One Step Ahead

[Ignutz]

Has this been read yet??

The Year of the Investor
by Mark Faulk
Will 2005 be the year of the small investor? For years (maybe forever) Wall Street has been controlled by "big money", those who control the pursestrings, and therefore, wield the power over the stock market. For the most part, the small investor has been left to gather crumbs, and many watched helplessly as their hard-earned investments and retirement funds took a beating, partially because of the "stock market bubble" of the late 90s, but also because of rampant corruption that has been allowed to flourish in the stock market itself.

Then, the tide began to turn in 2004, as small investors, fed up with naked short selling, corruption in many of the companies themselves, and a system seemingly rigged in favor of the elite few, finally banded together and demanded to be heard. The Faulking Truth took up the fight in March of last year, joining a handful of other voices who had been calling for reform in the stock market for years. It was a call to arms that was finally heard. When investors joined in the battle, we were able to collectively make measurable progress over the past year. We all worked together to expose the "Canadian Connection" to the naked short selling scandal, and when the scams moved to Berlin, we exposed that as well. As a result, hundreds of companies who were listed without their permission on the Berlin Bremen Stock Exchange succeeded in having their shares delisted from that exchange. We have continued to keep pressure on Dateline to air an expose' on the naked short selling scandal, and that expose' will (finally) air sometime in the next few weeks. (We are currently awaiting confirmation of an air date from Dateline officials.) And our efforts to reach Congress have not been ignored, either. Our voices are being heard by those on Capitol Hill, and I am confident that we will see results from those continuing efforts in the very near future.

However, as with all worthwhile causes, our efforts have not been without opposition. Several online websites have recently sprung up with the specific purpose of discrediting those of us who would carry the torch for the American investor, and bashers continue to wreak havoc on stock message boards on the internet. The bashers have become more vocal, and more desperate in their attempts to discredit those of us who would speak out against corruption, claiming that those companies that have been abused by naked short sellers and those who invest in them somehow deserve to be driven into bankruptcy. All I can say to those who side with the very ones who threaten to destroy our stock markets is, "bring 'em on".

Let me clarify this one more time: Abuse exists on both sides of the issue, corruption exists both with some of the OTC companies, and even companies on the major exchanges (do the names Worldcom and Enron ring a bell?), who use the naked short selling scandal to perpetuate their own scams against shareholders, AND with the naked short sellers and those who profit from their activities, including lenders, brokers, and the NASD and SEC themselves. The only way to expose ALL those who would abuse our system is by a full Congressional investigation. One basher, who says that he works for a hedge fund in Florida, had this to say about naked short selling, "Yes, it happens. But it happens in a venue that is beyond the reach of DTC or the SEC. So you've got your "YES". Now, what about it? Let's suppose, for the sake of a truly absurd argument, that there are a billion shares that have been "naked shorted" through DTC in Datascension. So what?"

So what? Let me make this point once more, and then I'm moving on: If the bashers are so certain that they are right, and that the corruption exists within the companies themselves and not with the naked short sellers, then they should be screaming for an investigation themselves, even louder than we are. It is only when the fraud is exposed, wherever that fraud exists, that investors will regain some degree of trust in our stock market system. And if that trust is not re-established, the market itself will eventually collapse under the weight of it's own corrupt system. In fact, there is only one reason that bashers would want the corruption (no matter where that corruption originates) to continue unabated: they are profiting from the current system, they are a part of the corrupt system themselves.

There has been much speculation as to the SEC's motivation behind the SHO Regulations, ranging from posts on message boards that say the "the SEC has been on our side all along" to accusations that the regulations will do little to improve the current problems that have plagued the securities market for years. It is the opinion of The Faulking Truth that any actions currently being taken by the SEC are a result of pressure from all of us who have carried the fight to the SEC and other regulatory bodies, including Congress. The small investor has finally become the squeaky wheel.

The SEC has finally implemented Regulation SHO, aimed at putting a stop to the abusive and illegal practice of naked short selling. On the evening of January 7, 2005, the first "Securities Threshold List" will be posted, after which a list of securities with excessive open naked short positions will be published each day. (NYSE "Securities Threshold List": www.nyse.com/threshold ) (NASDAQ, AMEX, and OTCBB "Securities Threshold List": http://www.nasdaqtrader.com/aspx/regsho.aspx )

According to the OTC Journal, "Under Regulation SHO, threshold securities are defined by two criteria: 1) there are at least 10,000 shares in aggregate failed deliveries for the security for five consecutive settlement days and, 2) these fails to deliver constitute 0.5% or more of outstanding shares.
If the failed deliveries for the stocks on the Threshold List are not rectified within 13 trading days, the market maker to whom the shares was sold will effect a "buy in" in the open market.
The Threshold List could become a favorite resource for locating trading ideas on the long side. It might become the sport of hedge fund managers. These new regulations are emerging out of down side excesses from the the 2000 to 2003 time frame. The pendulum is finally swinging back to a level playing field. These actions by the regulators will help the OTC Bulletin Board become the incubator it is intended to be."

Will the recent actions of the SEC truly put an end to the abusive and illegal practice of naked short selling? Let's hope so, because proposed regulations submitted by the NASD aimed at curbing naked short selling were scrapped after Regulation SHO was enacted by the SEC. Oddly, the NASD denied to the very end that they were planning to scrap their proposal (Rule 3370), even though that information was leaked to the public through a "slip of the tongue" by SEC official Peter Chepucavage, which was detailed by the Faulking Truth in "He Said, She Said: SEC, NASD at Odds over Status of Proposal". Even though I was told by the NASD that it was not being rescinded (since it would be illegal to take any action without notifying the public), Rule 3370 was officially repealed on November 30, 2004, almost four months after that very same information was leaked to "insiders". As always, the public (that would be you and I) was the last to know. So now, our fate rests squarely in the hands of the SEC, who has had a history of putting the interests of those in power (in this case, as is usually the case, money=power) above the interests of the small investor that they are pledged to protect.

And with the implementation of Regulation SHO, we were yet again the last to know. According to Dave Patch, "The present list of companies that fall under this category is greater than 1000 and represent over 12% of all securities. Soon we will know exactly who is on this list although the regulators have already provided this confidential information to WALL STREET." The Faulking Truth began receiving phone calls and emails before the first of the year making those same claims. Once again, those in power, and those who stand to profit the most from this inside information, appear to have been tipped off in advance. Once again, we are the last to know.

I agree with several of my colleagues that the Threshold Securities List might offer some interesting investment opportunities. It might be well worth using the daily "Threshold Securities List" as yet another tool in your investing strategy. However, this does not in any way right the massive wrongs that have been committed against the American investors for years. In fact, many of the very hedge funds that profited on the down side during the naked short selling scandal will most likely reap rewards once again on the upside. Those small investors who have lost everything in the stock market will be left holding the bag. In the end, this is not a "get rich quick scheme" aimed at making back the massive losses that so many have suffered, it is a fight to make the markets fair once again, and to insure to our generation, and to generations to come, that they will have the opportunity to share in the American Dream, and to invest their hard-earned money in the stock market with the knowledge that it's not a "rigged game".

I sincerely hope that the new measures enacted by the SEC help alleviate the problems that have plagued investors for years, but their recent history suggests that they will once again sell out to the big money. Plus, all indications suggest that they intend to sweep all past corruption under the carpet yet again, and to allow those who robbed America's investors to take the money and run. That is, unless those same voices who helped to turn the tide in 2004 continue to speak out, and convince the major media, Congress, and state and federal authorities to join us. It is up to us to take back our stock markets, to finish the job that we started in 2005.