Watch out for the Short Sellers!

With the nearly 260 point drubbing the Dow took yesterday I thought it would be a good time to roll out a post on short selling. Sure, some of this is generated by folks simply sell because of sovereign debt fears in places like Greece, but some of this is probably naked short selling that the SEC turns a blind eye to. This should be illegal, oh wait, it already is! Thank you SEC for letting Wall Street crooks run wild in the markets. Ellen Brown from Webofdebt.com does great work because she backs up what she says with great detail. Here latest post on how the small investor gets creamed by short selling Wall Street pros is right on target and something all investors should read. –Greg Hunter–

SHEARED BY THE SHORTS: HOW SPECULATORS FLEECE INVESTORS
By Ellen Brown
Guest Writer for USAWatchdog.com
Unrestrained financial exploitations have been one of the great causes of our present tragic condition.”
– President Franklin D. Roosevelt, 1933

Why did gold and silver stocks just get hammered, at a time when commodities are considered a safe haven against widespread global uncertainty? The answer, according to Bill Murphy’s newsletter LeMetropoleCafe.com, is that the sector has been the target of massive short selling. For some popular precious metal stocks, close to half the trades have been “phantom”sales by short sellers who did not actually own the stock.

A bear raid is the practice of targeting a stock or other asset for take-down, either for quick profits or for corporate takeover. Today the target is commodities, but tomorrow it could be something else. When Lehman Brothers went bankrupt in September 2008, some analysts thought the investment firm’s condition was no worse than its competitors’. What brought it down was not undercapitalization but a massive bear raid on 9-11 of that year, when its stock price dropped by 41% in a single day.

The stock market has been plagued by these speculative attacks ever since the four-year industry-wide bear raid called the Great Depression, when the Dow Jones Industrial Average was reduced to 10 percent of its former value. Whenever the market decline slowed, speculators would step in to sell millions of dollars worth of stock they did not own but had ostensibly borrowed just for purposes of sale, using the device known as the short sale. When done on a large enough scale, short selling can force prices down, allowing assets to be picked up very cheaply.

Another Great Depression is the short seller’s dream, as a trader recently admittedon a BBC interview. His candor was unusual, but his attitude is characteristic of a business that is all about making money, regardless of the damage done to real companies contributing real goods and services to the economy.

How the Game Is Played…

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