MMCLUB

[lonestar1a1]

Wow Swamp! Not sure I can stand the pressure... Here is a great read which I copied from another board. Should prove to be very interesting in future trades:

If you have not yet heard of S.E.C. Regulation SHO....read the
following...re the new Regulation that requires the covering of naked
shorts starting January 3rd, 2005.

This is NOT relegated only to the OTCBB. It is estimated that over
90% of all listed securties on all exchanges have unauthorized Naked
Short shares in the marketplace.


Trading groups find a stock that has been weak..or where they know
huge naked short activity exists...or trading groups see a stock
jumping on volume. The shorts begin to cover and get flushed out
in "panic". The MMs have to make a decision. If they begin to
cover...then fresh shorts are immediately snuffed out. Market Makers
bid it up more trying to entice retail longs to take profits. Retail
longs are more tempted to hold now because the longs know what is
going on. Market Makers are forced to start covering into the lack of
liquidity. Shorts switch sides and ride the train. You now have a
short squeeze.

Take the time and read this, and we'll talk more about it in the
coming days:
Very interesting read on upcoming OTCBB Regulation SHO scenario

Borrowed from Raging Bull...


The SEC Market Reformation…

The Securities and Exchange Commission (SEC) really has been on our
TEAM all along. For years we thought as investors that we were out
there all alone in the market because of years and years of many
people being on the losing end from stocks being manipulated.

I received a very important phone call from the SEC that was very
powerful. The info is so powerful that I deemed it would be selfish
for me to not share such with those in here since our goals have
always been to help each other as much as possible. What I am about
to share might be known by some, but I am sure that it is not
understood by most. This is concerning the true power and intentions
behind Regulation SHO

. There is more that I have not heard discussed by people and I think
there are some things we are not seeing correctly by normally seeing
the SEC unsuccessful attempts so often in the past.

What you are about to read are not my opinions. It is what I was told
by the SEC and was given permission to share this information with
you for a better understanding. I was told that they want our
feedback so they will want to know if it worked or not in fixing what
they knew was broke for years, but just recently discovered how to
resolve.

The pressure is on the Market Makers (MMs) to do what is right
because all eyes will be placed on them. There will be many key
Federal Authorities, Economists, Mathematicians, etc. that are
already lined up to be performing certain studies for historical
purposes. All the MMs have to do to not make matters worse is to do
what is right and fix what they had broken for years with any fully
reporting company that's a threshold security as soon as
possible.
Let me explain a bit further to show you how this will work.

First understand that the SEC always wanted to help us shareholders,
but never
knew how to do so. They had always received many complaints, but
never knew
how they could trap the MMs to simply do what was right. The shorting
and
naked shorting had gotten out of hand as I will explain both.

The Naked Shorting With the implementation of Regulation Sho, the MMs
will be forced to close out their open naked short position on all
stocks that meet the Regulation SHO requirements for coverage. They
will have to do this everyday by midnight beginning on 3 Jan 05.

This leads us to talk about the requirements as some are already
familiar. A stock must be fully reporting and considered a threshold
security. A threshold security is one where .5% of its outstanding
shares (OS) have been proven to have been naked shorted for 5
consecutive trading days and where the MMs have failed to close out
those positions for five consecutive trading days.

Example: If stock ABCD had 2,000,000 shares outstanding and was a
fully reporting company as of 3 Jan 05, the MMs would need to fail to
close out the open naked shorted position of .5% of 2,000,000 shares
which would equate to 10,000 shares not being "completely"
covered
for 5 consecutive trading days.

This means that the MMs would need to make sure they don't allow
5
consecutive days to happen where they leave any balance remaining of
the 10,000 naked shorted shares as an open account of stock ABCD.
They must "completely" close all open accounts of naked
shorted
positions.

For proper accountability of all of this to work, the SEC will have
to have a coordinated TEAM effort from key entities within the market
as authorities.

The SEC, Depository Trust Company (DTC), brokerage companies, all
market exchanges, the fully reporting companies, and their transfer
agents will all be working together to make sure all the proper
coordination take place for Regulation Sho to work.

Coordination will take place with the fully reporting company (and
their transfer agent if they have one) to make sure there is a full
accountability of what's their OS. The facts will be reflected in
the
company's SEC filing which is why it is essential for them to be
a
fully reporting company.

The DTC will be responsible for informing the SEC where the open
sales exist as in the amount of shares existing that have transacted
through them that they placed into our brokerage accounts. This was a
problem before because many relied on the DTC to give them more than
this information to help resolve this issue sooner.

This is where the brokerage companies come in along with the help
from the exchanges. The SEC will be further detailing and defining
their information of transacted shares from the DTC by having
revealed to them the guilty MM that have transacted the naked short
position from information received from the brokerage companies and
all of the market exchanges. This is proving to be something bigger
than what many of us had realized. Let me explain why.

All of this brings us back to something I discussed earlier. When the
supply of shares of a stock is zero, the supply is zero. It
doesn't
matter how you get there, be it by a naked short position or by the
float being absorbed.

This is where it all starts as a short squeeze will now be formed and
grows as demand to purchase shares increase. This is where the
misperception exists with Regulation SHO. People think that a new
naked short position has to be created as of 3 Jan 05 in order for a
stock to be eligible for protection and rectification under
Regulation Sho. This is not true. It's even better. All naked
short
positions of the past will not go away and must be dealt with. The
clock begins ticking for covering on 3 Jan 05 for fully reporting
companies. PERIOD!!!

This means that any stock that has been naked shorted will
automatically start out in a forced short squeeze mode that will only
escalate the longer the MMs wait to cover.

Any buying pressure will cause the increase of the naked shorted
position to grow to begin approaching the 5 day consecutive window of
not getting covered by the MMs. After the 5 days transpire where the
MMs have failed to deliver and close the open naked shorted position,
that stock in which they failed to deliver will be placed on a
Threshold Security List for the public to view. This is where it
starts to get awesome.

Example: Let's say stock ABCD, a fully reporting company, was
trading
at $1. and had an OS of 1,000,000 shares. Let's say that stock
ABCD
have been naked shorted by 1,000,000 shares over the OS/float of
1,000,000 shares. Come 3 Jan 05 the MMs will not be forced
to "possibly" immediately cover the 1,000,000 naked shorted
shares.
Here's the beauty of this and where the MMs are currently mad at
everyone about. Don't worry, they will make money, but in
a different way as we might talk about later.

With no buying pressure, they won't have to cover as soon as one
might have hoped as shares are sold exceeding the amount of shares
being bought for stock ABCD. Still, if they don't cover the
"entire"
1,000,000 naked short position for 5 consecutive days, stock ABCD
will show up on the Threshold Security List for the public to view on
10 Jan 05. After such, the MMs have 13 days to close out the
"entire"
naked shorted position or face being suspended and/or shut
down from that security and other penalties to possibly put that MM
out of business. The end result will still be the supply being zero
and the stock would be forced to be traded correctly based on supply
and demand with an already dried up supply. This means the creation
of an instant short squeeze!

What I anticipate happening, and the SEC, is that in the above
example with stock ABCD, the MMs will need to get the 1,000,000 naked
shorted shares out of circulation by increasing the bid to entice
shareholders to sell. The problem comes when they allow for the
buying to outweigh the selling due to increased demand for the stock.
As orders are placed to buy shares, they must be filled by the MMs.
This will worsen their problem when nobody is selling. As the MMs
make the mistake and allow for any stock to be placed on the Threshold
Security List, it will publicly reveal where the MMs are already
having a problem in covering. Us as shareholders will see this list
and contribute with forcing the short squeezes for every stock on the
list.

If they raised stock ABCD to $5s and there was more buying than
selling than no ground would have been gained by the MMs. They only
gain ground when there is more selling than buying that exists.

IMPORTANT: So where is the "Threshold Security List" that we
all will
be looking for? This is how we all get a chance to help the MMs reap
what they sowed. Go to… www.nasdaq.com

… to see the Threshold Security list beginning on 10 Jan 05 and
review it daily. Any stock that you see on that list "should"
immediately present a wonderful buying opportunity by being in an
instant short squeeze scenario.

The MM guilty of the naked shorting will have a hard time from not
generating enough selling by enticing the bid high enough for
shareholders to sell to out weigh the buying to allow for a covering
to transpire.

Again, I do not believe that all MMs are bad and I am not posting
this to lead some type of crusade against the MMs. Remember, all we
ever wanted was for the MMs to trade the stocks we invest into fairly
as investor/traders in the market. Without the MMs, there would not
be a market and all the SEC is doing is making sure the MMs create
and maintain an orderly market, fairly. This Regulation Sho is
something that is long over due.

The Shorting The shorting of stocks are referring to the Pilot
Program that was delayed to begin on 2 May 05 and will last for one
year through 2 May 06. This is where they will be selecting 1,000
stocks to use for an SEC experiment that they call the "Tick
Test."

Example: Imagine stock ABCD trading at $10.00 per share. Let's
say
you now decide to short stock ABCD at $10.00 per share by buying
through shorting 1,000 shares. You really just borrowed $10,000 to
short stock ABCD to buy 1,000 shares. Two days later, let's say
stock
ABCD drops to trade at $8.00 per share. You now decide to cover your
short in stock ABCD and sell your 1,000 shares back to the market to
have them delivered at $8.00 per share for a total of $8,000. You
cover by paying back the 1,000 shares you borrowed, but since the
price dropped down to $8.00 per share, your cost for paying back the
1,000 shares of stock ABCD will be $8,000. Since it's mostly all
about the share amount and not the dollar amount for covering in the
eyes of the MM, you would profit the $2,000 difference from using the
proper timing for delivery of the 1,000 shares.

The SEC will be doing a study on 1,000 stocks while examining these
stocks to see how and why certain problems have existed throughout
the market with the delivery of the shorted positions. What they have
come to find out is that there is a problem that exists with somebody
shorting a stock as reflected above and never delivering the funds to
cover the shorted position whether the stock goes up or down. They
have come to find out that somewhere and somehow the intentions to
later deliver never existed. The Pilot program is being designed to
get to the bottom of this.

The opportunity that we have here with the rectification of the naked
shorting and shorting of stocks is something that will go down in
history for the better in fixing something that was broke for a long
time. The primary objective is to have an orderly and fair market for
those stocks that are legitimate and trying to actually grow to trade
fairly on its own merit of supply and demand principles and not on
manipulation of choice.

Bottom line, any stock falling under the protection umbrella of
Regulation SHO will automatically begin trading under a short squeeze
scenario due to its supply of shares immediately being zero. How huge
the short squeeze materializes is predicated upon how soon or how
long the MM that is guilty of naked shorting decides to take for
covering. Whenever the "demand for buying" exceeds the
"demand for
selling" within that naked shorted security, the MM will have a
very
difficult time in covering by the mandated time frames
allocated. Added buying pressure will only compound the dilemma for
the MM.

I am expecting Jan 05 to be the best month in the history of the
market for opportunities for prosperity because of Regulation Sho. We
are about to be part of a positive piece of history. I hope the above
info have helped many to see what is the importance of making sure
you are positioned and well planned for strategic moves to be made in
the market to capture the opportunity for prosperity. We all must
prepare and plan now if we can afford to do so. People don't plan
on
failing, they fail to plan. May we all become prosperous

HAPPY 2005 Ahead....for Us All!