In the jungle not everyone can survive…

[fastwalker]

someone has to be killed in order for the other species to survive.”<br>
This was meant to be an eye grabber, which I'm sure it did, since you are here reading this thread. I will get to the situation with CMKX, SEC, NSS, MM na dmany other things, but first, I would like to give you a bit of an insight as to my thinking and why I decided to use the phrase "In the jungle ...."

What we have here with the SEC, DTC and others of the Govt Agencies, is "damage control," over an obvious problem (CMKX--NSS) that should have resolved itself, by CMKX going out of business. But those d**n pesky shareholders won't let it die.

So. how do you make a bad situation look better? The remedy is called spin. Actual events are recast and retold and appear to the general public in a different light. In the financial markets perception is everything. What can be perceived can be believed, if only for a short while Which brings us to our situation with the SEC and the NSS.

I’m not attempting to be witty here, but I found that the following quotes are applicable to some of us who are investing in “today’s” modern market place….

Idiot: A member of a large and powerful tribe whose influence in human affairs has always been dominant and controlling.

The good Lord set definite limits on man’s wisdom but set no limits on his stupidity---and that’s just not fair.

Tell a man something is bad, and he’s not sure he wants to give it up. Describe it as stupid, and he knows it’s the better part of caution to listen.

Let us be thankful for the fools. But for them the rest of us could not succeed.
Mark Twain 1835-1910, American Humorist, Writer

Are our financial markets manipulated? Of course there are. The real question is: are they IMMORALLY or ILLEGALLY manipulated. One can answer the question simply by asking – Is it in the nature of predators to be nice and play by the rules?

As an experiment, enter the following query into Google

"neither admitted nor denied" OR "admit or deny" settled

That phrase has a familiar ring to it, dosen’t it? I’ll wait, go ahead…do it now see what it says....

What you get is a list of over 4,000 hits listing the very clear proof that market predators do what they do…and unlike most industries, Finance has a special “get out of jail free” capability built into the law…all they have to do is turn over a large portion of the carcasses – the settlement - over to the masters of the feast – and then they can go back to their predations.

When you have been in the “market” for a while, at times, it seems that the inmates of an insane asylum are running the economy and the financial markets. The Fed is hell bent on debauching the currency and doesn’t appear to be worried about the consequences.

They are confident that monetary alchemy can solve whatever problem ailing the economy. In private, they freely admit they’re not sure what will work.

The word “unconventional” is used more often when solutions are proposed. The fact that the Fed is even considering using unconventional means should alert the average investor these are not normal times and that all is not well., while the SEC conspires with others to maintain “market stability” by allowing Naked Short Selling.

All of this should at least get the attention of investors; and as investors we should ensure that it has the attention of policy makers (Congress).

Yet even after the debacle of Enron and others , our financial markets are still treated as one giant casino where professionals and amateurs alike are always encouraged to speculate.

Wall Street in one sense has become the adult version of Disneyland where investors can act out their money fantasies. This is no more evident today than to view what is moving in the markets and what is analyzed and recommended. To most professionals and traders they believe the good ole’ days are back.

The best way to describe the present euphoria is to say that the bubble is back. In reality it never fully deflated. Speculation is back in full bloom. This is reflected in what is moving the markets and the metrics used to analyze stocks.

The companies that have done the best in the market are companies that are losing money, companies with deteriorating balance sheets and declining income statements, or companies that are constantly revising their estimates downward or having to restate their earnings.

more....

[fastwalker]

A company with $14 million in sales and a $1 billion market cap is not an investment. It is a speculation. Fund managers don’t see it that way and all the fashionable people on Wall Street own such stock, from fund managers, pension funds, to large banks that run mutual funds are quick to justify their logic for acquiring such stocks.

Speculation is back in fashion on the Street again, and the more speculative the investment, the greater the institutional interest. Meanwhile as valuations once again reach absurd levels, there is greater interest in buying what is absurd. In fact there isn’t a day that goes by that some analyst, fund manager or Wall Street investment strategist is recommending investors put more money in the market and increases their holdings in stocks.

In the crime business, detectives know that money plays a very important role. ‘Follow the money’ is an old cliché. The same is true in the financial business. If you want to know which area is going to go up next, follow the money. In the larger context of the financial markets, this means follow credit and money flows.

Central banks around the globe are creating oceans of money or credit that is finding its way into every nook and crevice of the economy and the financial system. Excess money creation during the 1990’s created a credit boom leading to financial bubbles in the U.S. stock market and in the economy.

Those conditions within the economy represents excess capacity as cheap money and credit created an extraordinary investment bubble in not only the financial markets, but also excess capacity in almost everything but energy. There is now excess capacity in just about everything you want, and scarcity in everything you need such as energy.

Do you guys remember the Michael Douglas movie Wall Street. There are three lines in that movie that I think are appropriate for today's markets. I disagree with Mr. Gecko's view on greed. It isn't good and it doesn't clarify as he intimates. It got him in trouble and will most certainly get today's momentum investor in trouble. At the beginning of the movie when Bud Fox, his new apprentice, gets concerned about one of his bow-wow stocks, Gordon Gecko admonishes him and tells Fox, "Don't get emotional about stocks. It clouds your judgment."

This brings me to the assumption, that the markets today are driven by emotion instead of fact. The constant mantra you hear repeated each day is that "earnings are better than expected" and "stocks are cheap." Therefore, don't get left out of the next big move in stocks in what bulls believe to be a new bull market. Buy now or regret it later. Complacency and greed have once again taken over the markets. The big worry now for investors is being left out of the rally.

Don't Believe The Lie

Stocks are not cheap and earnings aren't as rosy as Wall Street would have you believe. Yes, companies are easily beating estimates , all while the Fed, who has an unnecessarily adverse or constricting effect on the U.S. economy, sings the tune of optimism, instead of solving the problems of the economy through a much needed "money reform" or "alternative money" systems.

But lets face it guys, if we as a country, were not so idiotically attuned to the day- by-day, minute-by-minute jerking around of the "Down-Jones" Index as our basic indicator of the economic health of the universe as a whole, this elementary reality for a real change would have been grasped already.

I believe that greed and competition are not a result of immutable human temperament; I have come to the conclusion that greed and fear of scarcity are in fact being continuously created and amplified as a direct result of the kind of money we are using.

Perhaps the greatest conspiracy about our system is the ability of those in power to distract us from the truth, so that we will lose money and property to the powerful conspirators, who corruptly monopolize wealth and power, and gain more power as a result. Inconsistency causes confusion

more....

[fastwalker]

What do I means by that phrase… Inconsistency causes confusion? Well think back to, or if you are to young to remember, the day known in the stock market as “ Black Monday.”<br>
This was the crash that everyone expected but could not justify because of the alleged work of the U.S. Securities and Exchange Commission,, the governing body President Franklin D. Roosevelt ordered formed after the depression.

The SEC--which was established for the prevention of further crashes and fraudulent practices that had infected the stock market--was allegedly doing a fine job after the war and as such, finally coaxed tentative investors back into the market in the sixties.

Ah but then greed raised it’s head. We were allowed believe that the SEC had all the answers , that in fact they would protect us from the bad guys, but they also provided us with a caveat, which was, if we failed in the markets, it was simply because that while they ( SEC) told us pertinent things about the market place, they (SEC) couldn't make us think and understand these things they (SEC) defined them. Which essentially resulted in the a false sense of security during the early sixties and seventies, when many investors assuming the SEC was on the job, looked not at the value of the company but at the appeal of its public image and the vernacular used to describe it.

Really you say? How could people be so stupid…(remember my opening quotes?) What exactly was being said, that elicited such stupidity? Well for an example, over-embellished statements were wide spread and prevalently made relevant to a company, in order to attract the public eye. Terms like “This company’s triumphant new paradigm will be enacted through a leveraged advantaged momentum initiator.”

WTF?

Even though these illustrations were vague, investors were infatuated with these grand sounding companies, which somehow represented to them, some type of a higher idea. The SEC meanwhile we were told, required companies to state explicitly that they had no assets or even a fighting chance at getting any, but since the SEC turned a “BLIND EYE” TOWARD ENFORCEMENT regarding “truth in advertising,” many investors assume that such statements were factual and continued to believe that the potential for these companies was limitless.

This bullish attitude, despite frequent bumps and insolvencies, continued into the eighties when conglomerates and hostile takeovers were the golden children of a finance-hungry media. Under the math of the “new economy,” firms would grow exponentially rather than incrementally simply by picking up other companies.

Again the SEC, we were told, was unable to halt the shady IPOs and conglomerations, so the market continued to rise unabated throughout the 80s. Even institutional investors and large mutual funds, increasing their dependency on program trading, began to adhere to the mantra, “if a stock isn't gaining big time, find one that is.” Then, in early 1987, there was a rash of SEC investigations, wonder what lighted a fire under their butts then? Could it be, the SEC had informers leaking information about insider trading?

For the most part, people were aware of the tendency of Wall Street to look out for itself, but the barrage of SEC investigations, rattled investors. By October, investors decided to move out of the crooked game and into the more stable environment offered by bonds or, in some cases, junk bonds. As people began the mass exodus out of the market, the computer programs began to kick in.

The programs put a stop loss on stocks and sent a sell order to DOT (designated order turnaround), the NYSE computer system. The instantaneous transmission of so many sell orders overwhelmed the printers for DOT and caused the whole market system to lag, leaving investors on every level (institutional to individual) effectively blind.

Herd-like panic set in and people started dumping stock in the dark without knowing what their losses were or whether their orders would execute fast enough to keep up with plummeting prices.

The Dow plummeted 508.32 points (22.6%) and 500 billion dollars vaporized. Fortunately, the newbie chairman of the Fed, Alan Greenspan, was around to help fight off a depression by preventing the insolvency of commercial and investment banks. The market recovered, and some modest refinements were made, including a circuit breaker that cuts out trading programs if the market slides to a set level.


more... later, have to return to running my business...lol

[fastwalker]

I've complied, from various sources for your edification possible main causes of the 87 crash, or an adjustment as the market people like to call it....

CAUSE #1: DERIVATIVE SECURITIES

Initial blame for the 1987 crash centered on the interplay between stock markets and index options and futures markets. In the former people buy actual shares of stock; in the latter they are only purchasing rights to buy or sell stocks at particular prices. Thus options and futures are known as derivatives, because their value derives from changes in stock prices even though no actual shares are owned.

The Brady Commission [also known as the Presidential Task Force on Market Mechanisms, which was appointed to investigate the causes of the crash], concluded that the failure of stock markets and derivatives markets to operate in sync was the major factor behind the crash.

CAUSE #2: COMPUTER TRADING

In searching for the cause of the crash, many analysts blame the use of computer trading (also known as program trading) by large institutional investing companies. In program trading, computers were programmed to automatically order large stock trades when certain market trends prevailed. However, studies show that during the 1987 U.S. Crash, other stock markets which did not use program trading also crashed, some with losses even more severe than the U.S. market.

CAUSE #3: ILLIQUIDITY

During the Crash, trading mechanisms in financial markets were not able to deal with such a large flow of sell orders. Many common stocks in the New York Stock Exchange were not traded until late in the morning of October 19 because the specialists could not find enough buyers to purchase the amount of stocks that sellers wanted to get rid of at certain prices.

As a result, trading was terminated in many listed stocks. This insufficient liquidity may have had a significant effect on the size of the price drop, since investors had overestimated the amount of liquidity. However, negative news to investors about the liquidity of stock, option and futures markets cannot explain why so many people decided to sell stock at the same time.
Bruce Bartlett:

While structural problems within markets may have played a role in the magnitude of the market crash, they could not have caused it. That would require some action outside the market that caused traders to dramatically lower their estimates of stock market values. The main culprit here seems to have been legislation that passed the House Ways & Means Committee on October 15 eliminating the deductibility of interest on debt used for corporate takeovers.

Two economists from the Securities and Exchange Commission, Mark Mitchell and Jeffry Netter, published a study in 1989 concluding that the anti-takeover legislation did trigger the crash. They note that as the legislation began to move through Congress, the market reacted almost instantaneously to news of its progress. Between Tuesday, October 13, when the legislation was first introduced, and Friday, October 16, when the market closed for the weekend, stock prices fell more than 10 percent -- the largest 3-day drop in almost 50 years.

In addition, those stocks that led the market downward were precisely those most affected by the legislation. [Ultimately, the legislation was stripped of the provisions that concerned the stock market before being enacted into law.]4

CAUSE #4: U.S. TRADE AND BUDGET DEFICITS

Another important trigger in the market crash was the announcement of a large U.S. trade deficit on October 14, which led Treasury Secretary James Baker to suggest the need for a fall in the dollar on foreign exchange markets. Fears of a lower dollar led foreigners to pull out of dollar-denominated assets, causing a sharp rise in interest rates.


One belief is that the large trade and budget deficits during the third quarter of 1987 might have led investors into thinking that these deficits would cause a fall of the U.S. stocks compared with foreign securities (this was the largest U.S. trade deficit since 1960). However, if the large U.S. budget deficit was the cause, why did stock markets in other countries crash as well? Presumably if unexpected changes in the trade deficit were bad news for one country, it would be good news for its trading partner.

CAUSE #5: INVESTING IN BONDS AS AN ATTRACTIVE ALTERNATIVE

Long-term bond yields that had started 1987 at 7.6% climbed to approximately 10% [the summer before the crash]. This offered a lucrative alternative to stocks for investors looking for yield.

CAUSE #6: OVER VALUATION

Many analysts agree that stock prices were overvalued in September, 1987. Price/Earning ratio and Price/Dividend ratios were too high [Historically, the P/E ratio is about 15 to 1; in October 1987 the P/E for the S&P 500 had risen to about 20 to 1]. Does that imply that over valuation caused the 1987 Crash? While these ratios were at historically high levels, similar Price/Earning and Price/Dividends values had been seen for most of the 1960-72 period. Since no crash happened during that period, we can assume that over valuation did not trigger crashes every time.


ummmm! nothing about NSS

more...

[ADVENTURE]

as always great post fastwalker...

[fastwalker]

The reason I outlined the 1987 crash is that it is relatively new and can be used as the "fear factor" by those who do not want the NSS problem to be addressed.

Many questions come to mind after reading what I posted above, but basically I ask “Who, what, where or when was an initiator of the "open secret" that allowed deception, theivery and corruption introduced to the market place with a "good ole boy" handshake or wink?

We can assume that the market place was filled with problems and corruption, prior to Mr. Donaldson’s appointment. So we can't assign all the blame to him.

But, we can also assume, because he at least gave the matter lip service, that he would attempt to restore legitimacy and order to the market place.

After all, speaking after being sworn in as chairman of the Securities and Exchange Commission (SEC), he stressed the importance of restoring confidence in how corporate America was run.

"We will hold accountable all those who violated the public trust," Mr Donaldson said.

"We will demand responsible corporate governance throughout the business and financial world.

"We will strengthen our market structure, making the markets more efficient, more transparent and friendlier to all investors."

(I think those statment deserve recognition.... )

Investors' confidence in US companies has been rocked by a series of high profile scandals, such as Enron and WorldCom. Mr. Donaldson said it was up to business leaders to show the public a different face.
"It is time that all those who manage and govern our corporate and financial institutions show true leadership," he said.

"As chairman of the SEC I will call on them individually and collectively to create a new environment of integrity and accountability that goes well beyond adherence to laws."

Was Mr. Donaldson the right man for the job, or simply a man who was owed a favor from the Bush administration?

We see that he was a co-founder of investment-banking firm Donaldson Lufkin & Jenrette. He also served as chairman of the New York Stock Exchange from 1991 to 1995 and was chairman of the insurance giant Aetna.

Surely, he helped define the direction of the mega corporation Aetna? Lets see….

As head of Aetna (nyse: AET - news - people ), Donaldson presided over a company that lost $400 million, maintained a corporate governance structure that squelched investor dissent in its attempt to repel takeover attempts, and he rejected a generous merger offer from Wellpoint Health Networks (nyse: WLP - news - people ) that would have left his shareholders 64% richer than they are today.

Herbert Denton, chief executive of New York-based Providence Capital, an institutional investor in Aetna, has compiled a dossier of complaints against Aetna's management over the past two years, during which, the top job at Aetna changed hands three times. Many of his complaints are aimed at Donaldson, who sat on Aetna's board since 1977 and became CEO Feb. 29, 2000.

Two weeks before Donaldson's tenure, Wellpoint had sent a confidential letter to Aetna, asking to negotiate a merger in which Wellpoint would pay $70 per share to acquire the company, a $30 premium over Aetna's share price. Aetna's stock closed at $41.25 the day Donaldson took over.

On taking office, Donaldson received 500,000 options to buy Aetna stock. Three hundred thousand of those shares had a strike price of $41.25; 100,000 shares would be in the money at $55. The last 100,000 shares had a $65 strike price. The next day, news of the Wellpoint offer was made public and the stock climbed to nearly $59.

more....

[fastwalker]

continued...

Between his options and the 100,000 restricted shares he'd been granted, Donaldson added $11.4 million to his net worth on his first day.

Of note, when the options were granted, Aetna knew about the Wellpoint offer but Wall Street didn't. Providence's Denton believes that Donaldson's options should have carried a $70 strike price, to match Wellpoint's offer.

On March 12, 2000, Donaldson announced that Aetna wouldn't negotiate with Wellpoint, saying that the $70 all-stock offer

"significantly understates the value of our company and does not reflect the current value or potential of our core business."

Donaldson embarked on a corporate restructuring that moved Aetna's incorporation from Connecticut to Pennsylvania--a state notorious for laws that make takeovers difficult and minority shareholders impotent.

In the process, Aetna shareholders received one share of the new Aetna and $35 in cash, for a total value of $74 today. But had Donaldson accepted the Wellpoint offer, Aetna shareholders would have been rewarded with Wellpoint stock that's worth a split-adjusted $120. Aetna's board rewarded Donaldson with a $6 million bonus in addition to his $1 million salary.

Throughout Aetna's reorganization, Denton had been writing to Donaldson and Aetna's board members, urging them to drop their staggered board that served as a "poison pill" to ward off take-over attempts.

He also complained that company bylaws couldn't be amended without at 80% majority and that share holders had no right to call special meetings or to take action by written consent.

Denton outlines his complaints in a letter to Donaldson on Sept. 25, 2000.

He'd have to wait two years to see results. At the end of October, Aetna finally agreed to abolish its staggered board, to allow shareholders to call special meetings with a two-thirds majority, to amend bylaws with the same majority and to approve mergers and transactions with a 50% majority.

But the 71-year-old Donaldson had retired from Aetna's board in the spring of 2001, after reaching the mandatory retirement age. Reform, it seems, had to wait for his exit.

Well, we now have a better understanding of the Donaldson’s mindset toward getting and keeping what he believes is his entitlement.

“Donaldson presided over a company that lost $400 million, maintained a corporate governance structure that squelched investor dissent….” Guess his tenure at the SEC has been one to ensure similar lethargy.

It would appear, that in big business and big Government, there are virtually no consequences for lying, stealing or cheating the investing American public… why is that I wonder?

Given the man’s background, it not difficult to assume that his response to the “NSS” question was , to say the least, “evasive.

Which brings us to the assumption, that the logic being put forth by the SEC and by others of similar ilk, is that in a situation where the problem is so big and wide spread, to address it within the boundaries of the law, could have serious ramifications that might devastate the economy.. …

Guess what they are advocating is that it's O.K. to engage in larceny and to ensure your success, the SEC will simply “grandfather the problems away''

Not trying to minimize things, but truth is "People can't stand two things - randomness and responsibility.

On the first point we again cite Voltaire: "If God did not exist, it would be necessary to invent him." The premise is obvious and a truism - life must have order.

The class needs rules and a teacher. An occasional accident is acceptable, maybe not understandable.

The logical (for many of us) existence of a deity transmutes in the secular world into - someone is in charge. (The government, the moneyed interests, some religious or ethnic group, etc.)

"Now factor in the inability to accept responsibility.

My stock doesn't move - the MM’s have fixed (manipulated and held down my stock).

It can never be my fault for picking a bad stock, that would mean I was careless, or confused or hasty or maybe even wrong. The latter is unacceptable so it must be someone else.

This is the premise used by the SEC and reflected in the questioning about certain aspects of Regulation SHO, by the SEC’s Division of Market Regulation, who arrogantly mocked investor concerns hinting toward investor ignorance and greed.

The Investor concerns stem from the possible illegal actions of the SEC to “grandfather” past settlement failures from the mandatory closeout provisions of past and present law. “Grandfathering” fraud!

We see the activities of Annette Nazareth, SEC Director of Market Regulation and wife of U.S. Federal Reserve Vice Chairman Roger Ferguson, as suspect that the SEC is interconnected at many levels and has a serious need not to address the NSS issue.

Ms. Nazareth was quoted in a New York Times article in February belittling concerned investors almost challenging their ability to have a lucid thought.

Ms. Nazareth stated that the rule was aimed at assuring that new naked shorts will be cleaned up relatively quickly.

Some people, she said, "are very disappointed that the impact of this rule was not to make these stocks go up."



To a layman these comments appear benign but read carefully what Ms. Nazareth has stated “Aimed at assuring new naked shorts will be cleaned up relatively quickly” and they are far less benign.

What about the “old naked shorts”? The naked shorts that amassed into Mr. Brigagliano’s referenced “large pre-existing open positions”?

The naked shorts that have resulted in issuers remaining on the Regulation SHO threshold list for 94 consecutive trading days and counting. Certainly 94 trading days are not very quick when the law requires all trades to settle in three trading days.

Just by the actions taken by those with a “mandate” to protect the investors, We see that the problem is not confined to one individual within the SEC, but instead, for lack of a better term there appears to be a wide spread “conspiratorial mandate” to "lock down" any attempts to validate evidence of a NSS.

An example of such “authority” being exercised can be found in the case with Eagletech Communications, Inc.

biz.yahoo.com/prnews/050406/nyw122.html?.v=4

And of course we witnessed a similar situation in the CMKX's hearing with regards to introducing NSS evidence into court records.

Can headway be made against such “powerful” people?

Maybe, since the DTCC is incorporated as a State of New York Special Purpose Trust Banking Organization I believe Elliot Spitzer, New York's Attorney General, would have that authority to “look into this matter.”<br>
It would also appear that the SEC's Congressional Oversight Committees, the Senate Banking Committee and the House Financial Services Committee would have such authority to investigate these crimes.

As demonstrated by viewing Senator Robert Bennett's impassioned admonition to SEC Chairman William Donaldson in a Senate Banking Committee hearing that "Regulation SHO in not working" we can only hope that other members of the SEC's Oversight Committees can be convinced to take a serious look at this issue....

banking.senate.gov/index.cfm?Fuseaction=Hearings.Detail&HearingID=140

I believe that when you put it altogether, the Sarbanes-Axle Act will eventually do more good than harm, but I do not believe that the bill does as much good as it could do.

The long-term potential for companies to credibly improve transparency within their organizations is a good thing for investors.

However, the reality is that the SOA, has very little impetus for actually bringing white collar fraud cases.

Why? It takes a lot of resource to do so and it’s increasingly difficult to convince juries that people are guilty.

Ultimately, the NSS issue can be won, but keep in mind; there are very powerful people who do not want the source of their “fun” money dried up. Only when we, investors on the whole, act in a cohesive manner, can we hope to initiate some serious enforcement actions against those engaged in illegal market manipulation.

I personally feel that reform should start with the SEC, which in turn will have a cascading effect on those in the market place.

fw....thats all for now...

[bobalooeymd]

Here is an intereting article on Black Monday, amongst other things.
ming.tv/flemming2.php/__show_article/_a000010-000923.htm

[fastwalker]

Thnaks B,