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Abelian


Thank you Elaine, for this article.

It reminds me of Pavel Volfeyn and Alexander Belopolsky, former employees of James Simon's Renaissance Tech.

They claim to have been asked to develop trading algorithms which violate securities laws and if they are truthful, were fired when they said no. Good for them.

One comment about Bear Stearns though, is that if you live by the sword you should die by the sword. Bear executives made millions of dollars over the years by executing similar strategies of "arbitrage"...another word for piracy the way they do it.

Unfortunately SO many people rely on this system, since there is hardly a safety net left, that even the peons will fight to the death to keep it around. Just imagine all of the 401k's in jeopardy, the teacher's retirement funds, the hospital/educational endowments that are caught in their web.

Even good natured people will allow the bottom 80% of this country to live in squalor, if that means they have their retirement fund or Sally can go to her expensive school.

Look at Mexico and South America ( save for Venezuela for now)...that is what will happen to the U.S. if not worse. Look at Santa Cruz and Zulia now...screw the rest of the country we have riches underground and its ours! Kind of like Golum and the ring of power.

And to think that privatization of social security could have happened....crazy world.

"Insert Mad Mike's trademarked slogan"

GK

Is there a red hot hell in Cabalistic Freemasonry?

http://www.masoncode.com/Masonry%20and%20Cabala.htm

"The Magical Language is a mode of cryptic writing used to preserve and transmit the practical secrets of the Western Tradition of Ageless Wisdom. It is an artificial language, combining Hebrew, Greek and Latin elements. Its outstanding characteristic is that the letters of the three alphabets it employs serve also as numbers. Consequently, every word, phrase, or sentence is also a number, the sum of the values of the letters"

David Bish

Great post! Short selling is a legitimate contra-force in economics. It balances the overall positive bias in the "interested parties" commentary about things economic.

Naked short Selling is without any value - even market makers don't need this ability. Failure to deliver should simply be called fraud and punished according to long-standing laws.

This is so simple that I can't believe it is even an issue - although it clearly is as the the DTCC/Prime Broker/"Connected" Criminal element prospers.

Thanks for the exposure.

Dave

hardrock

Elaine, Great job on a tough subject. Anyone who has money in the market in any form or fashion should take this problem very seriously. The entire 'end game' that financial writers such as 'Deepcaster', Jim Willie and others write about could hinge on this tactic of selling phantom shares with the intent of never, ever having to cover. The thing is so big that if regulations are passed it will cause a market meltdown....just what the 'perps' want anyway. If the markets tanks 'big time' they could cover for pennies on the hundreds of dollars....not just dollars.

As Mitchell and others have discovered, the money is gone....gone forever, never to be retrieved. The best defense for your readers is to extricate themselves from the market and move their money into other forms that cannot be manipulated so easily. Precious metals, agricultural land, oil & gas producing royalties etc. We are being robbed on a systematic basis...and worse, being laughed at in the process by the likes of guys like Jim Cramer.

Oz Observer

Greed, greed, greed....everywhere! It seems to have corroded in a 360 degree spectrum. Everywhere you look...it lurks!


What folly!

hardrock

Elaine, Further to the point of 'how it works' for the benefit of the perps. Let me quote Jim Willie of The Hat Trick Letter, where he says:

"The USGovt and Wall Street carnival barkers want your money still, for yet another shift of wealth from the plebeians to the elite. They took your pensions in year 2000. They have taken your home equity in the past year. They plan to take your desperate borrowings in the next year."

Let none be deceived, America has entered a severe downturn which was caused by greed, ignorance and sloth. It will not end in our lifetimes. Our children and their's will pay one helluva price for our indolence....some would call it tolerance. We failed to discriminate, we failed to recognize bullshit when we saw it, we failed to call it by its right name and were fed a constant stream of BS from educated [so called] idiots who knew nothing of where things came from, including 'bullshit'!

blues

I have no special knowledge about these Wall Street shenanigans. But maybe it works like this:

There are insiders, day traders, and hapless gamblers. The hapless ones eventually go bankrupt. The insiders have inside information, and use it to make big bucks. The day traders tread water, making money on good days, losing money on bad days. They "pay" a small tax on the days when they gain. On the days they lose, they "write the losses off" on their good day "taxes." So they lose nothing on bad days, and pocket taxless gains on good days. So they end up getting white collar welfare. Just a guess.

I think I can now define the concept of "derivatives." If I owe Joe Blow $1000 (plus interest), Joe Blow is free to sell my indebtedness to some third party, without even warning me in advance. The agreement that formalizes that sale would be a "derivative." Loans are abstract relationships to begin with, and these derivatives allow the creation of yet another layer of abstraction. So derivatives are basically new layers of abstraction piled upon relationships that are themselves of an abstract nature, including transactions other than loans. There is no limit to how many layers of abstraction can be added. So these relationships can become complex without limit. And we should all understand that complexity is the best friend of the cunning schemer.

I would suggest simply outlawing these derivatives, so things like indebtedness can never ordinarily be sold to third parties. That would enforce simplicity, which is the best friend of the honest dealer. Being no expert, I am only expressing my best guess about these matters. The extreme complexity of these derivative transactions would seem to engender a frightening potential for instability that could easily lead to total systemic collapse. Not good!

As to the manifestation of unchecked greed, I offer the following sad story:

The Independent, UK
Exclusive report: Soldiers need loans to eat, report reveals

((----- Copy & Paste - W/O The Line Breaks -----))

http://www.independent.co.uk/news/uk/home-news

/exclusive-report-soldiers-need-loans-to

-eat-report-reveals-825928.html

«The analysis, described by General Dannatt as "a comprehensive and accurate portrayal of the views and concerns of the Army at large", states: "More and more single-income soldiers in the UK are now close to the UK government definition of poverty." It reveals that "a number of soldiers were not eating properly because they had run out of money by the end of the month". Commanders are attempting to tackle the problem through "Hungry Soldier" schemes, under which destitute soldiers are given loans to enable them to eat.»

British soldiers depending on loans for food!

Elaine Meinel Supkis

This is the 'mercenary trap', blues. The mercenaries were kept artificially poor and the only relief was for them to LOOT someone while the generals turned their backs deliberately.

Note that we let our soldiers LOOT Iraq. It was very medieval.

About these various 'windows of opportunity': whenever any system has a time lag problem somewhere, the people in control of this system will exploit it in order to make unregulated profits. After a while, they focus more and more in the loopholes and glitches because the profits occur in both GOOD AND BAD times! This means these glitch problems will grow ever larger until they totally displace the system.


This is why they should always be ruthlessly eliminated. When the DTCC was first organized, it was to fix the 'empty space' in the delivery of stocks from seller to buyers. But instantly, the guys running the system realized people didn't know that all stock sales could be finalized INSTANTLY. So they LIED about the time lag and it grew and grew and grew until it is over 400 days long in some cases!

This is why it takes laws and regulations to prevent these things. Note that the ruling rich have propagandized to us all that laws and regulations 'slow them down' and are evil.

DeVaul

Bravo Elaine! Bravo!

Finding the hideout of the Derivatives Beast is a truly magnificent feat of mental detective work. You should be proud.

This is why I hold out little hope of America achieving "greatness" again, unless you consider a small, self-sustaining agrarian republic that can somehow defend itself from rampaging empires a sign of "greatness".

(For the record, I would.)

blues

If I had any money to invest, I think I would avoid the entire stock market altogether. Maybe I'd think a lot, and invest in some small business that could be both innovative and "safe." About maybe seven years ago, some Chinese-Americans bought out a local laundromat. They are running a successful, tight little business. I think these Chinese have this laundry business thing down. They probably train each other in the intricacies of the trade. Too bad I don't have some group that would help me do that. Locksmiths do that too. You have to be born into a locksmith family, basically, to become a locksmith.

These stock market DTCC thing was born just in time to swindle investors with computers. I personally think the computer business might actually come to an end. I've read that an automobile consumes about as much energy just being manufactured as it will when it goes out on the road. I've also read that the manufacture of just three computers consumes about as much energy as the manufacture of one automobile. So there is some deeply hidden subsidization going on in the computer marketing business!

And, probably any half-competent intelligence agency could hack all our computers to bits in about three days! So this almost seems inevitable. So I think we should be stockpiling bicycles! Going back to that old super light-weight "airmail" paper would help tremendously. Another thing to stockpile!

Elaine Meinel Supkis

No way is that true, blues.

1. Cars have lots of computer parts inside of them.

2. Mining the iron ore, processing it, mining the alum and processing it, moving scrap metal around by ship, processing it, all this is very, very energy intensive. The sheer weight of a car must be part of the calculations

3. Transporting cars is 10X more than computers!

Just from these three objections, it is obvious that cars eat up way more resources than mere computers.

blues

The devil resides in the details, Elaine.

Manufacture of computers requires at least an order of magnitude greater precision than manufacture of mechanical devices. Modern vehicles do incorporate a lot of electronics, but that is not essential to their operation.

Great precision = extreme industrial operations = huge energy input.

Just tantalum capacitors require refinement of tantalum from coltan ore, from 400 parts per million concentrations. Coltan comes only from Africa, although Australia provides a small amount. Its production is extremely energy intensive.

Electronics grade silicon wafers require processing with silane gas. Very toxic, very hard to produce, very energy intensive. The purity of the silicon wafers must be astronomically high. And that is super energy intensive. So silicon chips are super energy intensive components to manufacture.

So, modern electronic components require vast amounts of energy to produce.

blues

The "three computers = one auto" assertion is just something I read somewhere. I didn't detect any bias in the statement, but I must admit it strains credulity. Just think of the sheer mass of iron in a car! I always thought that, like aircraft, they should be made of aluminum. Aluminum "rust's" very little, only forming a thin, hard-to- see-even film. So it can be recycled without huge losses due to rust. On a "volume basis" it's not nearly as strong as steel, but pound for pound, it is. That means thicker parts are needed, which means it presents less surface area susceptible to oxidation (rust). It is vastly more recyclable, although it is very hard, very energy intensive, to extract initially from bauxite.

I gather that there are probably zero steel mills left in the USA at this point. So I guess we can't gripe too much about Venezuela nationalizing theirs! See:

((----- Copy & Paste - W/O The Line Breaks -----))

http://www.nytimes.com/2008/05/13/business/worldbusiness

/13fobriefs-STEELCOMPANY_BRF.html?ref=worldbusiness

Royal Dutch

Here it is for all of you afraid of fascism and war, Amerika gets the alternative....

http://www.bloomberg.com/apps/news?pid=20601087&sid=aHhguABj3V.g&refer=home

Green, is the new red. MWHAHAHHA LET THE BEATINGS BEGIN!

Royal Dutch

Hmmmmmmmmmmm. a ten year plan.

doesnt smell of fascism at all.......

Elaine Meinel Supkis

Thanks for the further information, Blues.

Royal Dutch, thanks for the link. Yes, the New World Order is all about chaos being fixed in odd, stupid ways. I guess there is no 5 year plan due to the obvious reference to Communist dictators.

Royal Dutch

An acknowlodgement of nobility is always appreciated. Love your posts Elaine.

Patrick Byrne

Elaine,

Nice post. Thank you for the kind words (even if you think there ARE no good guys).

Patrick Byrne

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Well, failure to deliver should simply be called fraud and punished according to long-standing laws.

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