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MGIC Investment Corp. Message Board

  • pepsiberger pepsiberger Feb 2, 2013 8:54 PM Flag

    Some history of short sellers and the SEC borrowed from another site. PAY ATTENTION TO THE UPPER CAPS

    Read below kind of explains what happened to MTG starting with the Whacko attack report!!!!!

    The bias in favor of short sellers by the SEC really began in the mid-1980's when a Wall Street Analyst named Ray Dirks finally beat an SEC "tipping" violation through the US Supreme court. From inception in 1934, until the after the Dirks decision, the SEC was quite hard on short sellers and those who through their own good DD uncovered fraud in public companies and first selectively told investors about it. This is what happened to Ray Dirks who even today is an active Wall Street Analyst. If you want to read the whole story, you can here , but below is just a short paragraph on what happened. I met Dirks several years ago on a couple of occasions.

    In 1973 Dirks uncovered the biggest Ponzi scheme of the 20th century, the Equity Funding fraud. Equity Funding Corporation, listed on the New York Stock Exchange, had been widely touted as the fastest -growing large insurance company in the country, but Dirks research, which he conveyed to The Wall Street Journal and Barron's, exposed the fraud in less than 30 days. Over 20 officers and accountants and lawyers went to jail, However, as the man who blew the whistle on this Ponzi scheme, Ray himself was charged by the SEC with civil fraud and was forced to battle the Securities and Exchange Commission all the way to The Supreme Court where Dirks won the landmark 1983 decision on Inside Information violations, known widely as The Dirks Decision.

    Dirks himself was not really a short seller and in fact several years ago he began assisting a number of public companies in fighting short sellers, but he was and still is a through analyst. In spite of the fact he seemed to have done everything right in exposing the Equity Funding scandal to include tell the SEC about it first, they still found him guilty of a violation for telling his investor clients about the fraud before any news on it was published. He told me years ago that fighting the SEC over the ten years cost him a million dollars but he finally got his name cleared. BUT AFTER BEING HUMILIATED BY THIS CASE, THE SEC SINCE THAT TIME HAS PRETTY MUCH LET "ATTACK WRITER"S AND SHORTSELLERS PRETTY MUCH SAY WHATEVER THEY WANT.

    I am not making this last comment up. Remember the SEC sanction against me 25 years ago brought up by Shareslueth on a few of their KNDI bashes? My attorney at the time was Irwin Borosky who was formally the top attorney at the SEC under the Carter Administration, which was during most of the time the Dirks case was active. He is the one who told me this story as to whey the SEC became reluctant to go after short sellers.

    Anyway; in more recent years the SEC has become even more lax against Shortsellers due to the way SEC institutes new rules and regulations. What they do is they take suggestions for new rules from outside sources with short sellers being the biggest contributors, or congressional sources. They debate them internally and come up with a draft idea. They then publish this for public "comments" that anyone can respond on line at the SEC site, though rarely are these comments made by individual investors. If the subject has anything to do with trading, most of the comments are made by attorneys for short seller groups who are well organized. There is no groups that ever bother to represent individual investors. Certainly not the brokerage firms. They love short selling. That and margin interest is how they make most of their profits.

    Aside from being paid standard interest by the short seller to lend shares, they also get the "premium" for "hard borrows" but where they really make the money is off the "credit balance" that shows up when stock is shorted. For example. If I short 10,000 shares of a $10 stock, a "credit" for 100,000 appears in my account. But, I can't touch any of that credit. But the brokerage firm can not only use it, but they can leverage it over 10 times and use this to lend to margin buyers. So they get an incredible rate of return on short positions.

    So now you know why the playing field is now so heavily tilted toward short sellers".

    Sentiment: Strong Buy

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    • Very interesting piece of history there. thanks. The game is definitely skewed. Even the company can't really defend itself for fear of REG FD violations. And "defense" always leaves an air of "guilt" so they just stay quite. Longs that post "bull" seem to be legally scrutinized more than shorts who post "bull" as their informed "opinion". Meanwhile the buyer is left to make "truth" judgements with no assistance from any regulatory agency. I know a prominent retail long who exited a large position because of that article.(Lance Jepsen; the Stocktradingguru). Basically with an attitude of "I don't know if its right or wrong" but because a big money short did the attack, he figured just get out. And the fact that "anything" serves as "NEWS" and gets picked up by online news feed sites and brokerage account feeds, effectively takes the "integrity" out of news all together. Another unfortunate by-product of our times. In the end it's you, your money and your due diligence that will keep alive the separation between "you" and the "poor house".

      Stay vigilant, and make DD a continuous feedback loop before, during, and after, stock ownership.

      jw

      Sentiment: Strong Buy

      • 1 Reply to jwtechy
      • I imagine if you are a Hedgefund or other larger palyer you will want to have several writers that cannot make it in the true writing world. I expect a massive bear raid the day of earnings along with lies and gray writing put out by the shorts. It is being calculated everyday... The company would be wise not to mention the day of the release...

        Sentiment: Strong Buy

    • Pretty good info ; I had no idea short sellers had this kind of advantage

      Sentiment: Strong Buy

 
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