According to a George Soros editorial in The Wall Street Journal dated 23 March 2009 http://online.wsj.com/article/SB123785310594719693.html,
One Way to Stop Bear Raids:
‘…it's clear that AIG, Bear Stearns, Lehman Brothers and others were destroyed by bear raids in which the shorting of stocks and buying CDS mutually amplified and reinforced each other."
If Soros is right, there should be some forensic evidence to support his case. In my June 2009 formal report on Economic Warfare, there was some interesting information provided along these lines in the section Unusual Trading Activity. The following is directly taken from that section:
"Unusual Trading Activity
Given the lack of transparency already discussed, there is obviously very little forensic evidence available to prove that an organized financial attack took place. Despite this, however, it is possible to note unusual trading patterns and draw some possible theories from them. The logical place to start would be by reviewing the available trading in the stocks of the financial services firms that appeared subjects of bear raids.
Based on NASDAQ market participant reports, an anonymous author submitted a paper titled Red Flags of Market Manipulation Causing a Collapse of the U.S. Economy to various law enforcement agencies as well as members of Congress and regulators. The report contains some startling statistics that would, on the surface, appear to support many of the concerns already discussed. Included among the key points of the 65-page paper are the following thoughts:
"This report discusses extensive research that shows significant ‘red flags' of danger to the world's economy from what appears to be market manipulation in the global financial markets, which includes trading in common stocks, options, futures, commodities, currencies, oil, and bonds.
Two companies…are at the heart of this trading and they consistently work in concert. These firms became, virtually overnight, the largest traders in the U.S. financial markets. These companies provide a one-stop-shop for trade execution, back office clearing and bookkeeping that cater to hedge funds and small broker dealers. To give perspective, the amount of trading executed by these two firms in October 2008 exceeded the trading of securities firms Goldman Sachs, JP Morgan and Merrill Lynch combined in the NASDAQ market participant reports.
1) The firms have traded trillions of dollars worth of U.S. blue chip companies. They are the number one traders in all financial companies that collapsed or are now financially supported by the U.S. government. Trading by the firms has grown exponentially while the markets have lost trillions of dollars in value.
2) These firms appear to own few or no shares of blue chip companies they are number one traders in. There is no doubt that the magnitude of their trading impacted the marketplace. Since the direction of the market place has been in a severe downward trend, the impact from the firms has been and remains, negative to the marketplace."
Some other starling findings in the report, based almost exclusively on reviewing basic trading data, include:
- The two previously small broker dealers mentioned in the report are market makers for every major financial services firm under attack.
- These firms have a combined 76 different symbols under which they act as market maker (by contrast a major firm such as Citigroup has just 6).
- Both firms offer sponsored access.
- Both firms offer access to dark pools.
- From June through September 2008, the two firms appeared to concentrate on Lehman Brothers, trading 1.04 billion shares while the stock price collapsed from $33.83 to $0.21 on 15 September. This pattern seemed to repeat in every other major financial stock.
- The report estimates that the two firms completed as many as 641,000 trades per hour in October 2008 (based on market participation statistics and average trade size from the last available data).
- Total trading volume by month in the financial sector listed for these two firms grew from approximately 350,000 shares (less than 1% of all market participant trading) in September 2006 to approximately 600,000 shares in the sector (about 6% of all market participant trading) in September 2007, to over 8 billion shares in the sector (about 19% of all market participant trading) by September 2008. That's an increase of 2.4 million percent in two years.
- While both firms have been around for several decades, their rapid growth occurred beginning in 2006 for one and 2007 for the other.
- Both firms seem to specialize in the same stocks at the same time, appearing to work in concert.
- Combined, the two firms traded 203 billion shares, mostly concentrated in major financial services companies. This compares to a total of 427 billion shares outstanding of all issues on the New York Stock Exchange.
- The report estimates trading of at least $5 trillion over the 25-month period ending in November 2008.
- The trading appears to represent new money to the marketplace by new participants.
- From July 2008 through September 2008, the two firms "traded more shares of Fannie and Freddie than were issued" even as the share prices were collapsing.
- The firms were also the largest traders of the UltraShort funds as well as the "financial spider" (symbol "XLF") during the reporting period.
- The firms also became the largest traders of energy stocks.
- The two firms did not and do not hold major equity positions on their books.
The names of these two firms have been purposely withheld in this report because trading data alone is insufficient to consider any accusations against them. But, this trading data is specifically the type of red flag that should prompt further investigation. In addition, even in the event that trades were entered with the purpose of manipulating markets, there is no evidence to suggest that either of the brokerage firms discussed had any knowledge of, or in any way participated in any wrongdoing. They simply could have been conduits through which orders were placed as the laws and regulatory authorities currently allow.
Nevertheless, this trading activity does lead to numerous questions:
- Who had the capital to effect $5 trillion worth of trades in such a short period?
- Who are the clients behind the trades? Are they foreign or domestic?
- Why would two long-standing but relatively minor broker dealers be selected for such massive trading rather than the major firms? Did they have more permissive rules for sponsored access?
- Why was trading concentrated in the financial firms that failed (Lehman, AIG, Bear Stearns, Fannie, Freddie) or were under threat of failing (Citigroup, Bank of America, Merrill Lynch, and Wachovia)?"
BOTTOM LINE: This information is sufficiently unusual to justify further investigation at the very least. The issue of naked sponsored access has only recently been addressed by regulators. It is entirely possible and even plausible that this very unusual trading activity was initiated intentionally. If that were the case, it could well have been an act of global economic warfare or financial terrorism.
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