Another from the Department of you Heard it Here First

March 2, 2011

Okay, I’m normally skeptical of any story I only can find in the Washington Times EXCEPT when said story supports something I fervently believe.
Okay, at least I’m honest.
The lack of visibility into the activities of short-sellers makes us vulnerable to outside attack. The fact an entity can sell more shares of an organization than exist through the process of naked short selling (selling shares you don’t own and haven’t borrowed) essentially allows counterfeiting of stock certificates.
How? If I sell 100 shares I don’t own, then the number of shares on the market just increased by 100 shares. Now imagine this scenario. China wants to inflict financial damage on the system.
Through a hedge fund or other such entity they start selling shares they don’t own. Share prices decline, triggering a panic where other entities sell actual shares, dropping the price further. Confusion ensues.
Now, let’s say the owners of the hedge fund disappear or just walk away. In their accounts are billions, if not trillions, of dollars. Since they’ve sold countless shares they don’t own, the value of the legitimate shares has dropped proportionately. How? Well if a company had 100 shares outstanding and I sold 100 shares I don’t own. Now the company actually has 200 shares and the value of each share has dropped 50%
In this scenario what happens? If I have unwittingly bought stolen shares am I due anything? The weak link in this plan is how does the entity keep the billions or trillions? That’s traceable and ought to be easy to find. Perhaps, but the below report comes over two years after the fact. So, there will likely be so much confusion that it’s going to take a long time to figure out.
All this talk of reform and no one is addressing this core issue. Why? Because the “liquidity” brought on by allowing a “legitimate” entity to sell shares they don’t own allows all this program trading to occur. Without it the billions of profits hedge funds are spooning from the rest of us wouldn’t be inhibited.
The regulators ought to be thrown in jail for malicious malfeasance. Then we ought to start picking off the managers of hedge funds.
And in case you’re doubting me, figuring that there must be some sort of means to restrict this sort of thing, then read the link below:
The official story is that a Citibank employee initiated a trade selling $16 billion of P&G stock instead of $16 million. The DOW immediately plunged 900 points. I doubt Citibank owned $16 billion of the shares. If this is possible, then there are probably enough really smart people in the anti-American world to exploit it. It’s really just a matter of time.

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