Thursday, March 19, 2009

Lehman's naked shorts

Lehman had 33 million naked shorts:

As Lehman Brothers Holdings Inc. struggled to survive last year, as many as 32.8 million shares in the company were sold and not delivered to buyers on time as of Sept. 11, according to data compiled by the Securities and Exchange Commission and Bloomberg. That was a more than 57-fold increase over the prior year’s peak of 567,518 failed trades on July 30.

The SEC has linked such so-called fails-to-deliver to naked short selling, a strategy that can be used to manipulate markets. A fail-to-deliver is a trade that doesn’t settle within three days.

“We had another word for this in Brooklyn,” said Harvey Pitt, a former SEC chairman. “The word was ‘fraud.’”

But look at the journalist coming to Lehman's defence, who it appears, keep getting spoon fed from hedge funds:

The news that almost 33 million shares Lehman Brothers were sold and not delivered to buyers on time in the days before its bankruptcy is sure to revive the old theories that short-sellers somehow manipulated the price of the stock through the practice of “naked shorting.” It shouldn’t. Naked shorting—selling a stock without first borrowing it—has almost no effect on the price of a stock.

What Planet is he on????

Look at what this journalist from says next!

The most vigorous critics of naked shorting sometimes liken it to counterfeiting. But this view seems to be based on a misunderstanding of the mechanics and effects of naked shorting.

A misunderstanding? Where have we heard that term before? How about the Merril Lynch trader who said he made $120 million, when he lost $400 million?

Now look at what Henry Blodget from says about the Merrill trader.

Merrill has discovered that a London-based trader who said he made $120 million last year actually lost $400 million. Merrill describes this as "an irregularity." The trader described it as "a misunderstanding."

My rules of logic would seem to indicate that misunderstanding, is fraud, but maybe these journalists use different dictionaries!

I guess I'll just stick with Harvey Pitt's definition.

Now today, we heard about the Government's investors in the TALF plan.

Guess what?

We had only 20 hedge funds that participated!

Only 20?

At the Government "free money TALF trough?"

Are those the only hedge funds that will allow the Government to look over their books?

Now I've been harping on Phil Falcone of Harbinger Capital, and their $2.5 billion dollar profit they made from shorting Wachovia.

He'll probably call it a misunderstanding. Harvey Pitt calls "naked" shortselling fraud.

So will most SEC lawyers, unless Falcone hires them into his private practice!

Which is probably why Falcone hired Peter Jensen from Citadel as their new COO.

Investors at Harbinger were getting nervous that Falcone has been trying to buy-out some of the early backers at Harbert Management.

So he hires away, Citadel's controller, who watched it's CEO, Ken Griffin, who they say, paid out a few hundred million of expenses and trader salaries from his own pocket.

Meanwhile, his investors can't get redemptions, because their assets are in various side pockets!

Talk about jumping from the fire into the frying pan!

You may wonder why Ken Griffin's picture is at the top of the page. After all, what's his relationship with Lehman?

Did everybody already forget that?

Last year he blamed Lehman's bankruptcy for his poor returns!

He learned though.

AIG, I mean you, the taxpayer, just paid him a couple hundred million back from credit-default swaps.

Pocket money!

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