Lessons In Manipulation – Part 2
My recent article regarding stock manipulation left many questions unanswered. I have received numerous requests as to how it may work more specifically to Sirius XM and who may be involved in such manipulative practices. Allow me to introduce to you a means of manipulation that I believe is occurring with Sirius XM common stock; the Wash sale:
“A wash sale involves a person, either directly or indirectly, being both the buyer and seller of securities in the same transaction, that is there is no actual change in ownership of the securities. The manipulator will undertake frequent trades hoping to attract other investors who note the increased turnover in the security. The manipulator aims to gain financially through creating a small price differential between the buy and sell rates of the security in question.”
Sounds a lot like Sirius XM common stock, doesn’t it? Over the course of the last 2 years, every Wall Street analyst maintained a buy recommendation on Sirius. All that is, except one. Mark Wienkes of Goldman Sachs. In what could only be described as amazing insight, Mr. Wienkes was the only analyst that was right about Sirius, albeit always for the wrong reasons.
During this time we learned that Goldman Sachs, which had a conviction sell rating on Sirius shares had quietly acquired many millions of shares of the equity and that Goldman Sachs owned most of the February debt used by the media as “evidence” of Sirius XM’s recently averted doom. You read that right. They owned most of the bonds that were supposedly going to be defaulted on and they owned the very shares of stock which they recommended selling.
They hedged their short position by going long the stock, and hedged the bonds by shorting the stock. Seems to make sense. Enter Charles Ergen…
According to the press, Mr. Ergen had been “quietly” buying up Sirius XM’s February debt for some time. In acquiring the bonds from Goldman Sachs, Charles Ergen would have done what any prudent investor would have. He would have shorted the stock. The leak of potential bankruptcy created a scenario in which both Ergen and Goldman Sachs were able to cover their short positions at the expense of the retail investor, for as little as .05 a share. They were then paid full price for the bonds they had acquired for pennies on the dollar. We may never know who leaked that information, but the media sure did run with it by making claims that bankruptcy was coming within days.
Hindsight manipulation is easy to see. As rumors spread of Sirius XM’s potential bankruptcy, the bond prices retreated and were scooped up by Ergen, who by now had to have knowledge that Sirius XM was in talks with Liberty’s John Malone. Had this been made public during market hours rather than a 3 day weekend, the scheme would have been ruined. The weekend gave the media time to be manipulated into putting out stories that minimized its impact.
I think it’s probable that Goldman bought and held those bonds on Ergen’s behalf. Goldman’s position (along with their hedge fund buddies) in the equity made it entirely possible for both Ergen and Goldman to cover their short positions as Goldman and friends sold off an equal or greater number of shares from the long positions they had accumulated. Hence, the wash sale.
With the prior knowledge of events to come, client recommendations could have been made by Goldman to facilitate the scheme and the retail investor was again fleeced, with absolutely no fear of retribution by the SEC. Credit market and automaker woes facilitated the scheme.
This could be a scenario in which the stock was intentionally artificially suppressed. It could have no merit whatsoever (Legal Dept Put This Here). Is it more likely than not? Probably so.
I believe this is continuing in that there remain over 150 million shares short in the equity, which still need to be covered. Our old pal Jim Cramer gives us a clue into who the new manipulator of Sirius XM may be.
Position: Long Sirius XM, none GS
Excellent article. That is one of many manipulations and manipulators going on within this story. That is a small story, and one of my less likely scenarios, although still very probably. I would even suspect it goes deeper and much further than that. Good job for your bravery, and fortitude to attack dishonest manipulation around our company. Goodos.
Why aren’t the “losers” in this manipulation screaming to high heaven? Yes, this is plausable, but where is Mel or Malone to cry fowl?
You gotta wonder after awhile now, no news. I think sirius is a great company but their not doing anything to produce any public confidence to combat the bad news
brandon,
just over three hours (3 hours and 2 minutes to be exact) later and you are now cleansing yourself of that other article….
this is a great insightful article…the other one not!
don’t know whether you did it for that purpose, but thank goodness you did it.
Brandon
Great article! Probably one of your best. Very informative. I have not always agreed with your articles, but have to say good job!!!
Like I said, I just wanted the info from the other article out there. Now that it is I have in fact cleansed myself of it. And yes, I intended to do that.
BM,
If in fact what you say is true, why hasn’t Mel and crew filed a complaint with the SEC, FBI or any other Law Enforcement agency that would address this criminal act? I feel you painted a portrait of what has been going on with this company. Could be Mel wants to BK SiriusXM for his own personal gain? I believe you should contact Mr. Hartlieb. I also believe we have an ex-SiriusXM high ranking employee ready to spill the beans on Mel.
SXM
Can you elaborate alittle bit about the last statement? Please do not start with accusations unless you can and will prove it to us! I have had a couple of not to nice words to say about some of your posts. I promised the leaders of this forum that I would refrain from anymore personal attacks. When you post a statement that could be inflammatory, please give us proof or hold the comment until you have the proof. thanks
If you think I am going to reveal our sources before any public annoucement you need your head examined.
Brandon
If you had added any retail numbers to your other article, I could agree with you that you had to write the article as you saw it. However, IMHO your numbers are inaccurate and that detracts from the rest of the article. Even worse, you had ample time to correct the numbers before posting the article. I then have to assume that you stand by your numbers and expect the co to have zero retail subs. As stated above, this article is great journalism! However, the other one is factually wrong!!
Brandon, you are treading slander/libel here. clearly the bk rumour was manipulative. that being said, longs who bought at $5 to $9 weren’t rushing to the exits with just 10 cents to zero. If Ergen did start that rumour I give him credit. But how would he know that every media outlet in the world would RUN with it to the point that they continued the same story even after the FEB malone bailout.
If SIRI is being manipulated, and it is, then so is most of this market. That’s why no one gives a crap about any of these irregularities. It has been and always will be the wild west meets Blagojavich.
Refi will take place after, and not before the big dogs are fed plenty of cheap shares.
They can’t make up a better scheme. BK is not an option. No money there. Just play it up and down till 5/15, then announce the refi….Funny thing but it just might be Goldman who ponies up the money. I can see it now. Weinke’s said it was worth 25 cents, we looked at the numbers again and thought it was closer to $2 now that we have more clarity about the 3rd and 4th quarter guidance and iphone growth so it made sense to lend them the money at more favorable rates and by the way we also have been buying another 100m shares at a dime.
You will NEVER clear yourself from that article you nut job.
TYLER COME BAAAAACCCCCKKKKKK!!!!!!!!!!
If this be true. If this is really what is happening….why hasn’t the new head of the SEC stomped on their throats? Wasn’t she suppose to be a kick ass first ask questions second kind of operator? What happened to the promise of major reform? The market keeps on plummeting and NOTHING has been done yet to really change things? These manipulators are running around in broad daylight doing WHATEVER they want. What the HECK is going on here????
The government needs to investigate, overhaul and clean up Wall Street. I have more respect for the mafia than I do for the stock market!
I agree this is one of Brandon’s best articles. Great Job!!–Moviemakr
For everyone that mentioned the SEC: Give me a break. I don’t know if any of you have heard about this, but there was a guy who ran a multi-billion dollar ponzi scheme… Im sure none of you ever heard of Bernie Maddoff right? The SEC had information, complaints, and even an insider in the company coming to them with proof since 1989, and nothing was done until 2009? Maybe we will hear about someone getting questioned over Sirius manipulation in 2039.
BTW: There was a lot of sarcasm in this section. I hope most of you smart ones caught it…
For the rest of you, I would like to point you over to DeepCapture.com. Read the stories there (It will take many hours to get through them all). Then tell me that stock manipulation does not exist. Tell me that the SEC doesn’t have enough information to break this up IF they wanted to and were not corrupt themselves. And Steve O: Tell me why you respect the mafia more, when most of wall street is run by the mafia (if DeepCapture is accurate).
(DeepCapture.com) That was some good reading alot of what I see going on today seems to corralate with the lift of the uptick rule. It seems like all these bloated naked shorts are killing the markets and many companies, Obviously powers at hand to reinstate the uptick rule are being manipulated or paid off otherwise there would be protection in place to stop the downward spiral.
Dude,
You wrote:
“The head of the SEC if you are new to the planet, happens to be the former Chairman and CEO of Goldman Sachs.”
That is a false statement.
The head of the SEC is not, nor ever was, the former CEO of Goldman Sachs.
The former CEO of Goldman Sachs was recently the Treasury Secretary, but that’s a different job than head of SEC.
yeah….the SEC may have been lax and lazy in the past Newman….but that was BEFORE our economy faced it’s biggest hit since the great depression. The Madoff scandal may have been overlooked before…but NOW people are calling for blood. Attitudes are changing. They are cracking down.
HOWEVER….not fast enough in many eyes. For one thing, the friggin “uptick rule”. WHen the F is that going to be reversed???????
So although we are seeing change, it’s not going fast enough. The people want SWEEPING change.
that is he barometer of whether or not it’s still business as usual. until they reinstate the uptick rule, it’s obvious it’s business as usual.
Exactly. I mean everyone is LOOKING at the market as a barometer of the economy. DUH. HELLO????
By not changing the uptick rule back, they are just adding to the turmoil. It doesn’t take a genius to figure that out. Makes you wonder just how much pull these manipulators really have. It’s frightening really.
Newman,
You’re right… one is a synonym for the other. An obvious oversight by me.
Very interesting article!
Thanks Brandon
Brandon, you say:
“The head of the SEC if you are new to the planet, happens to be the former Chairman and CEO of Goldman Sachs.”
You provide a link to Paulson, former Sec of Treasury. Would you like to correct that comment? It is so far wrong, it shows an incredible lack of knowledge about stocks, the market, and just about everything that has happened in the govt as it relates to the economy over the last several months, yet seems to form the basis for your entire post.
I won’t even get into what the actual definition of a “wash sale” is.
Not sure why anyone wastes their time reading your posts any longer.
I stand corrected. I was under the impression that the SEC was a subdivision of sorts of the treasury dept. I don”t know why I thought this, but that was my thinking.
Alot of your thinking has holes in it, just like you don’t recognize retail subs for Sirius in 2009 and you believe they will lose 2M subs in 2009.
Your credibility is getting torn down because of your stubborness & cockiness.
SHOW me where 2 million net retail additions will come from. I’ll be more than happy to correct an error. SHOW ME your numbers and how you arrived at them rather than attack me personally.
You cannot. They added only 107,000 retail subs in Q3 2008. That’s it!
The company did not promote the NFL. They did not promote Howard, or Oprah or the merger. THEY DID NOTHING IN Q4 to warrant the benefit of the doubt that they added over 500,000 retail subs in the quarter.
Thats history. How do you think Q1 faired? Do you think radios are flying off the shelves this quarter?
10% unemployment on our doorstep. The markets have crashed. Home values have plummeted. No one is buying retail radios. Show me 500k/per quarter. It has not happened since Stern signed on, and it WILL NOT happen in 2009.
Brandon..
Interesting reading. The SEC is not effective and I doubt it ever will be since it is wall street.
If a new goverment agency was created to actually overlook and to investigate alleged improprieties called “We are going to get your ASS”, then maybe things would change. Make it part of the Dept. of Justice.
imho
vaporgold
Brandon..
Your take on the situation is impressive. I have tried to
keep your message on top of the Message board (at the other place..)
You have an articulate and informative Blog. I will book mark this page.. and look forward to reading more.
Thank you for your hard work.
Brandon’s article: Is it better than the first one? Of course. That first one was garbage. It was an uninformed interpretation of what was happening to the stock by looking at level 2 and actually thinking that 100 share lots could hold down a stock like this. Did it ever occur to anyone that the minimum shares a MM must quote is 100 shares and they’re the ones executing these orders as part of their MM obligations? What happened to that theory? I noticed this article really didn’t address your inaccurate previous statements which reduces the credibility of this one.
Brandon says he doesn’t know why he thought the SEC was part of the Treasury Department. Really? What is he doing writing articles? What kind of background does he have? Heβs missing some of the most fundamental concepts and knowledge that any sort of experienced industry professional would have.
As for the conspiracy theory, could it be true? Possibly, but let someone who actually has spent time on a trading desk explain: Goldman Sachs is huge. Its Research Department is completely separate from its Equity Trading, which is completely separate from its Fixed Income Trading. They aren’t working together. Wall Street is far from perfect, but over the last 10 years, the separation of these departments have been made. These issues are not the cause of our current problems but it’s easy to just point to all of Wall Street and blame the whole industry.
It’s almost as if Brandon looks up stats that could fit his theory but that’s all it is. I could use stats to prove anything I want.
I wont even begin to argue the wash sale issue because even a new trader that just passed the Series 55 could show you how off you are.
Disclosure: Long a lot of SIRI because I love the product but you can’t let your position affect the reality of a situation and screaming at the rain doesn’t help.
Short: Brandon
Brandon,
Great article. Mel spoke of this manipulation on Cramer day after XM merger. I suggest you search google and watch it (3/5 min video). I listen to it every few months. It was great! It may give you more clarity on the manipulation!
Brandon,
Back in 2002 wallstreet was speculating BK for Sirius and Sirius played that BK card to convince the bondholders to swap out 100% of the debt for 92% of the equity. They purposely played the bad media card to their advantage. Needless to say, the stock went from a low if .39 cents to over $9 a share over the next two years. It was a fantastic ride and I’m back afaik hoping for round 2!