Eric King Interviews Whistleblower Andrew Maguire And Adrian Douglas Of GATA

Re: Eric King Interviews Whistleblower Andrew Maguire And Adrian Douglas Of GATA

I believe that a large degree of leveraging is also occurring in the stock market, via naked selling, and manipulation on part of the market makers -- the entire FTD (Failure to Deliver) problem, as discussed on deepcapture.com by Patrick Byrne. This is particularly true, as almost nobody asks for their stock certificates, and the accounting of the stock trade paper trail is left to the broker for "convenience"

See two interesting linked articles by Judd Bagley
Prepare to be astounded

I�ve got everything ready to go for my next post, save one thing: the most current stock delivery failures data, corresponding to the second half of January, which the SEC was supposed to have made available yesterday.

I�m particularly eager to get that batch, because it has the capacity to confirm or rule-out my ability to predict the future.

See, I believe I know, to within a few percentage points, how some of that delivery failures data � up to this point supposedly known only to the DTCC and SEC � will read.

But instead of going mad waiting for it to be posted, I�m going to very publicly make my prediction here and now, and then follow up with the actual numbers once published. I shall then take my clairvoyant victory lap around the tiny office where I sit.

Therefore, I do predict the following:

With a margin of error of +/-2.5%, Shares of Sears Holdings Corporation (NASDAQ:SHLD) will be shown to have experienced CNS delivery failures of the following magnitudes on the indicated dates:

1/29/2010 879,444
1/28/2010 873,222
1/27/2010 870,570
1/26/2010 851,904
1/25/2010 848,742
1/22/2010 865,266
1/21/2010 857,106
1/20/2010 1,535,508
1/19/2010 1,540,914

Please check back often between today and tomorrow (or whenever the SEC gets around to posting the final numbers) to learn how accurate my predictions turned out to be, how I arrived at them, and why this is very bad news for our capital markets.

Cataloging Sears stock manipulation

Most of the examinations of stock manipulation published here on deepcapture.com take place after the fact, the damage being done. However, we�ve become aware of instances of apparently illegal, manipulative trading in several companies� stocks, happening right now, which we have the ability to monitor and report on in nearly real time.

I�ll start with Sears Holdings Corporation (NASDAQ:SHLD).

A few months ago, an unusual trading pattern in shares of Sears emerged, in which large blocks of shares change hands within minutes of deep in-the-money call options equivalent to precisely the same numbers of shares in these blocks. This behavior is consistent with the illegal �reset� transaction described in the enforcement case brought by the SEC against naked short seller Steven M. Hazan:

��a market participant who has a �fail-to-deliver� position in a threshold security buys shares of that security while simultaneously selling short-term, deep in-the-money call options to � or buying short-term, deep in-the-money put options from � the counterparty to the share purchase. The purchase of shares creates the illusion that the market participant has satisfied the close out obligation of Reg SHO. However, the shares that are apparently purchased in the reset transactions are never actually delivered to the purchaser because on the day after executing the reset, the option is either exercised (if a call) or assigned (if a put), transferring the shares back to the party that apparently sold them the previous day. This paired transaction allows the market participant with the fail-to-deliver position to effectively borrow the stock for a day, in order to appear to have satisfied the close out requirement of Rule 203(b)(3).�

If you want to see each of these reset transactions in detail, you can do so here. But if you�re content with the bottom lines, take a look at the following table, keeping in mind each call option contract gives the buyer the right to purchase 100 shares of the underlying stock (meaning, these trades were undeniably �matched� to one another).

<table align="center" cellpadding="0" cellspacing="0"> <tbody> <tr height="60" valign="bottom" align="center" bgcolor="#cccccc"> <td width="91">Date</td> <td width="71">Call option contracts</td> <td width="81">Equities block size</td> <td rowspan="21" width="3" bgcolor="#000000">
</td> <td width="64">Date</td> <td width="73">Call option contracts</td> <td width="87">Equities block size</td> </tr> <tr height="20"> <td height="20">12/3/09</td> <td>6,166</td> <td>616,600</td> <td>1/4/10</td> <td>10,374</td> <td>1,037,400</td> </tr> <tr height="20"> <td height="20">12/4/09</td> <td>6,194</td> <td>619,400</td> <td>1/5/10</td> <td>10,368</td> <td>1,036,800</td> </tr> <tr height="20"> <td height="20">12/7/09</td> <td>6,369</td> <td>636,900</td> <td>1/6/10</td> <td>10,610</td> <td>1,061,000</td> </tr> <tr height="20"> <td height="20">12/8/09</td> <td>6,668</td> <td>666,800</td> <td>1/7/10</td> <td>10,972</td> <td>1,097,200</td> </tr> <tr height="20"> <td height="20">12/9/09</td> <td>7,287</td> <td>728,700</td> <td>1/8/10</td> <td>16,032</td> <td>1,603,200</td> </tr> <tr height="20"> <td height="20">12/10/09</td> <td>7,749</td> <td>774,900</td> <td>1/11/10</td> <td>15,106</td> <td>1,510,600</td> </tr> <tr height="20"> <td height="20">12/11/09</td> <td>7,958</td> <td>795,800</td> <td>1/12/10</td> <td>15,050</td> <td>1,505,000</td> </tr> <tr height="20"> <td height="20">12/14/09</td> <td>8,376</td> <td>837,600</td> <td>1/13/10</td> <td>15,107</td> <td>1,510,700</td> </tr> <tr height="20"> <td height="20">12/15/09</td> <td>8,387</td> <td>838,700</td> <td>1/14/10</td> <td>15,054</td> <td>1,505,400</td> </tr> <tr height="20"> <td height="20">12/16/09</td> <td>8,876</td> <td>887,600</td> <td width="64">1/19/10</td> <td>8,403</td> <td width="87">840,300</td> </tr> <tr height="20"> <td height="20">12/17/09</td> <td>8,654</td> <td>865,400</td> <td width="64">1/20/10</td> <td>8,483</td> <td width="87">848,300</td> </tr> <tr height="20"> <td height="20">12/18/09</td> <td>4,767</td> <td>476,700</td> <td width="64">1/21/10</td> <td>8,321</td> <td width="87">832,100</td> </tr> <tr height="20"> <td height="20">12/21/09</td> <td>6,598</td> <td>659,800</td> <td width="64">1/22/10</td> <td>8,352</td> <td width="87">835,200</td> </tr> <tr height="20"> <td height="20">12/22/09</td> <td>6,918</td> <td>691,800</td> <td width="64">1/25/10</td> <td>8,535</td> <td width="87">853,500</td> </tr> <tr height="20"> <td height="20">12/23/09</td> <td>7,433</td> <td>743,300</td> <td width="64">1/26/10</td> <td>8,561</td> <td width="87">856,100</td> </tr> <tr height="20"> <td height="20">12/24/09</td> <td>8,444</td> <td>884,400</td> <td width="64">1/27/10</td> <td>8,622</td> <td width="87">862,200</td> </tr> <tr height="20"> <td height="20">12/28/09</td> <td>8,773</td> <td>877,300</td> <td width="64">1/28/10</td> <td>8,490</td> <td width="87">849,000</td> </tr> <tr height="20"> <td height="20">12/29/09</td> <td>9,087</td> <td>908,700</td> <td width="64">1/29/10</td> <td>8,326</td> <td width="87">832,600</td> </tr> <tr height="20"> <td height="20">12/30/09</td> <td>9,459</td> <td>945,900</td> <td>
</td> <td>
</td> <td>
</td> </tr> <tr height="20"> <td height="20">12/31/09</td> <td>9,830</td> <td>938,000</td> <td>
</td> <td>
</td> <td>
</td> </tr> </tbody> </table>
Take a look at how these blocks trades appear when charted.

SHLD matched block trades: click to enlarge

Looking at the relationship between these matched blocks and the delivery failure data currently available suggests the blocks are a pretty reliable predictor of delivery failures reported two days later.

SHLD matched block trades and delivery failures: click to enlarge

Moving fails back two trading days we see just how reliable a predictor these matched block trades really are.

SHLD matched blocks and failed trades, offest -2 days: click to enlarge.

On average, SHLD fails are roughly 102% of these matched blocks. Given that relationship, I feel quite confident predicting how the as-yet-unreleased SHLD delivery failures will appear (note the dashed line).

SHLD matched block trades and offset delivery failures with prediction: click to enlarge

Now for the good and bad news inherent to this situation.

The good news is: this unusual market activity is fairly easy to spot.

The bad news is: despite being easy to spot, in recent months multiple companies have come under identical attack, suggesting whoever is responsible is not too concerned about the consequences of overtly violating the securities laws�a familiar situation for anybody who�s followed deepcapture.com for any length of time.

I�ll have more on this subject as soon as the SEC fails data are released, so stay tuned.

I�ve astounded even myself!

Last week I dared to predict the number of then unreleased delivery failures in shares of Sears Holdings (NASDAQ:SHLD). The figures I ultimately settled upon (after two minor tweaks in the days to follow) were:

1/29/2010 879,444
1/28/2010 873,222
1/27/2010 870,570
1/26/2010 851,904
1/25/2010 848,742
1/22/2010 865,266
1/21/2010 857,106
1/20/2010 1,535,508
1/19/2010 1,540,914

This morning, the SEC having yet to release the numbers, I explained the basis for my prediction, which is in simple terms, based on a pattern of apparently manipulative naked short �reset� transactions the Deep Capture team has observed in SHLD, and how those trades consistently predict how many shares of SHLD will fail to deliver after two days.
Well, literally moments after I published my explanation, the SEC released the numbers.

I asserted that my prediction would be accurate to within +/-2.5%. I�m embarrassed to reveal that in the end, my predictions were on average accurate to within 2.55%.

Sorry. I�ll try harder next time

.

For the record, here�s a table comparing my predictions and the actual numbers.

<table cellpadding="3" cellspacing="0"> <col width="84"> <col width="64"> <col span="3" width="64"> <tbody> <tr height="20" bgcolor="#cccccc"> <td height="20" width="84">

date

</td> <td width="64">

predicted

</td> <td width="64">

actual

</td> <td width="64">

difference

</td> <td width="64">

percent

</td> </tr> <tr height="21"> <td height="21" align="right"> 1/19/2010
</td> <td align="right"> 1,540,914
</td> <td align="right"> 1,566,164
</td> <td align="right"> 25,250
</td> <td align="right"> 1.61%
</td> </tr> <tr height="20"> <td height="20" align="right"> 1/20/2010
</td> <td align="right"> 1,535,508
</td> <td align="right"> 1,498,938
</td> <td align="right"> 36,570
</td> <td align="right"> 2.44%
</td> </tr> <tr height="20"> <td height="20" align="right"> 1/21/2010
</td> <td align="right"> 857,106
</td> <td align="right"> 910,786
</td> <td align="right"> 53,680
</td> <td align="right"> 5.89%
</td> </tr> <tr height="20"> <td height="20" align="right"> 1/22/2010
</td> <td align="right"> 865,266
</td> <td align="right"> 914,056
</td> <td align="right"> 48,790
</td> <td align="right"> 5.34%
</td> </tr> <tr height="20"> <td height="20" align="right"> 1/25/2010
</td> <td align="right"> 848,742
</td> <td align="right"> 854,491
</td> <td align="right"> 5,749
</td> <td align="right"> 0.67%
</td> </tr> <tr height="20"> <td height="20" align="right"> 1/26/2010
</td> <td align="right"> 851,904
</td> <td align="right"> 846,268
</td> <td align="right"> 5,636
</td> <td align="right"> 0.67%
</td> </tr> <tr height="20"> <td height="20" align="right"> 1/27/2010
</td> <td align="right"> 870,570
</td> <td align="right"> 851,094
</td> <td align="right"> 19,476
</td> <td align="right"> 2.29%
</td> </tr> <tr height="20"> <td height="20" align="right"> 1/28/2010
</td> <td align="right"> 873,222
</td> <td align="right"> 851,705
</td> <td align="right"> 21,517
</td> <td align="right"> 2.53%
</td> </tr> <tr height="20"> <td height="20" align="right"> 1/29/2010
</td> <td align="right"> 879,444
</td> <td align="right"> 866,606
</td> <td align="right"> 12,838
</td> <td align="right"> 1.48%
</td> </tr> <tr height="20"> <td height="20">
</td> <td>
</td> <td colspan="2">

Average:

</td> <td align="right" bgcolor="#ffff66"> 2.55%
</td> </tr> </tbody> </table>
At this point, the most relevant question is: will the SEC do anything about this obvious violation of the law?

Sadly, I predict that no, the SEC will not.

The next most relevant question is: will the manipulator continue manipulating, knowing he or she has been spotted?

Wow, 100-1 leverage in the paper gold market. (So if this fails. does the price go up or down?)

http://www.zerohedge.com/article/eri...n-douglas-gata

Recently, whistleblower Andrew Maguire gained substantial notoriety among LBMA circles after disclosing what could be an epic cabal of commodity price manipulation, and was subsequently involved in what could be classified as an attempted hit-and-run. In a first media appearance, Andrew is interviewed in this exclusive with Eric King of King World News, where he is joined by GATA director Adrian Douglas, who also made ripples at the recent CFTC hearing in which he used the words of former Goldman analyst Jeffrey Christian against him in proving that the gold market is nothing but one big Ponzi, in which a run to deliverables would result in 99% unsecured claims (a 1 in 100 dilution).
As Eric King summarizes:

Andrew Maguire, independent metals trader turned whistleblower is in the center of a storm for exposing what could be the largest fraud in history involving countries, banks and government leaders. Adrian Douglas Board of Director from GATA, the man who Andrew reached out to also joins in this interview where they discuss a fraud so extraordinary and so unimaginable that it is the kind of thing that hollywood thrillers are made of. In this interview they also discuss the CFTC sponsored meeting on metals which was an unmitigated disaster because it additionally exposed the fraud on a grander scale. Thanks to GATA, Adrian and everyone else involved in helping to make this exclusive King World News interview possible.

Link to interview

http://www.kingworldnews.com/kingwor..._Douglass.html

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Eric King Interviews Whistleblower Andrew Maguire And Adrian Douglas Of GATA

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Eric King Interviews Whistleblower Andrew Maguire And Adrian Douglas Of GATA