In the wake of the SEC's crackdown, the mainstream financial press has acknowledged that widespread and deliberate naked shorting can artificially deflate stock prices, flooding the market with what amounts to counterfeit shares. But for years, The Journal and so many other news outlets ignored Byrne's warnings, with some journalists - most notably a Forbes.com columnist and former BusinessWeek reporter named Gary Weiss - painting the Overstock CEO as a raving madman.
Byrne has long argued that the press dismissed his views at least in part because Weiss - hiding behind various anonymous accounts - spent years controlling the relevant articles on Wikipedia, the "free online encyclopedia anyone can edit."
"At some level, you can control the public discourse from Wikipedia," Byrne says. "No matter what journalists say about the reliability of Wikipedia, they still use it as a resource. I have no doubt that journalists who I discussed [naked shorting] with decided not to do stories after reading Wikipedia - whose treatment [of naked short selling] was completely divorced from reality."
As recently as last week, Weiss told us he's never even edited Wikipedia. But emails shared with Byrne and The Register show that Weiss has in fact edited the encyclopedia's article on naked shorting. And they indicate he's behind an infamous Wikipedia account known as "Mantanmoreland," an account that - with the backing of the site's brain trust - ruled the articles on naked shorting, Patrick Byrne, and Overstock from January 2006 to March 2008.
This is journalistic malfeasance for which Weiss should be fired. Weiss had a platform for making his views known; he had no right to back up his credibility by assuming the appearance of neutrality in a public forum through anonymous sock-puppets, and then using that power to block his critics from access to that forum.
should? what's the p-value that he WILL be fired??? i don't know much about journalism, but this seems like a no brainer. if this guy isn't fired, i'm going to stop listening about this crap about how blogs are biased and not credible.
Megan,
Assuming this is true (grain of salt as always):
I strongly agree that he should be fired.
Wikipedia should also do some introspection about how they handle cases like these. Also everyone who uses Wikipedia should take note. This is not the first warning sign of serious institutional bias.
Finally,
I am in favor of shorting, but I think naked shorts are a problem. It seems to me that it creates a temporary increase in the commodity much like fractional reserve banking has a money multiplier on the money supply. Thats works for banking but it is a problem for stocks, because the increase in supply naturally drives down the price.
Simply Fired?
This is approaching Fraud status. At the very least, this would be Lawsuit worthy. After all, Weiss was making materially false claims about Byrne based on information that Weiss was making up to fool other reporters and the typical person.
Particularly if you're going to paint the person as a raving madman. I like the first amendment a lot. but I think this wouldn't be considered constitutionally protected speech.
One of the reasons the market has had big down days of late is the newly placed restrictions on shorting (and I would never advise shorting for anybody / everybody) - but that eliminated the possibility for shorts to cover and thus the bottoming process (still calling 9600 here) is more turbulent (since there is thus no / limited covering).
Naked shorting is simply fraud, like selling anything that you know you cannot, in fact, deliver. There are legal ways to engage in pure speculation on stock prices (e.g., trading options), but naked shorting is not one of them.
This doesn't mean that naked shorting is a major cause of current stock market problems, any more than mortgage fraud is a major cause of current mortgage market problems.
Byrne, and his employees, did themselves no favors on Wikipedia by their own behavior. The net result, in my opinion, is that any possible malfeasance by Gary Weiss was seen as comparitively minor. It should not be a surprise that you get better results editing Wikipedia if you behave rationally than irrationally, and that the side that presents itself as the sympathetic voice of reason (Weiss) gets more support than those that behave like raving conspiracy theorists (Byrne et al.).
In particular, Byrne et al.'s ill-treatment of anyone who stood in their way just hardened attitudes against them.
(I'm a member of the English-language Wikipedia's Arbitration Committee, in the interests of accuracy; however, my posts are purely in a personal capacity)
To back up Matthew Brown, this is the list of proven sockpuppet accounts used by Gary Weiss, while this is the list of proven sockpuppet accounts used by Patrick Byrne's own Director of Communications, Judd Bagley. Mr. Bagley's inability to conform to any decent standard of behavior masked Weiss's wrongdoing for months, if not years, since Weiss could game Wikipedia's dispute resolution procedures, while Bagley generally acted like a paranoid maniac with a flamethrower. Administrator attention was completely consumed by restraining Bagley, while Weiss was able to defend himself by pointing out that his main accusers were the worst sockpuppeteers that Wikipedia was dealing with at the time.
To clarify, just because Messrs. Byrne and Bagley have demonstrated approximately zero social skills doesn't mean they're wrong on the substance of short selling, but their inability to contribute to the Wikipedia coverage is not primarily Wikipedia's fault, nor Weiss's, but their own.
Does excess supply really affect a stock's price?
I buy a bicycle because I want to ride a bicycle. My marginal utility curve would flow rather steeply downwards. I might barely want a second bike [of the same kind] but probably never a third.
Stock prices are defined differently. Narrowly, the supply and demand curves must cross, of course, but the I would expect the demand curve to be essentially horizontal. I do not buy stock because I have a satiable appetite for that particular stock. Instead, I value the stock for the returns it creates and/or for those returns I expect it to create in the future. As such, the natural price of a stock is that price which sets the risk adjusted time discounted present value of the expected future income stream about the same as the adjusted price of that return elsewhere. This formula does not depend on whether there are short sales inflating the pool of available stock. Note that the extra dividends are made up by short sellers.
-dk
I do not buy stock because I have a satiable appetite for that particular stock.
I think you kind of do. You only have so much money to sink into investments (and you're probably diversifying), so for a given return (price) you're going to stop buying at some point. If there are still people who need to sell, they'll lower the price, which will either induce you to buy more (better returns) or induce others, whose estimate of the future return is less optimistic than yours, to buy their first share.
But I will confess pretty substantial ignorance of the workings of the stock market.
I buy a bicycle because I want to ride a bicycle. My marginal utility curve would flow rather steeply downwards. I might barely want a second bike [of the same kind] but probably never a third.
That's because you're not a dedicated ciclyst, or if you are, you have found your niche in one very narrow type of bicycling. It's possible your present region of residence and/or time commitments offer you no other options, in fact.
Now, if you spent part of your week engaged in long-distance road commutes and another part engaged in severe-duty trail biking, and perhaps some intermediate terrain as well, your utility curve might expand a bit to accommodate two bicycles, possibly even three.
What does that do for the comparison to stocks?
A journalist who actually had an agenda? I'm shock, shocked...
Life insurance is, at heart, simply a bet. What could be wrong with allowing anyone to participate in that pool? There's a reason why we don't allow someone to buy life insurance on a second party without their permission/approval. There aren't many people out there who are cold-blooded murderers, but there are a few, and that's the reason for that rule.
Naked shorts have EXACTLY the same problem.