Naked Short Selling! What it is and how it's killing our soldiers!

[TheDebbieDee]

This is a link (provided by w8liftinglady) to a very brief presentation on "Naked Short Selling" and how these traitors are, in one instance, getting our soldiers killed and undermining our economy!

http://www.deepcapture.com/hedge-funds-to-us-soldier-i-need-a-maybach-so-you-can-die-too/

[katusha]

1. wikipedia link on practice

http://en.wikipedia.org/wiki/Naked_short_selling

in essence these A-holes are dumping huge amounts of "ghost" shares of this company that don't exist on the market and let supply-demand function lower the price without actually selling anything. this is the financial equivalent of yelling fire in a theatre when none exists simply to get a better seat.

[w8liftinglady]

2. thank you for that link

this whole thing has me so pissed,i'm(almost) speechless

[oldnslo]

3. This should qualify as a capital crime, with deathrow results. n/t

[dems_rightnow]

4. It's not the short-sellling

It's weak orders, increased competition, and the expectation that they're not going to make much money next year. And a stock that got WAY ahead of itself. Their revenues and profits are expected to decline by nearly half next year.

Not nearly as much fun as shadowy guys manipulating the stock for profits, for sure.

http://www.forbes.com/markets/2007/12/12/force-protection-cheetah-markets-equity-cx_er_1212markets21.html

[w8liftinglady]

5. reading this banter between two investors....I don't think so

http://www.stockhideout.com/naamplaos-great-white-north/1330-force-protection-inc-nasd-frpt.html


Quote:
Originally Posted by Stock_Analyzer
Naamplao, I am starting to like FRPT - Force Protection Inc. higher lows here. Whats your take. I am looking at the 3.25 area as next resistance.

Thanks
SA

Yes, I can see why you like this stock. It is nice to see a stock that appears to be turning around for a change. I checked there are no pinchers so I will show my normal chart

FRPT - SharpCharts from StockCharts.com

In this chart it looks like the Bollinger bands are expanding and the stock has taken off...but we cannot see the lower band here. In The Bigcharts.com chart for the same time period you can see the lower band is flat.



So I am not sure that we are seeing a breakout yet.....the bands could return to getting tighter. However I do like the position of the share price versus the upper band. I also like the fact that the share price has crossed the 50dayMA....always a good thing...the TRIX and Accum/DIst showing strong and positive and the RSI is nice with it oscillating between 60% and 50%.....very nice sharpchart indeed

Here is the P&F chart



This is an interesting chart. I put the resistance a little lower than your $3.25 suggestion.

I see resistance at $3.00 then again at $3.10...almost continuous resistance between these two values which to my mind make it a pretty strong resistance. I don't see any resistance at all around $3.25...in fact if it makes it past $3.10 the next resistance I see is at $3.60-3.70...then $4.40

Then again I see where you are coming from...$3.25 is roughly where the 200dayMA is currently at....hhhhhmmmm perhaps because it does not appear in the P&F chart, it means we will meet the 200dayMA when it drops to the $3.10-3.00 level in the days ahead.

I think $3.00-3.10 is the key point to pass....then it should be a nice run. Support is at $2.50 then $2.40 and should be pretty strong as it corresponds roughly to the 50dayMA

On the short term here is the 5 day Bigchart linechart



You can clearly see that $3.00-3.100 resistance in this chart, can't you?

It may challenge the resistance again tomorrow but it does look like it will go down before that.

Nice chart....especially for these troubled times. It could go sideways for a while and I see it challenging resistance and support for a while in the near future....but if it passes $3.10...it will take off.
__________________
I am not a stockbroker. I retired four years ago and learned charting. The opinions expressed in my posts are my own. Do your own DD and accept or reject my comments as you please.

[w8liftinglady]

7. and here

http://seekingalpha.com/article/18431-force-protection-heading-for-a-fall

[w8liftinglady]

8. and here

http://www.bloggingstocks.com/2008/08/17/force-protection-another-naked-short-selling-victim-faces-del/

[dems_rightnow]

9. Nothing there re short-sellers

They're debating whether it's reached bottom from a technical standpoint. It may well have done so, we'll see.

The fact is, the stock price has been bad because the Company's performance and outlook have been deteriorating rapidly.

Projected Revenues:
2008- 833.98M
2009- 456.05M

Projected earnings per Share-
2008- 0.62
2009- 0.35

http://finance.yahoo.com/q/ae?s=FRPT

[WhiteTara]

10. the official story

is always benign. Look under the layers to find the cancer rotting the body.

[aquart]

6. I don't understand: how do you counterfeit a hedge fund?

I'd like to pass the link on, with all its commentary, but I need to understand it better. Help?

[Statistical]

12. You hire Chris Cox

Shorting a stock (I have done it numerous times) REQUIRES you to borrow it.

When I place a short sell order I am selling something I don't own so my Broker borrows the stock.
I sell that borrowed stock and when the stock drops I buy it back at lower price and the Broker returns the stock to person it was borrowed from.

Given that enough people hold the stocks for weeks, months, years, decades there will always be a supply of stock to borrow.

Chris "I love short sellers" Cox (SEC Chairman) decided the big boys shouldn't have to borrow anything.

They simply "pretend" they have the stock and sell something that doesn't exist. Now there is no supply & demand. There is no requirement to actually locate stock to borrow.

That is where the "naked" part comes from. They simply sell a tremendous amount of stock that they magically make up.

Obama should (within 7 days) make these 3 MAJOR yet easy changes:
1) Demand Cox resign. (He can't force Cox to resign but he can turn the heat up).
2) Remove "naked" (fraud) short selling.
3) Bring back the "up-tick" rule.

Those 3 things will strengthen the financial markets, help to level the playing field and will cost $0.00 to implement.

[aquart]

16. Who buys what "doesn't exist"?

Is delivery never required? I've never been comfortable with regular short selling. This naked stuff has me baffled.

[Statistical]

17. They don't know.

It is all electronic. Virtually nobody asks for physical delivery of stocks anymore.

When you or I sell something on the market the only thing preventing a naked short is the brokers computer system
Broker's computer checks if you are already long if so initaites a SELL TO CLOSE order.
If you are not long it borrows stock (usually from someone else in brokerage or an aligned brokerage) then initates a SELL TO OPEN transaction.

The naked short sellers are already a direct broker. They simply sell something they don't have. They know the stock will go down and then they buy it back at lower price and don't have to ever deliver anything.

There is NO reason for naked short selling to be allowed other than the short hedge funds wanted an EVEN GREATER advantage over the market.

Cox is the short sellers best friend.

The combination of
1) Large amounts of cash (the hedges need the cash required to short just not the actual shares).
2) Multiple hedges colluding together
3) Naked Short Selling
4) No uptick rule
5) Credit Default Swaps

have allowed naked short sellers to annihilate stocks and generate insane returns at the expense of trillions in shareholder wealth.

Multiple funds will hang up on a single stock. They will short with abandon. If necessary they borrow to increase the short pressure to insane levels. No uptick rules means they don't need to wait for a buyer to short more. They can keep shorting over and over and grind the stock into the dirt. Each down tick generating more profits and allowing them to punish the stock further. The worst part is if the company has debt they take out CDS which were intended to be "insurance on a bond" except they don't have bond. As the stock tanks the CDS will rise in value (as more people buy CDS over fear that bond will default). They make money both ways. Usually the will take some of the CDS profits to short even more driving stocks down to way way below what fundamentals would indicate.

Then after nice 2000%, sometimes 5000% profit. They formulate an exit strategy. Buy to cover the stocks they never had to begin with. Sell the CDS. Calculate their profit and look for another target.

If it seems crazy, or stupid, or should be illegal it is because it IS all 3. Cox basically took the book of rules designed to prevent a 29 crash and burned it. Essentially EVERY SINGLE decision he has made has benefited naked short sellers to the detriment of every other investor. Prior to being the SEC Chairman, Cox ran a hedge fund that ..... specialized in taking large risks shorting vulnerable companies.

[natrat]

21. plus the 100x leverage they were allowed makes it particularly obscene

[gravity]

11. This is bullshit

The reason force protection stock is down is because it isn't making much profits and the stock price was too high. It is no different than the dot com bubble.

If Force Protection needed to raise more capital they could just take out debt to fund their expansion, because they currently don't have any to begin with.

I am against naked short selling, but sometimes these claims are ridiculous. There is no way that it is actually harming our troops overseas.

[ThomWV]

13. Remember $150 oil, how much of it actually existed? Answer? Not a drop.

Same principal, or principle.

[muriel_volestrangler]

14. What does "Quantity (Fails)" mean?

Without knowing that, I can't understand the graph in that blog at all, which seems to be key to the whole idea (because there's nothing saying "this is the amount of short selling going on"). I note that sometimes, the 'quantity (fails)' amount went pretty high, while the stock price was rising, as well as when it was falling. But obviously it's an important amount, or it wouldn't have been pointed out.

And I can't see how a share price that has never dropped below the price it was in May 2006 means that a company in which the profits have continued to increase (up to Sep 08, anyway) cannot fulfil an order from the DoD.

I'd suggest the company's problem is that the DoD is unwilling to pay for the equipment in advance, and so it has to borrow money from banks. And the banks are not lending money. So the solution is for the DoD to pay for the vehicles in advance; the company will then be able to make them.

However, reports in late 2007 said the price fell because Force Protection received a smaller than expected order from the DoD:

The brokerage expects the company to receive orders for 600 Cheetah vehicles in 2008, lower than Force Protection's estimate of 2,000 vehicles, it said.

On Tuesday, Force Protection received an order of about $379 million for 358 mine resistant vehicles, trailing significantly behind competitors BAE Systems Plc (BAES.L) and Navistar International Corp NAVZ.PK.
...
Force Protection shares, which touched a year-low of $3.89 in intraday trading, were down $1.30 at $4.61 in afternoon trade on the Nasdaq.

They had fallen 66 percent so far this year after the U.S. government scaled back purchases of heavy mine-resistant trucks, citing improving security situation in Iraq. (Reporting by Anant Vijay Kala in Bangalore; Editing by Deepak Kannan)

http://uk.reuters.com/article/UK_SMALLCAPSRPT/idUKBNG17655220071219?pageNumber=2&virtualBrandChannel=0

[jmowreader]

18. Force Protection's problem is they're not very big

I am VERY familiar with this company. They make incredible vehicles--at the rate of six per day. These things are built like twenty-ton Swiss watches.

Navistar and BAE Systems have assembly lines that can crank out a hundred MRAPs per day. Big difference.

[muriel_volestrangler]

19. Still seems no-one can explain how naked short selling caused them a problem

Since no-one has actually said how much of it happened, let alone how it affected their production capability.

Are the Force Protection MRAPs better than the Navistar and BAE Systems ones?

[jmowreader]

26. Two questions here; I shall answer both

Naked shorting is specifically designed to fuck a company by artificially forcing its stock price down. It doesn't affect CURRENT production capacity: if you can ship six MRAPs a day before someone starts naked shorting, you can do it afterward. It does fuck your credit rating, so if you need to expand to shipping 12 or 18 vehicles a day, you're issuing junk bonds.

As far as the quality of the vehicles go, they're all just fine...if I had to, I'd rather be in the Force Protection Cheetah than in the Navistar MaxxPro, because it's a smaller vehicle. It's like the difference between a Suburban and a bread truck. Both vehicles have been involved in IED attacks, and the only people who've been killed were machinegunners who were rolled over on. BAE's vehicle is called the Caiman, and it competes with the Force Protection Cougar. In that contest I don't know which I'd choose--both vehicles are pretty big. The BAE is based on the Family of Medium Tactical Vehicles truck chassis, so there are plenty of parts in theater because every unit in the Army has a few FMTVs to haul cargo in. The Cougar was the first MRAP on the market and there are a lot of them in theater, so once again there are plenty of parts--with, unfortunately, no commonality of systems (the Cougar has a Mack engine in it, and as far as I know everything else in the inventory runs on either Cummins or Cat engines) with anything else in theater. 'Course, if worse came to worse you could pull a blown Mack engine, put a Cat in there instead and use the Mack for a two-ton paperweight. We old Army guys like commonality of systems--they're more likely to send parts for your weird-ass machine if those parts will fit in something else. MRAPs all work, and there's nothing wrong with any of them.

[muriel_volestrangler]

27. So does 'quantity (fails)' directly measure the amount of naked short selling?

If so, why did the share price sometimes go up when there was significant naked short selling going on?

I'd dispute that naked short selling is specifically designed to fuck a company. It's specifically designed to make money, without the pesky details of having shares available to meet the contract. The fucking of the company is a common side effect.

From the reports at the time, the DoD were sending less contracts to Force Protection than they had hoped, and this was what caused the share price to fall. The short sellers (if there really were an appreciable amount of them) jumped on that, which forced the share price down. It's not actually clear that this meant Force Protection was/will be unable to meet the contracts that it has got.

Thanks for the info on the relative merits of the vehicles; if the other makes are adequate too, then blaming the naked short sellers for the deaths of soldiers seems doubly wrong - they'll get the vehicles of one make or another.

[bertman]

28. So, jmowreader, if I'm reading your comments correctly, if I wanted to hamstring a

competitor, one way would be to get a "friendly" trader to naked short sell my competition's stocks.

Sounds like financial warfare to me.

On edit: Thanks for the explanation about the vehicles.

[earth mom]

15. Wall Street is full of nothing but a bunch of gawd damn disgusting crooks!

I've been screaming that around DU for months! :grr:

[natrat]

22. the politicians who enabled them are worse-bill clinton,dodd,schumer, frank etc etc

[earth mom]

25. My dad always said that ALL politicians were crooks, so if the shoe fits...

:yoiks:

[DeSwiss]

20. Excellent, and yet....

...disturbing information. Thank you for that link.

- K&R

[unblock]

23. this is idiotic. if the shorts are wrong, BUY like crazy and they'll get screwn

naked short selling beyond a certain limited amount (say 5% of the outstanding stock) can create certain problems, e.g., how to you decide a shareholder vote when there are now 105% voting stock?) and i wouldn't mind some limitations because of these problems. but crippling a company isn't one of them.

the main reason the shorts are able to drive the price down and down is because the stock sucks, and there aren't enough buyers even at the lower price. that's not the fault of the short sellers, that's an astute observation BY the short sellers and the company is simply blaming the bearer of bad news to deflect responsibility away from management.

if a company is "worth $10/share and the shorts have driven it down to $5, then anyone could get massively rich by buying a ton up at $5. hell, the company itself could buy back its shares and make itself and its other shareholders much better off. the reason that they don't is because the company is not worth even the $5/share and the shorts are merely expediting the effects the longs would have by dumping their shares eventually. that's market efficiency.


public companies should always maintain methods, such as emergency buyback plans, available to screw the shorts just in case. it's the companies that go out on a limb and leave themselves exposed to attack that get the attention of the shorts. that's bad management.

[the other one]

24. Drivel. Ending the war would save lives too.

I'm for that.

[Still Sensible]

29. Short selling by hedge funds has destroyed more than one company

and very often it is with the help of high profile asshats like Cramer...

[Are_grits_groceries]

30. When we were in the middle of economic hysteria

in order to get the brazillion dollar TARP passed, short selling was suspended.
They should suspend it indefinitely.