NO QUARTER FOR CORRUPTION (Focussing on The Fed./FRBS)

[bartermania]

Some eg.'s of how shorting/naked shorting U.S. stocks works and the damage it does from my own experiences:

Eg.#1: ACF




http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=acf&sid=0&o_symb=acf&fre....

As one can see, this stock had a very high pps in 2001 and 2002. This company had grown very fast...they financed car loans (and I think sold the cars also) to/for folks with bad or risky credit. They have formula's for this and they worked very well for this company as the US stock markets rose during the late 1990's and into 2000. Stock market mania was in full effect, unemployment was low, the middle and lower classes had lots of money and most felt very good about the future of the US economy. ACF grew rapidly and made lots of money during this period. Then, the markets started to crash/tank...IMO...this was when the shorts were finally able to get control over the markets in general. Sure the tech boom was slowing...but, an understanding of shorting creates a different much different mental picture for me. Study ACF's chart. It went up with the markets and it came down with them too (with a few...likely short-term short covering exceptions thrown in there). I became interested in this co. because of how much it had come down and how fast (this stock crash several times)...and at the same time, how amazingly low it's P/E ratio was during it's final descent (the last year or so) down around P/E 2:1 (may have been around 40:1 at the 2000 peak...but, it had a 25% or more year over year growth rate at the time) and the huge Yahoo listed short position on the stock (some 25%-40% or so as I recall). Critics claimed that because of the recession/slowing economy ACF was going to have a higher than acceptable level of defaults on their risky client base that they had financed. The fact was the critics were right. They did have problems...and this (defaulting on payments rate 6% or higher) caused ACF to default on some of the rules under which they raised money (or bonds of some sort) to finance their car loans and purchases. The debates went back and forth...would ACF have enough money to keep their biz running (a lot of their money was tied up and restrict because of the default...all of this is as I recall...so, I may be off somewhat sometimes)? Well, one of the guys running the co. was faced with same problem in the mid 1990's (same co.) and he was able to work it out then...he claimed he'd do it again too. He was right, he did. The stock eventually turned around. I actually bought a couple thousand shares on the exact day ACF hit it's absolute bottom (bought around $1.58 or so)...later that afternoon it had already moved up 20% in about 15 mins on very heavy volume. After this point news started to come out that ACF, though challenged...and having had to close quite of few of it's less well performing offices, was going to make it and they'd turned the corner. Good for them! AFC deserved this...they're a fine co. What they didn't deserve (IMSO) was to have their stock pummelled by shorters and the media until, the pps bottomed-out at around $1.55/sh. It seemed like everywhere I looked (in print, on the net, or on tv...Jim Kramer [on CNBC and in his column] and others were telling folks to short this stock. More-or-less saying: Com'on /pile-on this co. ain't gonna make it...it's a dog...it's all over for ACF. And down and down and down went the pps. ACF's CEO (a major shareholder) said conference call after conference call that he couldn't understand what was happening to his stock and co. or why. He kept saying they'd make it...they were doing what needed to be done...and he was right.

But, what happened to ACF...it's shareholders (longs...those who didn't sell and/or short this stock) and the stock's market cap and business was that they got most of the money they invested swiped and removed from their accounts for a period of about 2 years. Oh yes, when the shorts began to cover money came back into this stock...but, by no means did it all come back (they took away lots of it). In fact, I'm quite sure that after the damage was done via shorting (and I'd also bet a lot of naked shorting occurred here too) many of the shorts became longs again. What was also bothersome about this stock, and what happened to it, was that before shorting became a major issue there was a large amount of institutional investment in this stock. I can't remember how many of those shares were sold during the down-trend...but, it is my feeling and assessment that many of these institutions shorted (perhaps) the same shares they (themselves) held. So how about that...they made money on the way up...then, they shorted the crap outta this stock and almost knocked it out...and then (perhaps) they covered their shorts were long again. Perhaps creating, for the most part, ACF stock's mess. I believe there may have been some shareholder's lawsuits popping up as ACF went below $10/sh. I can't say the SEC was going to investigate them...but, it may have either happened or was mentioned in the news or in pr's.

Does anyone see where I'm going here??? How much of a company's stock problems...and then by extension, a company's actual financial problems can be exacerbated by shorting selling/naked shorting/negative media commentary/threats in the press of shareholder lawsuits/bringing up a possible SEC investigation and/or bankruptcy (look how much leverage can be created to do damage for the biggest profit possible) and if, pushed too far...actually succeed in destroy a co. As ACF's pps went below $7/sh and lower (rapidly)...it became much more difficult for them to try (if, they had wanted to..or if they did) to issue/sell some shares to overcome the finance pinch they found themselves in...ie. when the dot.com/market rally/"bubble"(???) finally crashed/popped (seems to me...quite a few folks helped to make this crash and "bubble" bursting last as long as possible for themselves...and to hell with the companies and investors who were stuck in the middle...left holding the bag...and still being told the next big rally was always just around the corner.)

Think about it. Whom do you believe? Is what happened to ACF "right"??? Does it do any real good??? Or does it perhaps, just make some wealthy people even more wealthy at the expense of this public company and it's actual non-institutional investors?

More later: Next...CPN or perhaps, GLW or maybe the Enron nightmare (remember Enron?...they were supposed to be the epitome of trading corp.'s and they were supposed to be the model/eg. to follow for the new economy. Wall-Street's darling...never mind the higher P/E Enron's worth it. Get some before it gets away from ya.

Hmmm.... How much of this really needs to be??? Do these types of things need to occur???

I say things can change...but, they require persistence and lots of hard work...and vigilance. If, the system is allowed to remain as is...regulating itself and hiding and attacking investors and companies from behind and within the shadows and protective walls of investor's collective ignorance and the system's duplicity (that they keep and fighting to keep intact)...well then, investing in companies just ain't worth the effort. The corruption needs to be eliminated, before it destroy all that is still good in the system...and before it destroys ways for folks with good ideas to publicly raise money to potentially make their good ideas come true...reality.

Make the US markets a place where investors can feel reasonably safe from theft...and where these same public companies can be free to make the best use of the money investors are willing to conditionally entrust to them.

Create a climate/environment/system that supports investing and success...and eliminates all the barriers and things that stand in the way of making this exist.