Yesterday the ASX fell 7%. I've certainly never seen that in my lifetime but I was certainly expecting it with or without the influence of Corona.
Because of the way the markets are manipulated by short sellers wielding algorithms and algo traders hell bent on destroying share prices, it came as no surprise. Algo traders may work for either short sellers or larger corporations that want to take over smaller corporations by way of a hostile takeovers or forcing the smaller company into voluntary administration. Or they may be simply hell bent on stripping small gains from the market each day. Many small profitable trades repeated over the course of the day can amount to very sizeable gains. The problems is that algorithms can be tuned to maximise the success of the bets that are placed on price movements. It boils down to blatant manipulation as many of the trades breach Section 1041a of the Corporations Act.
Naked Short Selling.
The legal form of short selling is bad enough (borrowing shares off other institutions to sell them and buy them back and profit from the fall) because it is done in cartels of hedge funds plus the usual suspects of Credit Suisse, Citigroup, HSBC, UBS, Merril Lynch, Goldman Sachs, RBS and JP Morgan who are all involved in the stock lending and the covering up of what goes on. The illegal form of short selling which was very prevalent in yesterdays fall of 7% is much worse - it is selling shares that nobody owns and buying them back later - can you think of anything more unfair and ridiculous - how can anyone justify that ever being legal.
So they banned naked short selling but how do they enforce it? Do they even bother to check for naked shorts or worse, do they even care?
As long as the short seller can produce an agreement that sets out they they have the right to borrow stock if needed, then they can make a sale and then cover (buy back) later in the day or even later the next day before settlement. And if settlement does fall due then they can call on the shares in their agreement. So you can imagine cartels of these institutions driving the share prices down with heavy volumes of shares trades to completely over ride the forces of supply and demand, and then buying them back later in the day as panic sets in. Plenty of evidence gets shown to me by other traders, I see it constantly. There is more than enough evidence to conclude that shares are simply sold naked continuously, and if things go wrong and they can't cover, then they can call on shares by invoking the agreement they have up their sleeve. Legally, they are protected, and so an outright manipulative approach to trading is officially sanctioned.
Those thinking I'm wearing a tin hat right now need only read this article which shows the very same institutions that are manipulating the ASX on days like yesterday, doing the same thing on the Forex exchange using secret chat rooms to communicate with each other. It resulted in Billions of dollars of fines but its a drop in the ocean compared to the money they made from it. Vast amounts of the world's wealth is disappearing because exchanges are being 'allowed' to be manipulated.
What is laughable is that these companies always claim there were 'rogue' traders within the company. They are just the only ones that get caught. These cartels are quite obviously supported from the top ranks within each company.
As I have said before the stock market was made to create wealth by assisting emerging companies access much needed capital. Short sellers are killing off these emerging companies, or taking them over long before the benefits can flow back to the genuine investors who helped get them started in the first place. The profits flow back to the Big-End-of-Town.
Let us look at the answer I received now from Allan Gray Australia a fund manager in Australia with majority holdings in many of Australia's ASX companies. They are a contrarian investor meaning they usually invest in unloved companies with weak sentiment which have fallen in share price. I asked Allan Gray's Chief Investor Simon Marwhinney if they lend their shares to short sellers. He replied 'Yes we do". I asked if they know the shorters intentions and strategy and he replied.
"No, we don’t have any visibility on how many of or which of our shares are lent. Our clients actually decide whether to allow “their” shares to be lent or not, not us, and they might have visibility as you suggest, but I don’t know. I very much doubt they know any of what you flag below and I certainly don’t"
The clients that Simon refers to are the Superannuation funds that Allan Gray manage funds for. These Super funds have the agreements in place with the short sellers. It is these agreements that are needed by the short sellers in case they ever make a mistake in their settlement period and if they are short overall after buying back the stock. Effectively short selling benefits custodians, fund managers and the short sellers; the ultimate insiders. The real owners of shares take the hit, and often without their knowledge, and there is also collateral damage caused to the portfolios of all other shareholders. Short selling has long been recognised as being capable of causing enormous damage, which is why it has been banned whenever a global financial crisis hits; although not so regarding the current crisis. Is that because the powers that be want this coronavirus induced crisis to be monumental in effect and extremely rapid in duration, just so that it can be used to usher in a much needed financial reset?
The Super funds play a large role in the destruction of Australian companies. Those that lend shares to short sellers are not acting in the best interest of their clients, of Australian companies and Australian society in general. There is absolutely no public benefit in what is allowed to take place - just stupendous benefits for the Big-End-of-Town at everyone else's expense..
Short sellers are all rejoicing from yesterdays fall but the time will come when short sellers are seen for what they are - parasites that destroy the wealth of this country and other countries.