Naked Short Selling - no more skepticism

A while ago, when there were a lots of shorts on KXL, up to 2 million shares at one time (though no more shorts right now), there was a lot of skepticism about the existence of "naked" shorting. Even I was a doubter.

You will recall that naked shorting is when a gang of stock pros sells a huge pile of shares to profit from pushing a stock price down, but - instead of legitimately borrowing the shares - they just write them out of thin air. They promise to get around to borrowing real shares, but the promise gets delayed forever without any real intention of filling, meaning that people can sell shares that they just write on a piece of paper. The exchange enforcers do mostly nothing, and occasionally next-to-nothing ("nerf penalties", as written in one of the articles).

It turns out that the "journalism" on this topic, which pooh-poohed the stories of naked shorting, was actually written by shills for the Wall Street firms that were the most guilty of doing the naked shorting. The foxes guarding the henhouse. We should be surprised?

Here are two great articles on it. The second one being at Forbes magazine gives it some weight. Now if only the OSC could get honest with us on this! No more fake shares!

Link - Fake wikipedia writeups that denied the existence of naked shorting.

Link - Forbes Magazine - Byrne describes payola for fraudulent coverup of naked shorting.

On another topic of fraudulent media, here's how the media is establishing precedence and the legal framework to completely lie about the news, and even completely make up the news:

Link - Fox News legal defence is based on their right to lie about and falsify the news.

As the articles point out, naked shorting also allows companies to vote on the companies' boards with zillions of shares that they make out of thin air. In effect, they get to vote the same shares 2 or 3 times over, diluting everyone else's vote

Why does the naked shorting and false news matter to us Kodiak investors? Two relevant examples:

1) Gold price manipulation - Goldman Sachs, the company who has their man - Paulson - writing up the Bush bailouts for the rich, is most often associated with manipulation of the gold price. An artificially low price of gold makes things harder for Kodiak and all other exploration and mining companies. Goldman is taking money out of our pockets. Maybe they are not called 'Goldman' for nothing.

2) KXL price manipulation - The continuation of naked shorting and either the complicity or being-asleep-at-the-wheel of the Ontario Securities Commission means that whenever the price of KXL legitimately rises to a reasonable level (i.e. see my post - link, our stock should be $11-plus), nefarious traders can profit to their hearts' content naked-shorting KXL down. They collect their profit and leave us devastated. The market is about psychology, and generally the market has a hard time telling the difference between a drop in price for real reasons and a drop because of a rigged stock game. Either way, people get discouraged and the stock isn't at a realistic level.

It's a crime, and yes, so are about 10,000 other Bush, Harper & Co. things. But even if it never improves, better that we should know about it!