BloggingStocks

Coinstar Could Be a Short Candidate

Jason Raznick — Fri, 03 Sep 2010 16:30:00 EST

Bearish traders should be using the recent strength in the equity markets to identify short opportunities. The S&P 500 is currently trading above 1,100 and has rallied very sharply off of the 1,040-1,050 level in just a matter of days.

This surge in equities appears to be driven by a combination of short covering and better than expected economic numbers. Rather than getting bullish here, however, it may be time to put out some tactical shorts. Traders that have been buying the highs and selling the lows in anticipation of a breakout of the current trading range have been consistently burned.

Continue reading Coinstar Could Be a Short Candidate

Coinstar Could Be a Short Candidate originally appeared on BloggingStocks on Fri, 03 Sep 2010 16:30:00 EST. Please see our terms for use of feeds.

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Money winners of 2008: Jeff Greene shorted subprime

Carol Vinzant — Mon, 15 Dec 2008 12:42:00 EST

Filed under: Recession, Financial Crisis

This post is part of our feature on Money Winners of 2008. See all 20.

Lots of people thought real estate was overpriced. Many worried that banks were giving out mortgages too cheap. But what did you do about it? (Either to help the situation or to make money.) Jeff Greene, a real estate mogul in California, actually found a way to bet against the subprime mortgage folly. He made $450 million -- at least that was the count earlier this year.

Well, he didn't just think of it on his own. He basically took the idea that his friend, hedge fund manager John Paulson, had. Paulson thought that, as an individual, Greene wouldn't be able to do this complex a transaction. According to the Wall Street Journal he even used special software so investors in a hedge fund Paulson created just to exploit the subprime crisis couldn't pass on his strategy.

How Greene and Paulson made money involves two financial terms you've probably had to learn this year and never want to hear again. Collateralized debt obligations (CDOs) are the way mortgages are packaged and sold to investors in various slices of risk. Credit default swaps are the holders of those investments insured themselves -- by buying what was like unregulated insurance from one another. The credit default swaps are what got so many big companies in trouble -- they had to pay up on investments that went bad. So Paulson shorted CDOs and bought some credit default swaps.

Continue reading Money winners of 2008: Jeff Greene shorted subprime

Money winners of 2008: Jeff Greene shorted subprime originally appeared on BloggingStocks on Mon, 15 Dec 2008 12:42:00 EST. Please see our terms for use of feeds.

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SEC backs down from short selling disclosure rule

Zac Bissonnette — Fri, 03 Oct 2008 10:45:00 EST

Filed under: Good news, Law

Earlier this week I wrote about what a bad idea the SEC's new rule requiring short selling hedge funds to disclose their positions was:

Mandatory disclosure of short positions will expose fund managers to issuer retaliation, frivolous lawsuits and harassment. What's so ridiculous about this rule is that a short position in a stock does not represent ownership of a security, and other than subjecting short sellers to harassment, there is no reason to require that the positions be publicly disclosed.

The SEC failed miserably in its responsibility to protect investors, and now it's compounding that mistake by targeting the wrong enemy.

Happily, the SEC has since seen the light. Short sellers will now be required to disclose their positions to the SEC -- which is fine -- but will not be required to make those disclosures public. If you like PDF files, you can read the announcement here.

What's so hypocritical about this is that while press releases posted prominently on the SEC website were made available for the crackdown on naked short selling and mean trash-talking hedge fund managers, you have to do a bit more digging to find the new announcement that backtracks.

It just goes to show what many of us have been saying all along: the "crackdown" on short sellers was just pathetic grandstanding by an agency that failed miserably in its duty to protect investors from misleading statements by public companies.

SEC backs down from short selling disclosure rule originally appeared on BloggingStocks on Fri, 03 Oct 2008 10:45:00 EST. Please see our terms for use of feeds.

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SEC Chairman shatters naked-shortselling conspiracy theories

Zac Bissonnette — Wed, 20 Aug 2008 11:00:00 EST

Filed under: Law, Scandals

SEC Chairman Chris Cox, who has been off battling the imaginary dragon of naked short selling as actual securities fraud continues to be as easy as ever to get away with, has a message for you about the recently-expired naked-short selling rule.

He said that failures to deliver in the 19 financial stocks affected "were reduced substantially" and added that "It was a very effective order from that standpoint." Fair enough. But then he dropped this bomb shell: "We expected and intended to have no impact whatsoever on the direction of prices. That's not the purpose of regulations."

Uh-oh. That takes quite a bit of the wind out of the sails of the naked shore-selling conspiracy theorists -- if naked short selling was an evil scheme driving down share prices, then wouldn't regulation designed to curb it be expected to impact the direction of share prices? That statement from Mr. Cox would seem to be an admission that failures to deliver are a procedural issue, not some conspiracy to drive down stocks involving crooked journalists and a "sith lord" as Overstock (NASDAQ: OSTK) CEO Patrick Byrne infamously suggested.

For a summary of the commentary on this mess, check out this post from Gary Weiss.

SEC Chairman shatters naked-shortselling conspiracy theories originally appeared on BloggingStocks on Wed, 20 Aug 2008 11:00:00 EST. Please see our terms for use of feeds.

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Force Protection: Another naked short selling 'victim' faces delisting

Zac Bissonnette — Sun, 17 Aug 2008 14:00:00 EST

Filed under: Law, Scandals

One of the most common rebuttals to the naked short selling conspiracy theories is this: Name one company that has been hurt by naked short selling.

In a July 22nd interview with Fox Business, Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne gave an example: Force Protection (NASDAQ: FRPT). "Makes vehicles for soldiers in Iraq. . . stock was at $25, got naked shorted down to $4, canceled the secondary. . . Some soldiers are going to die in Iraq this week because some hedge fund guys need a new Ferrari."

Oops. On August 14th, Force Protection dropped some bad news on its shareholders. In addition to having missed the deadline for filing its 10-K, the NASDAQ is now threatening to de-list Force Protection's stock for failing to file its 10-Q for the quarter ended June 30, 2008. This comes after the company changed auditors and, back in March, disclosed "certain material weaknesses in internal control over financial reporting."

And that is, according to a message Patrick Byrne left on a message board (View the post for a video of the interview) the "easiest way to explain this problem to Congressmen, Senators, and most Americans."

Note to Byrne: I, and I suspect many others, will be more convinced when a company without serious accounting/internal controls problems and/or a failed business model complains about naked short selling. So far we haven't heard anything like that.

Force Protection: Another naked short selling 'victim' faces delisting originally appeared on BloggingStocks on Sun, 17 Aug 2008 14:00:00 EST. Please see our terms for use of feeds.

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SEC set to extend emergency short-selling limits to other companies

Zac Bissonnette — Mon, 28 Jul 2008 10:30:00 EST

Filed under: Law, Scandals

When SEC chairman Chris Cox announced an "emergency" rule to make short-selling in certain financial stocks more difficult, the reactions basically fell into two categories: 1.) How stupid: that will create an artificial price increase not justified by fundamentals. 2.) How stupid: if that's a legitimate rule, why not apply it to all companies?

Continuing on the theme of hypocrisy and scapegoating, The Wall Street Journal reports (subscription required) that Cox is set to extend the emergency rule to include "insurance, housing-industry and a broader range of financial stocks."

In other words, let's protect all the stocks that deserve to go down from going down.

I've spent the past few hours trying to figure out who exactly these "emergency" rules are protecting. Why do we need to make a special effort to curb short-selling in companies that are fine, as their defenders insist? Are they protecting the longs? But if these companies are in such great shape and the shares are heinously undervalued because of short-selling, wouldn't that present a great opportunity for investors to go long and profit from the long-term tendency of stocks to move to reflect their intrinsic value? Heck, where are the buyout firms that could be scooping up these undervalued victims of market manipulators?

What's so pathetic about these SEC rules is that they're a giant waste of time, essentially trying to micromanage day to day price swings in companies with futures that are very much up in the air -- time that should be used to improve the poor, and possibly misleading disclosures at many of these firms that led to so much pain for investors.

SEC set to extend emergency short-selling limits to other companies originally appeared on BloggingStocks on Mon, 28 Jul 2008 10:30:00 EST. Please see our terms for use of feeds.

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SEC's lame short-selling move means bank stocks will be overvalued

Carol Vinzant — Wed, 16 Jul 2008 17:06:00 EST

Filed under: SEC Filings, Rumors, Law, Lehman Br Holdings (LEH), Bear Stearns Cos (BSC), Blackstone Group L.P (BX)

On Tuesday, the Securities and Exchange Commission threw a brushback pitch at those who are betting on the further collapse of our big financial institutions. Instead of suggesting better oversight of the companies, the SEC is going after short sellers.

For 30 days starting Monday, short-selling will be restricted on 19 financial companies. Financial regulators are also cracking down on "sensational rumors." To put the short-selling rule in perspective, consider that even when the market re-opened after the September 11th attacks, the SEC considered, but didn't implement, short sale restrictions.

Since Bear Steans collapsed and Vanity Fair bought the company's story that short-sellers did them in, everyone is worried that short sellers are bringing the market down. And I'm sure they are, but short-selling, after all, is legal. The SEC just loosened rules on it last year.

Yesterday, SEC chair Steven Cox testified that he's worried about short-selling in connection with spreading false rumors to manipulate the market. OK, that's not legal, but as Cox pointed out, the SEC brought its first case -- EVER -- for this sort of deception this year. And it still hasn't gone after anyone for spreading false positive rumors about a company.

Continue reading SEC's lame short-selling move means bank stocks will be overvalued

SEC's lame short-selling move means bank stocks will be overvalued originally appeared on BloggingStocks on Wed, 16 Jul 2008 17:06:00 EST. Please see our terms for use of feeds.

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Open season on short sellers

Zac Bissonnette — Wed, 16 Jul 2008 08:50:00 EST

Filed under: Magazines

Life as a short seller isn't much fun these days, except for the whole getting rich part.

Rather than slapping them on the back for their prediction of trouble at many of the leading financial firms, regulators and pundits are lashing out at short-sellers, implying that their place on the moral spectrum lies somewhere between child molester and Al Qaeda operative.

And, sadly, the "naked short selling" conspiracy theories that have generally been spread only by the tinfoil hat crowd that Gary Weiss dubbed the baloney brigade are going mainstream.

Forbes writer Liz Moyer writes that "Many hedge fund managers deny naked shorting occurs, but a growing number of company executives, from bigger and bigger companies no less, have complained that short-sellers have used manipulation to drive their shares down."

Well that is kind of interesting. Why are bigger and bigger companies tossing the same allegations that used to be tossed by small, crappy, cash-bleeding corporate crybabies? Because bigger and bigger companies are operating more and more like small, crappy, cash-bleeding corporate crybabies every day! And when the cash is flowing out instead of in, scapegoats must be found.

Open season on short sellers originally appeared on BloggingStocks on Wed, 16 Jul 2008 08:50:00 EST. Please see our terms for use of feeds.

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SEC hits 50 hedge funds with subpoenas in rumor probe

Zac Bissonnette — Tue, 15 Jul 2008 11:35:00 EST

Filed under: Law, Scandals

The Wall Street Journal reports (subscription required) that the SEC has subpoenaed 50 hedge-fund advisers as part of its probe into allegations that traders spread negative rumors to drive down the share prices of stocks they were short.

It seems especially zealous given how little the SEC has done to crack down on a multitude of other problems harming investors, like the inadequate disclosures of serious risks that have sent shares of companies like Lehman Brothers (NYSE: LEH) and Washington Mutual (NYSE: WM) tumbling.

Maybe there was some foul play at hedge funds, and maybe it's a good use of SEC resources to go after it. But it's worth noting that, throughout history, every time a bubble has burst, the short sellers who profited from its demise have been scapegoated for their foresight. The men who were at the helm of Bear Stearns (Yes, it was men. Women would never foul anything up that badly!) when it collapsed can blame rumor-spreading short sellers for causing a run on the bank. It's the same excuse that former Enron CEO Jeff Skilling invoked in his testimony before Congress.

SEC hits 50 hedge funds with subpoenas in rumor probe originally appeared on BloggingStocks on Tue, 15 Jul 2008 11:35:00 EST. Please see our terms for use of feeds.

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Overstock falls off REG Sho list -- who cares?

Zac Bissonnette — Tue, 08 Jul 2008 08:45:00 EST

Filed under: Scandals

Overstock.com (NASDAQ: OSTK) CEO Patrick Byrne -- sometimes referred to as the clown prince of online retailing -- has never managed to report a profitable year for his company, in spite of years of optimistic projections.

You might think that a CEO would take responsibility for his company's failures after years of over-promising and under-delivering. Heck, he might even lose his job!

But not Byrne, who is also chairman of the board and owns 28.7% of the company. I would speculate that if he did not have such a large stake, he'd have been pushed out years ago. Instead, he uses his place at the helm of a money-losing company to propagate his theory that there is a vast plot against his company, involving naked short selling (brokerages executing sell orders on behalf of short sellers even though they haven't located any actual shares for sale, potentially (theoretically at least) driving the stock down when shareholders aren't selling -- here's more from the SEC on this stuff), crooked journalists, stock bashers, and a sith lord, although he recently conceded the sith lord doesn't exist.

Continue reading Overstock falls off REG Sho list -- who cares?

Overstock falls off REG Sho list -- who cares? originally appeared on BloggingStocks on Tue, 08 Jul 2008 08:45:00 EST. Please see our terms for use of feeds.

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Spooky shortsellers spreading rumor and innuendo?

Zac Bissonnette — Wed, 11 Jun 2008 08:35:00 EST

Filed under: Rumors, Scandals

A DealBook piece looks at David Einhorn's very public battles with Allied Capital (NYSE: ALD) and Lehman Bros. (NYSE: LEH), both of which he is short and accused of accounting chicanery. Einhorn's willingness to "talk his book" has generated controversy. Steven Davidoff writes that "Many short plays are enhanced through rumor and innuendo spread by those self-same shorts. Needless to say, these whispers are sometimes unfounded but can do real harm to a company's share price and the company itself."

In his email newsletter, fund manager Whitney Tilson slams this comment: "Hmmm... How many is "many"? More than one? A majority? 99% of the rumor and innuendo in the market I see is on the long side! The shorts I know, on the other hand, perhaps because they're often falsely accused of spreading "rumor and innuendo", bend over backwards to be open and factual."

This is exactly the point. What is the ratio of "pumps" to "bashes"? When Einhorn goes on CNBC and trashes a stock, it's a national story. That's because it's incredibly rare for anyone to go on CNBC and slam a company. The extent of the skepticism we usually hear in the financial media is "overvalued" or "tough prospects."

So I say to Einhorn and Co.: Keep doing what you're doing. Differing opinions, and especially unpopular ones, make for a better market.

Spooky shortsellers spreading rumor and innuendo? originally appeared on BloggingStocks on Wed, 11 Jun 2008 08:35:00 EST. Please see our terms for use of feeds.

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David Einhorn's picks and pans

Zac Bissonnette — Mon, 26 May 2008 14:32:00 EST

Filed under: Stocks to Buy, Stocks to Sell

David Einhorn has one of the better money management track records of anyone in the business and has also made headlines with his efforts to expose alleged fraud at Allied Capital (NYSE: ALD). If you haven't read his book on that company, it's probably the best investment title of the year.

Einhorn recently sat down for an interview with TheStreet.com (you can watch it below). He's long Target (NYSE: TGT) and Microsoft (NASDAQ: MSFT) but is still short some of the badly beaten down financial stocks and credit rating agencies. He's bearish on stocks that are trading at high multiples in anticipation of a second-half recovery, something he is "not so sure about."

David Einhorn's picks and pans originally appeared on BloggingStocks on Mon, 26 May 2008 14:32:00 EST. Please see our terms for use of feeds.

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Biovail: another naked short selling poster child exposed

Zac Bissonnette — Tue, 20 May 2008 16:28:00 EST

Filed under: Law, Scandals

With the former CEO of naked short selling conspiracy theory poster child Richard Altomare locked up, the group Gary Weiss calls the baloney brigade is badly in need of a new commander in crap.

Well it looks like they can forget about Biovail Corporation (NASDAQ: BVF). Fortune's Roddy Boyd reports that, a couple months after the company settled an SEC complaint for $10 million, "The big Canadian drug company agreed Friday to plead guilty to U.S. kickback and conspiracy charges ... Biovail and a New Jersey-based subsidiary will pay a $24.6 million fine to avoid a court case that could have cost them future business with federal agencies."

Gradient Analytics -- which had published negative research about Biovail and head cry baby Overstock.com, Inc. (NASDAQ: OSTK) and was subsequently sued by both companies -- appears to have been right on the money in its criticisms of Biovail.

Moral of story: when a company starts suing people and lashing out at its critics, sell the stock. That philosophy would have saved people a ton of money on Biovail.

Biovail: another naked short selling poster child exposed originally appeared on BloggingStocks on Tue, 20 May 2008 16:28:00 EST. Please see our terms for use of feeds.

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Book review: Fooling Some of the People All of the Time

Zac Bissonnette — Sat, 03 May 2008 17:40:00 EST

Filed under: Scandals, Books

Of the 50+ business-related books I read each year, maybe 15 were worth reading, in retrospect. Then another five of those are memorable -- in a good year. Hedge fund manager David Einhorn's book Fooling Some of the People All of the Time leapfrogs both of those categories, and establishes itself as a classic of business writing.

The story behind the book is intriguing. It's actually amazing that it ever got published, and tremendous credit should be given to Wiley for taking a chance with such an unconventional tale. Here's the deal: In a 2002 speech at a charity event, Greenlight Capital hedge fund manager David Einhorn gave a speech at a charity event. Asked to talk about his favorite investment idea, he spent 15 minutes explaining why he believe that Allied Capital (NASDAQ: ALD) was a financial crime in progress, ripping off investors and taxpayers as a Small Business Administration lender. Einhorn presented compelling evidence of aggressive accounting and indeed fraud, and disclosed that he was short the stock.

The speech made headlines and the stock tanked. Over the past six years, Einhorn has continued to beat the drum against Allied Capital, presenting information to regulators, reporters, and investors.

Continue reading Book review: Fooling Some of the People All of the Time

Book review: Fooling Some of the People All of the Time originally appeared on BloggingStocks on Sat, 03 May 2008 17:40:00 EST. Please see our terms for use of feeds.

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Lost money on Crocs? Thank the short sellers!

Zac Bissonnette — Wed, 23 Apr 2008 18:10:00 EST

Filed under: Management, Crocs Inc (CROX)

I know the title of this post seems cheeky, but I'm actually serious: if you lost money on Crocs (NASDAQ: CROX), you should thank the aggressive short sellers who may have helped you avoid losing a lot more money.

Nearly two years, Mad Money host Jim Cramer called the short sellers in Crocs "way too aggressive." While those shorts got burned in the short-run, the longer-term decline in the company's fundamentals has proven they were right. Renowned short seller Manuel Asensio was a vocal critic of the company, raising questions about its valuation and prospects back when it was the hottest company on Wall Street.

With a short interest of over 38% when it was a high-flier, it seems likely that short selling kept a lid on the company's run-up.

And who did that hurt? The insiders who were dumping shares like they were going out of style the way that Crocs subsequently have! The aggressive short selling capped the transfer of wealth from small investors to insider in the low hundred millions. Had the stock been allowed to soar over $100, the damage might have been much worse.

So if you lost a few thousand on Crocs, go hug a short seller! They saved you from yourself.

Lost money on Crocs? Thank the short sellers! originally appeared on BloggingStocks on Wed, 23 Apr 2008 18:10:00 EST. Please see our terms for use of feeds.

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Biovail settles charges with SEC

Zac Bissonnette — Mon, 24 Mar 2008 16:41:00 EST

Filed under: Law, Blogs, Scandals

Naked short selling whiner Biovail (NYSE: BVF) has settled accounting fraud charged with the SEC, agreeing to pay a fine of $10 million. According to the SEC's complaint:

The SEC's complaint alleges that present and former senior Biovail executives, obsessed with meeting quarterly and annual earnings guidance, repeatedly overstated earnings and hid losses in order to deceive investors and create the appearance of achieving earnings goals. When it ultimately became impossible to continue concealing the company's inability to meet its own earnings guidance, Biovail actively misled investors and analysts about the reasons for the company's poor performance.

The SEC adds that former chairman and chief executive officer Eugene Melnyk, former chief financial officer Brian Crombie, current controller John Miszuk; and current chief financial officer Kenneth G. Howling still face charges.

Biovail's allegations of a naked short selling conspiracy and menacing antics intimidated analysts, convincing Banc of America Securities, which had been negative about the company, to drop coverage of the stock. On his blog, financial journalist Gary Weiss writes that "Despite all the post-Enron rhetoric about the sanctity of independent analysts, the SEC has done woefully little against companies like Biovail and Overstock that want analysts to be obedient little puppies."

It seems like every few weeks, another naked short selling poster child is exposed as a securities fraud. Back in 2006, then-CEO Eugene Melnyk told 60 Minutes that "When you've got these companies, these people out there trying to bring you down, we're lucky we survived."

Moral of story: when a company starts complaining about naked short sellers conspiring to drive down the share price, sell the stock and ask questions after.

Biovail settles charges with SEC originally appeared on BloggingStocks on Mon, 24 Mar 2008 16:41:00 EST. Please see our terms for use of feeds.

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Short Stories: How to profit from the pending plunge

Peter Cohan — Tue, 22 Jan 2008 11:25:00 EST

Filed under: Short Stories, Citigroup Inc. (C), JPMorgan Chase (JPM), American Express (AXP), Merrill Lynch (MER)

Although short selling -- the practice of selling borrowed shares with the hope of repaying the loan by buying back the shares at a lower price -- goes against the American belief that stocks always go up, I have long been fascinated with it. Short Stories discusses what works, what doesn't, and what some of the leading lights in shorting stocks think about its opportunities and threats. I describe possible short trades and seek your comments and questions for story ideas. I don't offer any investment advice and I don't trade on any of the posts I write.

BusinessWeek reports that the consumer is tapped out. Can you profit from the combination of a falling market and a cash-starved consumer?

I was scheduled to appear this morning on CNBC's Squawk Box to discuss ways to profit from problems with consumer finance. Last night, my appearance was canceled -- I think it might have had something to do with the global market crash. But CNBC's loss can be your gain. Here's why I think the consumer will be the next shoe to drop in the economy and a few ways to profit.

Unemployment rate rising (to 5% in the most recent report)
Wage growth slower than inflation
Declining value of homes makes home equity borrowing a non-option
Savings rate -0.7% -- the worst since 1929
Consumer installment borrowing at record $2.46 trillion

Continue reading Short Stories: How to profit from the pending plunge

Short Stories: How to profit from the pending plunge originally appeared on BloggingStocks on Tue, 22 Jan 2008 11:25:00 EST. Please see our terms for use of feeds.

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Movie Gallery was a victim of naked short sellers?

Zac Bissonnette — Tue, 01 Jan 2008 15:20:00 EST

Filed under: Short Stories, Scandals

With shares of Movie Gallery (OTC: MOVIQ) having closed 2007 at just over 2 cents per share in the wake of the company's bankruptcy, I thought it would be fun to take a look at what the company was saying back in 2006, when its shares were trading more than 100 times higher.

You might think the company's CFO, Thomas Johnson, would have been busy looking for ways to stop the cash bleeding and return Movie Gallery's operations to something other than miserable failure.

But you'd be wrong. No, Johnson was actually conducting an interview with Bloomberg, saying that he had asked the SEC to investigate allegations of naked short selling in the company's stock:

"I'm throwing out the towel, saying 'Help me.' There are rules designed to deal with this, and people are still managing to do these naked short sales. It's extremely frustrating. It's like being on the front line and people are shooting you from every direction.''

"On the frontline... people shooting at you from every direction." I wonder if that's how Movie Gallery shareholders felt when the company recently filed a reorganization plan that canceled the stock of the company's common shareholders.

The moral of the story is this: When the bad management of a lousy company starts complaining about naked short selling ... go find a company where the management spends its time running the business.

Movie Gallery was a victim of naked short sellers? originally appeared on BloggingStocks on Tue, 01 Jan 2008 15:20:00 EST. Please see our terms for use of feeds.

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Overstock.com comes off of REG SHO list -- the mother of all short squeezes?

Zac Bissonnette — Tue, 18 Dec 2007 11:39:00 EST

Filed under: Scandals

On Thurday, Overstock.com, Inc. (NASDAQ: OSTK) put out a rambling press release complaining that it had been on the REG SHO list, which tracks the market for companies with large fails to deliver indicative of naked short selling, for 666 consecutive trading days:

Despite the requirement that a clearing broker-dealer must close out a fail to deliver position in a threshold security that has persisted for 13 consecutive trading days, Overstock has been on the Regulation SHO threshold list for 666 consecutive trading days (and a total of 706 trading days). "Apparently, the SEC is not serious about enforcing the close out provisions of Regulation SHO or stopping 'market manipulation that is clearly violative of the federal securities laws.'" said Overstock chairman and chief executive officer Patrick Byrne.

Well ladies and gentlemen, Overstock.com came off that list today. The latest REG SHO list has no mention of Overstock.com -- and yet the stock continues to be down more than 50% since early November.

Did the mother of all short coverings take place as the stock tanked? No one knows for sure. But with Overstock off the list, perhaps Dr. Byrne will end his self-proclaimed "jihad" and go back to doing a lousy job running his terrible company.

Overstock.com comes off of REG SHO list -- the mother of all short squeezes? originally appeared on BloggingStocks on Tue, 18 Dec 2007 11:39:00 EST. Please see our terms for use of feeds.

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When management says 'Trust us,' run!

Zac Bissonnette — Sun, 02 Dec 2007 18:18:00 EST

Filed under: Blogs, Scandals

Rocky Mountain News finance editor David Milstead recently blogged about Maximum Dynamics, a Colorado Springs company that has come under the scrutiny of regulators. The SEC has filed a lawsuit against two former officers charging that they operated a scheme.

But not so long ago, Maximum Dynamics had some penny-stock players convinced that the company was a victim of naked short sellers and other miscreants intent on bringing the company down. In an 8-K released in July of 2005, the company wrote that:

Until the anonymous internet attackers are brought to justice, management is providing a warning to investors to rely on the company itself as the sole source of information regarding the company. (emphasis added)

The idea of relying on a company as the sole source of information is probably the worst investment methodology I have ever heard -- it's actually slightly worse than examining goat feces to try to predict the future.

As ex-con turned white-collar crime fighter Sam Antar writes, " Do not trust, just verify. Verify, verify, and verify." Relying on the company as the sole source of information was exactly what cost investors billions in losses at companies like Enron and Worldcom. Since the analysts were just parroting the companies' claims, listening to them would have done no good either. Only strong independent research by journalists like Bethany McLean and short sellers like Jim Chanos was able to penetrate the elaborate fiction concocted by scheming executives.

Moral of the story: When a company says "Believe us, not your lying eyes," don't buy the stock. If you own it, sell it. If you don't own it, it may be worth shorting.

When management says 'Trust us,' run! originally appeared on BloggingStocks on Sun, 02 Dec 2007 18:18:00 EST. Please see our terms for use of feeds.

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