"His master said to him, ‘Well done, good and faithful servant; you have been faithful over a little, I will set you over much; enter into the joy of your master.'"
The practice of pump and dump is scheme whereby a person takes a long position and then uses media outlets (internet, TV, print) to pump up the stock, hoping that the public would buy the stock. The pumper then dumps the stock at a profit. Short-selling and then offering negative opinions is an equivalent scheme. Perhaps there should be a term for this like: “Short and Dump on”; or “Dump on and Cover Short”.
Vancouver-based Silvercorp, which operates in China, was one of the most high-profile companies targeted by short-sellers last year. Anonymous websites Alfredlittle.com and Chinastockwatch.com posted reports within days of each other, both suggesting the reported production and resource figures from the company’s Ying mine were too good to be true.
Silvercorp fought back. It figured out who was behind the anonymous sites and named them as defendants in a defamation and stock-manipulation suit. The company is disappointed it was dismissed, and has already filed an appeal.
My motto is this: Get the United States out of Canadian banks and get the Canadian banks out of the United States.
The Commodity Futures Trading Commission (CFTC) has figured out how to deflect attention from Jon Corzine’s stealing client’s segregated money to cover MF Global’s proprietary trading: Charge a Canadian bank with a mischief called “a wash trading scheme”. Such a scheme, whatever it is, is apparently illegal; but see if anyone can explain to you why it is wrong in less than five minutes. But stealing your clients’ segregated funds, which is a very clearly wrong, is something to which the CFTC turns a turn a blind eye. In my view, this is similar to the situation with US expats becoming the target of tax collection efforts, all while buying votes with tax credits from Americans still in the homeland. It stinks of corruption. So CFTC attacks a Canadian bank, and that makes it look like it’s really doing something–meanwhile it lets its friends steal billions from their clients. It stinks with a great malodorous corruption and decay of a once great nation that has now died. It is the straining of a gnat and the swallowing of the camel.
Now that the Chicago Way has become the American way, I say it is time to pull all our investments out of the United States; Canada’s banks did not heed my repeated warnings (e.g., here) and now RBC will pay the price. Gerald Celente told the Daily Bell:
Daily Bell: How about the CFTC? Are they doing their job of protection and prosecution?
Gerald Celente: Well who’s the head of the CFTC, Gary Gensler? He was one of the lieutenants for Jon ‘the Don’ Corzine when Corzine was head of the Goldman Sachs gang, before he became senator of New Jersey. You get it?
Who’s Obama’s Chief of Staff? Bill Daley, from that wonderful Daley machine in Chicago. Where did he come from? Oh, vice chairman of Morgan Chase. Who was Bush’s treasury secretary? Oh, Henry ‘Frankenstein’ Paulson. Where was he from? He began as the CEO of Goldman Sachs after Jon ‘the Don’ Corzine left. This is the guy who created TAARP and came up with the BS line of ‘too big to fail.’ Him? Yeah, that’s right.
[snip] …
The moneychangers are taking over the temple; you don’t have to go very far to look. It’s right there in front of everybody’s eyes and no one will call a spade a spade. The Rothschilds would be jealous to see what the Goldman Sachs gang, the JP Morgan Chase criminal operation, the Citigroup crooks, the Deutsche Bank bandits and the rest have pulled off.
When the system is corrupt, the regulatory commission will search far and wide for “criminals”. This US financial regulatory system has allowed the banksters to go free, but takes down little guys like Jonathan Lebed and Charlie Engle. See the following Chris Martenson’s interview with Gretchen Morgenson, in which they ponder the question why no major banker has gone to jail for the 2008 subprime mortgage fraud that caused the collapse of the world’s economy:
A few months ago I wrote a post critical of the hardline that the SEC took against Jonathan Lebed for so-called “pump & dump”. Lebed was a 15 years old at the time, and he was promoting penny stocks that he liked using bulletin boards and the like. It turned into a pretty lucrative trade for him, but the SEC made him pay a huge fine. I said that it was not right for them to go after some kid, when the people on Wall Street do this sort of thing all the time. Today, I think I found an example with one of the securities that I trade, Petrobakken.
In my last post, “Why Warren Buffet is Wrong about Gold”, which was published first by Mich at Beating the Index, I mentioned that the National Inflation Association (NIA) had decried the massive silver short position that banks, especially J. P. Morgan, had taken. J.T. McGee, 21 year old blogger and college senior, wrote:
The National Inflation Association is a joke, and it is run by a man who has been convicted on pumping and dumping stocks. He’s back at it again, this time he just takes in fees to pump stocks to his newsletter subscribers. Do a search for “Lebed.”
I knew that NIA was using its position to pump their stock choices, mostly junior silver miners. Whether they are guilty of pumping and dumping is nevertheless unverified and there have been no convictions. You may as well put me, Mich, and especially Eric Nuttal–for that matter just about every financial blogger in jail because we’ve all pumped our stock choices, and we make decisions to dump–which just means to sell–based upon our target prices. We all hope that our stocks go up and that we can sell at a huge profit, and if our promotion of the stock helps, well, ain’t that just too bad?
Nevertheless, I did some research on Jonathan Lebed and his relationship to NIA. Lebed is famous because at the age of fifteen he settled out of court with the SEC who accused him of a pump and dump scheme whereby he would promote stocks on his website and through Yahoo bulletin boards (pump) and sell them after the suckers who read his recommendations bought in and pushed up the price (dump). The SEC settled with him for a $285,000 of his earnings but let him keep $500,000. In a well-researched and balanced article about the subject, Michael Lewis brings up some serious questions about the Lebed case. He portrays Lebed as a kind of wiz-kid investor who was trading himself to a fortune already as a teenager but whose techniques of promoting his picks drew the ire of the SEC. The article is an entertaining and informative read. At one point Lewis asked for a statement from Lebed about the SEC accusations and their attack on him; Lebed responded with a four-page e-mail that began:
I was going over some old press releases about different companies. The best performing stock in 1999 on the Nasdaq was Qualcomm (QCOM). QCOM was up around 2000% for the year. On December 29th of last year, even after QCOM’s run from 25 to 500, Paine Webber analyst Walter Piecky came out and issued a buy rating on QCOM with a target price of 1,000. QCOM finished the day up 156 to 662. There was nothing fundamentally that would make QCOM worth 1,000. There is no way that a company with sales under $4 billion, should be worth hundreds of billions. . . . QCOM has now fallen from 800 to under 300. It is no longer the hot play with all of the attention. Many people were able to successfully time QCOM and make a lot of money. The ones who had bad timing on QCOM, lost a lot of money.
This perceptive response from 15-year old shows remarkable insight into a problem. The real issue is to ask the question why the SEC was going after some high school kid who used alternate media to promote his stocks, when big names on Wall Street do the same using major media outlets and made billions of dollars? Is it just because he’s a kid and therefore is not allowed to inform others of his opinion? We all love Eric Nuttall, but every time he goes on BNN and promotes his stock picks we notice on the next market day a serious surge in the share price of his longs and a painful plunge of his shorts. Shouldn’t he be fined and imprisoned for expressing his opinion? Yet by all accounts, his pump and dump has many times greater effect on the oil and gas market than anything Lebed could have done on Yahoo boards and with his pathetic little website.
There is a principle in law that goes back at least to Jesus–one should not go after minnows when there are whales to be caught–or as Jesus himself said while criticizing the Pharisees and the legal experts of his own day (Matt 23.24): “You blind guides, straining out a gnat and swallowing a camel!” Nowadays, there are so many laws that governments could probably throw us all in jail and throw out the key, as Stalin’s chief of police said, “You show me the man, I’ll find you the crime.” It is incumbent upon government to show self-restraint and wisdom in the application of the law, lest we all find ourselves in federal penitentiaries. But perhaps it is time for people to rise up and to curtail this arbitrary and capricious power that governments have to whimsically go after anyone that they feel like, while leaving true crooks free to exploit and game the system. Just a few days ago, I find out that a marathon runner, Charlie Engle, who bought a couple houses goes to federal prison while the folks at Country Wide, Freddie Mac and Fannie Mae get a pass. And why? Because an IRS agent saw him on a running program on TV and decided that he had reason to suspect that the man had lied on his income taxes! Beware of fame!
The NIA writes about their association with Lebed,
Jonathan Lebed learned at a young age of 15 years old from first hand experience why Americans should never believe the propaganda that is in the mainstream media. His life experiences made him uniquely qualified to write ‘End of Liberty’ and we believe he did a very good job.
End of Liberty is well-done indeed, and it points out how Americans’ constitutional rights are being abused. I too have become a victim of the US Federal government, which is currently being run as a criminal organization. So I have great deal of sympathy for Lebed’s opinions. Is Lebed a good man? I don’t know him. Is he guilty of pump and dump? Probably, but then so am I, Mich, and Eric Nuttall. Do I recommend the man? No. Do I recommend NIA’s videos on inflation? Yes indeed, because they are telling a very important story about how the US is going down the tubes.
So I commented to J.T. as follows:
The National Inflation Association does promote stocks. I get their e-mails. I never buy the stocks or even look at their suggestions. I found that there is the broad accusation that they pump and dump but no proof and no convictions. So I will consider your criticism ad hominem guilt by association: The logic is basically that my view is wrong because I cited NIA, which has an association with Jonathan Lebed, and both the NIA and Lebed pump and dump and therefore their information can’t be trusted. But it doesn’t deal with the substance of the issue, i.e., how big is the short silver position of the banks.
I find that many people today feel that its ok to shoot down your position by simply associating it with some kind of nefarious or criminal activity–this is classic case of ad hominem and guilt by association. I would simply respond that when it comes to NIA, you’re gonna hafta do better than that. When you should be attacking their views on gold and inflation, you instead attack their character. J.T.’s argument was not substantial on this point but even after I pointed it out, he denied the logical fallacy and continued in his line that they were fear-mongering about inflation. Well, I happen to agree with NIA and the fear-mongering, for we all need to prepare for Weimar America.
In conclusion, Monty Pelerin writes about ad hominem: “Ad hominem attacks are not refutations of ideas, merely the refuge of scoundrels promoting a logically indefensible agenda.” Those like NIA, who offer opinions against the mainstream media and the criminals in Washington, will be subject to character assasination. This should not bother us if our opponents cannot refute the basic arguments.
So without further ado, here is Jonathan Lebed’s (writer) video, The End of Liberty:
The Righteous Investor 