NEWS FROM THE WORLD OF BALONEY: Sorry. Fraudulent investor-protection movements are a guilty pleasure of mine, like chocolate. I just can't resist writing about them! They are funny. Dangerous too, as well as irresponsible, and a little sick. The problem is that these paranoid crackpots influence regulatory policy, and that has to stop.

I'm going to make this item a kind of ongoing diary or "open item," so that all the latest news from the loony anti-naked-shorting movement can be posted in one place. That way this blog isn't totally overwhelmed by baloney. All your baloney in one sandwich.

After all, the anti-shorting scam artists are just one of twenty-one chapters of Wall Street Versus America. They represent just one of the ways the Street has its hand in your pocket -- in this instance by making it easier to rip you off in microcaps -- but there are far more important issues discussed in the book, such as the ghastly arbitration system and fee-happy funds. My general take on this issue is summed up in this post and a few others, most of which have the word "baloney" in the title.

I'll still post major tidings as separate items, but lesser "turns of the screw" I'll post here.

So, on with the Baloney Diaries! These items are in chronological order, with the most recent at the bottom. So you can bookmark the URL for this item (http://garyweiss.blogspot.com/2006/02/news-from-world-of-baloney-sorry.html) and check back periodically:

Feb. 12: The Baloney Brigade's "Sanity Check" website (as in "check your sanity at the door") posted over the weekend what it described as an "encyclopedic analysis" of the Securities and Exchange Commission's legal brief refuting all of the naked shorting lobby's phony "stock counterfeiting" claims.

The author was gravely introduced by Phil Saunders a/k/a "Bob O'Brien," the bravely pseudonymous proprietor of the site, as "Dr. Jim DeCosta." The good doctor describes himself in SEC comment letters as "Dr. Jim DeCosta and Associates, Consultants to Victim Corporations."

"Bob," an ex-peddler of used medical equipment according to the NY Post, didn't disclose exactly what kind of PhD or whatever that this esteemed gent has, so I looked up the phone number. According to Google, this expert in naked short-selling and consultant to victim corporations is James DeCosta, DMD, of the Tualatin Family Dental Clinic in Tualatin, Oregon.

Glad the Baloney Brigade has such a sturdy "consultant" for its "victims"! I'll bet they have good teeth too.

Feb. 13: Last night, Baloney Brigadier "O'Brien" clogged Internet message boards with posts promising an "explosive" revelation. Turned out to be a rumor about somebody serving a subpoena on someone else. I won't repeat the rumor, it being obvious baloney whipped up to divert attention from the beating being endured by stocks he's been touting.

I have a better idea for "O'Brien" to lure suckers to his website: cut rate dental insurance! He seems to be staffed up for it.

Feb. 14: When the "subpoena bombshell" fell flat, "O'Brien" went back to his "sources" and came up with another "scoop" -- that the SEC was investigating Rocker Partners. He didn't disclose his "source," which makes sense because it was The Street.com, which mentioned the probe a few days ago because Rocker owns a chunk of the company (see tail end of this story). To be precise, it said, "the matter is being investigated." SEC investigations are often prompted by long-short battles, with the result usually being either nothing or sanctions on the long side. The Baloney Brigade marches on.

Feb. 15: File this under "I'm not making this up" (with apologies to the blog by that name). The bravely pseudonymous head of the anti-naked shorting coalition, a paranoid crackpot named "Bob O'Brien," wants the world to confirm unsubstantiated reports and rumors that he irresponsibly posted on his website in recent days. I'm not kidding. He issued a "challenge" to that effect today:

If I do not hear from anyone by close of business today, as I haven't heard from anyone for the last 48 hours, I, and everyone else, will assume that the above 4 statements are correct and true, and will henceforth state them as fact.

Well, I guess that makes sense. Post a lot of smears on the Internet before you have gotten your facts straight, and then -- instead of getting the thing nailed down tight and asking for comment from the affected parties -- issue a "challenge" for your victims to contradict you. And these people influence regulatory policy and have gotten the attention of state regulators? NASAA, come to your senses, for Pete's sake.

Feb. 15 (later). The "Sanity Check" blog published a rambling, patently phony story about a threat supposedly conveyed to a "journalist" who was "investigating" naked shorting by "three men in Armani suits, slicked back hair, Ferragamo shoes." You know, sort of like a bad detective novel. This totally unbelievable cock-and-bull story is supposed to excuse the anonymity of "O'Brien," the leader of this crackpot movement, who hides behind a phony name while spewing paranoid conspiracy theories and smears. The "journalist" is anonymous, natch.

OK, I'll pretend for a moment that this story is not the phony that it obviously is. What is a journalist's duty in such a situation? It takes all of thirty seconds to come up with the answer -- to call the police or the FBI! Report the threat. Hell, I would. In fact, when it's happened to me, I have. So would any real, as opposed to imaginary, journalist.

What's sad is that some good people will believe this trash, no matter what, because they need someone or something to blame for their bad investment decisions.

Feb. 16. Rejoicing across the world of baloney today, as the subpoena rumor mentioned earlier -- Depository Trust & Clearing Corp. being asked for trading records by regulators in Connecticut and Utah -- is confirmed by the New York Post. What this means is that not one but two state regulators are devoting valuable resources to investigating a nonexistent scandal. It's a sad day for investors, who are ripped off by real scamsters while the regulators chase after imaginary ones.

A good example of the real thing was discussed in the Mark Cuban blog yesterday, in an item entitled "Naked Shorting -- the Real Bad Guys." Note the reference to C. Austin "Bud" Burrell, whose little "pink sheet" company is reportedly being pushed to overseas investors by a boiler room. Unfortunately, victims of real stock swindles have yet to organize. Victims of imaginary naked-shorting conspiracies, on the other hand, are not only organized but have clout, and the waste of resources reported today proves it.

Feb. 17. The rejoicing was premature. The Depository Trust and Clearing Corp. says today that the Connecticut subpoena was served several months ago, "related to an investigation the Conn. Banking Dept. is conducting of third parties." (Whatever that means.) Still, assuming "naked shorting" is the reason for this probing, the bottom line is that two state regulators are wasting their time with the Wall Street version of the flat-earth movement.

The taxpayers of these states have ample reason to be annoyed, and to ask why their investor watchdogs are chasing after baloney when there are real investor scams to stamp out.

Feb. 19: Investors in one naked shorting "victim," a cruddy mining company, aren't lapping up the "stock counterfeiting" con game. I think this entry is significant enough it deserves an item of its own, so I moved it here.