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A Wikipedia Conspiracy and the Wall Street Meltdown
PatrickByrne writes "This is The Register's world-class investigative piece concerning one aspect of the meltdown on Wall Street ('naked short selling') and how the criminals engaged a journalist to distort Wikipedia to confuse the discourse. The article explicitly and formally accuses a well-known US financial journalist, Gary Weiss, of lying about his efforts to distort a Wikipedia page under assumed names, and accuses the Powers That Be in Wikipedia (right up to and including Jimbo Wales) of complicity in protecting Weiss. This is not another story about a 15-year-old farm kid in Iowa pretending to be a professor. This is like the worst Chomskian view of Elites manipulating mass opinion. But it is all documented." We discussed the alleged Wikipedia manipulation when The Register first wrote about it last December. The submitter is the CEO of Overstock.com and a major player in this drama from the beginning.
IMO, all short trades should be naked. I'd prefer to see the lending of stocks prohibited. And short traders would not be able to cancel deals retroactively just because they could not buy what they had already contracted to sell (unlimited liability in this instance).
Those who can make you believe absurdities can make you commit atrocities. - Voltaire
see e.g. http://web.archive.org/web/20061017204807/www.blogmaverick.com/2005/12/23/this-will-make-a-good-movie-someday-overstock-com/
Excellent, Minitrue is working as planned. We can now commence with phase three or our diabolical plan.
I am becoming gerund, destroyer of verbs.
This is the funniest, hippiest statement I've heard in a while. Criminals engaged a financial journalist to modify some wikipedia articles. If they are the Elites, you got a real fucking crazy view on society, mate..
TheRegister really is going downhill. It always was a tabloid read at best but this is just sad.
Elephants are an expanding computing market.
This case is direct evidence for Chomskian media theory. (As if there wasn't enough already -- Chomsky has compiled literally thousands of incidents)
Why do you think the press would be any different than Wikipedia? Because it is permanent? Nobody cares about yesterday's news anyway. Because you need to be hired to join? Getting hired is easy -- essentially any interested party can join. Because journalists have integrity? I won't accuse all journalists of being disingenuous, but this particular journalist was caught manipulating both wikipedia and the mainstream media.
Certainly, if you let a fox in your hen house, you should expect your dinner to get eaten -- whether the metaphorical hen house is Wikipedia or the mainstream media.
After all, I am strangely colored.
Wikipedia doesn't warrant its information on the quality of its editors, and so their identities are immaterial to the trustworthiness of the articles. Wikipedia warrants its information by making the process transparent - you can see how articles evolved, and, in an article that is done right, you can see citations to where all the information came from. When those citations are missing, you are meant to be cautious.
The identities of the editors are immaterial - Wikipedia has never claimed to be trustworthy because of who its editors are. Given that, anonymity is wholly appropriate, and to go out and try to expose somebody is a petty attempt at harassment.
I say this as someone who edits Wikipedia openly and under my own name. The enemies I've made on Wikipedia have taken active advantage of that, filing spurious reports with my local police to try to subject me to police harassment and intimidation. They openly speculated that they might be able to force me out of my PhD program. That is the price editors pay for giving up anonymity. Judd Bagley openly associates with the editors who tried to subject me to police harassment. Given that, the intentions he has in outing editors should be clear.
Philip Sandifer's academic website
Pretty soon the share price has crashed, the company faces bankruptcy, ...
Perhaps I missed something along the way, but how exactly does a low (or zero) share price imply bankruptcy? Whatever investors might think of its shares, the company still has its assets, earnings, employees, relationships with customers and suppliers, etc. There could be problems getting credit, I suppose, but reliance on continuing credit is already a sign of financial troubles whatever the share price might be. Even then a creditor should be more interested in the company's earnings and profit margin than in the share price.
A precipitous drop in price would look very bad for the managers, of course, and would place the shareholders in a unenviable situation if there was a merger or buyout in the works, but from a net worth point of view -- assets minus liabilities -- the company's only relation to its shares is in the initial public offering, correct? The company doesn't gain or lose anything based on who happens to own the shares, or how much one investor paid another to acquire them, except insofar as (voting) shareholders can influence company policy.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
Uhh, no. It's just the foundation of the stock market. Our economy could get along just fine without any stock market at all. Private investment would do the job just fine, without being nearly as susceptible to fraud.
And I should also point out that this is all a brand new phenomenon. It's been less than 20 years that the stock market has gone so grotesquely out-of-whack, throwing us into several bubble and burst cycles. See: http://www.downside.com/charts/sp500asmall.gif
That's what happens when you change the tax code to eliminate dividends, and make all investors dependent on capitol gains, which requires a lot of finesse, and mostly luck (if not out and out fraud) to make sure you "getting out" at just the right time, when you can still find a bigger idiot with more money.
Slashdot gets worse every day... Pipedot: News for nerds, without the corporate slant
It's the same with stocks and a lot of other things. Few companies have anywhere near the assets that correspond to their paper value.
Of course they don't. A company's value is their assets plus their potential for future profit. A properly-priced stock takes both of these into account. Future profit is hard to predict, which is why stock pricing is tricky. But just because it's future profit doesn't mean it's illusory.
Also your example about house values sucks. If somebody prices their house at $110k, then somebody else who's selling at the same time will be able to undercut them to attract buyers. The net result is that, unless supply is very short, the guy who overpriced his house will never sell it.
I'd also love to know what you consider to be "real" money, if this is all fake money. I've yet to find any kind of money that doesn't end up being fake if you dig into it deeply enough. Even gold, the standard that everybody loves to hold up as being "intrinsically valuable" is just a soft, visually pleasing metal with no inherent worth outside of certain industrial processes. If it weren't so rare people wouldn't even care about it.
If you mod me Overrated, you are admitting that you have no penis.
The BADSITES pseudo-policy, which for a time led Wikipedia editors to be threatened with being blocked or banned for daring to link to antisocialmedia.net or Wikipedia Review (among other things), was a sterling example of Wikipedia's concept of "openness".
--Dan
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Bollocks. This is just straightforward lying. That has eff all to do with Chomsky and Hermann's analysis of how the media is distorted. On the contrary their theories mostly emphasize unconscious distortion and selection practiced out of the "highest motives" by those selected and self-selected to man the positions of power in our current system. You should read Chomsky and Hermann's original work so that you (or the original article author who is also talking out of his rear-end) do not present misrepresentations of that work. Failing that you could read a short summary such as the following .
Dividends aren't common as they used to be. But dividends by a company whose share price is collapsing? Not a chance. Companies issue dividends when they have excess capital, not when their capital is being vaporized. And if companies have loans secured by stock then they certainly can and will go bankrupt simply by a rapid drop in share price.
No, thinking about child porn would be thought crime.
Viewing it is an action and also requires you to obtain it, either by producing it or through distribution from someone who produced it. Penalising possession of child porn because of the criminal nature of its production is quite consistent with our laws, such as the law against receiving stolen goods.
I appreciate any well-thought-out arguments against my highly controversial signature. This category certainly includes yours. Unfortunately in America if not in other places, someone writing fantasies about children, drawing and/or selling cartoons or CAD-created CP scenes, or, being a minor, taking pictures of oneself nude, is illegal. It is mostly against these laws that I rail.
But I also disagree with your proposal that it is reasonably illegal to possess or view real CP. Recipt of stolen goods in rather unlikely unless one has paid for them. This is not the case with any form of pirate-able IP. (if one could call such horrible information "IP") CP is more likely to be possessed by piracy than by payment. Furthermore, and this does nothing to diminish your point, I believe that possession of stolen goods should not be illegal. I think only payment for stolen good should be illegal.
So I got an insightful mod on this post. It has me pondering.
I mean - sure, thanks for the nod. But I was kind of expecting a "funny." I'm not sure what "insightful" is saying. Is that, in itself, the joke? It boggles my mind that someone might have been taking the quip seriously.
We have polls claiming a large percentage of people get their news from comedy shows. That's a bit of a sting on our mainstream journalism. But it's always given me this uneasy feeling that it's more of a statement on said people.
That this is all coming from a meme started by The Colbert Report just seems like poetic justice.
1. Well, AFAIK a simple change worked perfectly for other countries, and in fact it's how the stock market has always worked in most places that aren't the USA. It's similar to what in computer programming you'd call "distributed transactions" or the ACID principle: the swap between shares and money happens simultaneously, and either both succeed or both fail.
In non-nerd terms: you don't get the money until you actually deliver the shares.
It's mostly a USA problem that you can sell IOUs. And the fallout is exactly the same that those of us programming databases already knew would happen when a non-transacted program goes wrong: Refco alone apparently left ridiculous ammounts of fake shares in the economy.
With the change of the swap being simultaneous, pretty much that disappears: you don't actually get the money for 1000 Sedona shares until you can actually deliver 1000 Sedona shares, and the buyer doesn't own an extra 1000 shares in the meantime. You can game on the delay, but in the end any transaction you can't deliver can be basically rolled back, leaving the economy to where it was before. Grandma gets her money back, sorry, couldn't buy Sedona stock after all. The broker didn't make any money in the end. Sedona doesn't end up with ten times more shares on the market than it issued.
Now I'm not saying it can't be gamed, but you can't sell what you don't have. You can promise to sell what you don't have, but at no point does it become something that looks like genuine extra shares.
2. Most of the world's economy works perfectly well that way.
It never ceases to amaze me the way the USA insists that any of their quirks are grrreat (and according to some, even _vital_) for a working system, and eliminating them would spell doom and gloom for everyone. Especially when perfectly good examples exist of countries and economies which work perfectly well without those quirks.
And yes, people still buy stock, even when it's impossible for it to be counterfeit. (Since your argument seems to be that without naked shorting you wouldn't buy stock for fear of it being overvalued.) I don't know about you, but I'd be _more_ inclined to buy stock in the next Sedona, if I know that there can't be a Refco flooding the market with FTDs and devaluing my portfolio to penny-stock.
3. It loks to me like shorting generally, whether legitimate or fraudulent ("naked",) does _nothing_ to prevent stock becoming overvalued, or even an outright bubble. You don't short stocks when they're _rising_, so it will do nothing whatsoever to prevent their becoming overvalued. It just accelerates the fall once they go a bit over the top. So instead of preventing a bubble, it just makes the crash harder at the end of it.
In fact, from where I stand, it looks to me like it might even encourage a bubble. Traders can essentially ride a company both ways, and make money from both its rise _and_ its fall. There is very little to discourage helping it become way over-valued, when it just means you'll make more money on its way down too.
What that means for the private investor isn't that someone is helpful and keeps you from buying overvalued stock which may fall later. It means that someone else is encouraging stocks to become overvalued in the first place and then helping _your_ shares fall faster when they fall, and making some money out of it. Essentially that mechanism means he can make some money by making you lose more. Exactly why _that_ would be more incentive to invest, is beyond me.
A polar bear is a cartesian bear after a coordinate transform.
How would the share price influence profitability and the potential for dividends may I ask you?
The more worrysome problem there, though, is that the USA system (and probably a few others) works on IOUs that are indistinguishable from real shares even to those who own them. In your car analogy, essentially you'd sell the car, but when mom looks in her garrage, she still sees the car there.
But analogies aren't even necessary, let's look at the real thing. Let's say we have the following actors: Mr Investor who owns 1000 shares of IBM, Mr Broker who does the shorting, and Aunt Emma who's gotten into her head to invest her savings into IBM stock. Now the initial stages of shorting look like this:
1. Normal shorting.
Mr Broker borrows the 1000 shares from Mr Investor, and replaces them with IOUs. Then he sells the 1000 shares to Aunt Emma.
Hopefully temporary outcome: Mr Investor now owns 1000 IOUs for IBM shares, Aunt Emma owns 1000 IBM shares.
2. Naked shorting.
Mr Broker doesn't bother even locating Mr Investor, and just sells Aunt Emma some 1000 IOUs.
Hopefully temporary outcome: Aunt Emma now owns 1000 IOUs for IBM shares, Mr Investor still owns his 1000 IBM shares.
The problem, the way I understand it, is that in both cases, the IOUs are indistinguishable from the real thing by anyone outside the DTCC. (The big hub where those transactions take place.) In both cases, both Aunt Emma and Mr Investor can look at their portfolio at any given time, and they _both_ will see that they own 1000 IBM shares. Genuine shares, not IOUs.
In both cases, 1000 shares just became 2000 shares. And the effect can further cascade, as Aunt Emma's shares can be loaned by somebody else, creating another 1000 IOUs that are indistinguishable from real shares. And so on. At some point 10 different people can show up and demand vote with their 1000 shares each, but they're all the same 1000 shares, duplicated in that process. And someone can look and see the extra shares around artifficially inflating the supply on the stock market.
Basically to go back to your analogy, after all, temporarily Mom _and_ this guy own the same car as if it were two different cars. And the car can be further duplicated down the line like that, until the whole bloody neighbourhood owns a car each... and they're all the same car: mom's 2003 Saab.
I wouldn't have a problem with it, if the IOUs were clearly marked as IOUs, and not as real shares. Then either Aunt Emma or Mr Investor can look at their portfolio and go, "ah, I'm still owed 1000 shares by that guy." But they don't. They both see that they have 1000 shares.
I think understand the reasoning behind hiding those details. After all, Aunt Emma paid for her shares, might as well hide the details, delays and imperfections in the system, and just pretend that she owns the shares already. The actual transfer will happen in the background, all will balance out, and she doesn't need to worry her head with all that. Ain't life grand, when the system just makes things work in the background, and you don't even have to know when the actual transfer happened or how?
Well, yes, except when it fails. The more obvious way is when you still have the IOUs, but the person owing them to you just went out of business. Refco's fallout apparently left hideous numbers of IOUs out on the market, and nobody except the DTCC can tell which are real shares and which are IOUs. As long as the two are exactly the same for everyone else, it doesn't even matter if it was normal shorting (and Mr Investor is left holding the IOUs thinking they're real shares) or naked shorting (Aunt Emma is.) In both cases, some duplicate shares are left on the market, and are screwing not only the companies, but also the individual investors. But then there's obviously also the situation where the system is gamed and IOUs are just left around to accumulate, at either end, pretending they're real shares.
I just can't see how or why that kind of a system is even legal.
A polar bear is a cartesian bear after a coordinate transform.