enjoy. There should be no strategy, or class of securities or trade that is only available to a select few. And none of us want to feel like we're being taken advantage of.
As a former NASDAQ market maker, firm CEO, stock analyst and "naked short seller" I know all too well what goes on behind the scenes. That is why the only way this market will truly work for all the people and re-start the accurate exchange of positive and negative information is to give EQUAL ACCESS to every trader to every share that trades. And the only way to do this is by restricting the short interest in a stock to the size of it's public float and doing away with the absurd notion that permission is needed. Mechanically, it's exactly the same as the current borrow system, but by disconnecting each short sale from the whims, motives, greed and hidden agenda that lurks behind each block of stock, each certificate and shareholder, we'd be liberating all Americans from the controls and advantage that nefarious-minded and gluttonous insiders currently enjoy. No idiot with 100 shares of Putri-Facts Corp. bundled around his crack pipe, should ever be able to tell you or me that we can't investigate his stock and make a dollar if we got it right.
EQUAL ACCESS puts an end to a system that allows the worst of companies to trade without any fear of ever being exposed because they aren't marginable, a system where the public is only allowed to buy more and more stock while squeezing the flow of negative information, and puts an end to the predatory loan practices that manipulate our investment decisions, artificially drive stock prices higher and enrich the Wall Street firms that designed a system in which they are the only winners.
If a share exists, it should be shortable...PERIOD. It shouldn't matter if the CEO is Bill Gates or Sith Lord or Ding Dong Hung Hi. Do this and you fix the market. And since every single short sale is literally a "covered" short, with each share duly accounted for in the float, you could still proudly wave the American Flag and state unequivocally that you don't allow "naked short selling".
Happy Holidays to All and a Happy New Year !