Replies to post #598511 on Zeev's Turnips Patch-No Politics (ZEEV)

[zab]

Zeev would be proud to see the many different discussions of the current market turmoil. All of us rely on something to make our investment decisions, some of us are well versed in financial reports and proper due deligience, others constuct their decisons using technical analysis. No matter how you make your decision this past week reminded us that investing nowadays is a real gamble. Like the world witnessed, we let Lehman fail but then change our mind about AIG, when Goldman Sachs and Company are on the hook its another way all together.

Yesterday it was purposely leaked that the goverment was coming up with a massive plan that proped up markets around the world, it was also options expiration Friday, that was conveient, we solved alot of problems and made it through expiration settlement day. Now they are having weekend meeting again, think this is the third weekend in a row of this, so that when markets open on Monday there will be business as usual. Unfortunately the TAXPAYER is on the hook, for possibly a TRILLION dollar bailout.

My question is, now where does this money go, since the list of players in the financial industry is getting smaller and smaller, and the concentration of real POWER is also getting smaller. In respect to this board, and in trying my very best to stay neutral, politics is involved in all of this, do you honestly think that if democrates were in power that the republicans would not be raising hell for proposing these sweeping changes, I mean it does sound like SOCIALISM !!!!

I thought in a free and open economy that when you fail you fail, but in this economy as presented by these past eight years, some people go under, but some people get saved, the right people, but its the people who are in power who are deciding who those people will be. Our system of a free society works, because we are smart enough to keep politics our of business, unfortunately this administration in its quest for power and influence around the world, is now using a self made crisis to bail out certain parts of Wall Street.

Now we are told that these wonderful assets that nobody wants, and that nobody can place a value upon, are going to be put into a special fund, called it another Resolution Trust, or anything you want, and we the taxpayers have to trust this administraion that its in our best interest. This was this administrations choice to do what they have done these past eight years, but its going to be the next President and the taxpayers who get this bill. The rich have done well under Bush, but its these same people who have screwed this country up, and now as a final gesture we are going to bail them out. Dosen't seem fair to me.

I have submitted this view, as it is my opinion, it is also my trust that I bring to the marketplace each day, and when it comes to investing, and finances, TRUST is a very big factor. You can do all the financial research you want, all the technical analysis you want, use any degree of due deligience, but if you don't have TRUST, you have nothing. After eight years of this adminstration its very hard to have trust in what they are proposing this weekend. There is also four months to go, and am just wondering what is next to keep this financial system afloat in BORROWED money. Sounds like an addict, just one more fix, trust me I will be just fine, then you wake up the next day and discover oops I need another fix.

Lastly, we are not even into October, god forbid something really serious happens.

Everyone have a great weekend, and many of us are anxiously awaiting just not Monday morning's opening, but everyday the market can open up without a crisis.

zab

[Bruce A Thompson]

Apology accepted

I knew it was out of character for you.

While I too do not wish to debate, hell it's Saturday and why not?

You guys seem to think I have no knowledge or experience in this arena. I have a degree in marketing with a minor in finance and I owned a mortgage brokerage business until I sold it and retired at the ripe old age of 52. I was very good at the mortgage business.

My research into the naked shorting scourge on Wall Street has been extensive. I could probably teach an adequate graduate level class in it.

That being said, please allow me to shed some light on your perception of what is happening in the market. I can sum it all up in a single sentence. You can stop reading after the next paragraph if you like.

Hedge funds have $4 Trillion dollars with which to bet against the US economy. That is a lot of money and it makes a real impact when they trade. They used to keep their nefarious activities confined to the OTC but, simply, they are too large now to keep messing with the little guys.

That being said, lets look at Novastar. I too researched mortgage companies. Warren Buffett says to buy what you know. With my career background in the business, I knew who was making crappy loans and who was filling their portfolios with time bombs. I determined that Novastar was truly the best of breed. That decision has proven out by the fact that they are the only pure subprime lender who is still in business and not a single investor who held their mortgage securities has ever lost a dime on their investment through default. Their portfolios have always performed at or better than the original model standards.

I did, however, recognize the futility of battling the shorts and got out of Novastar when it became clear that the market was not going to be allowed to recognize Novastar's intrinsic value. Yes I lost a bundle, but I did not ride it all the way down. So I am OK.

You speak of hedge funds trying to squeeze out an additional $3 or $4 below fair value and being slammed with a takeover bid at a higher price. In a fair marketplace, that would most likely be the result. But this is not a fair marketplace. It is a marketplace where the regulators and the media have been captured by the hedge funds and the little guy like you and me have no chance. These funds can literally dump an unlimited number of fake shares into the float of any company they desire and continue to do so until the share price collapses under the load.

Here's an example. http://www1.investorvillage.com/smbd.asp?pt=m&SearchBy=MessageText&SearchFor=2000000&clear=1&mb=4148&Search=Go I was already long since out of the stock when that happened but, at that time, Novastar only had 9 million shares issued.

When the shorts can do that anytime they like and as often as they like, they have no worries about some pesky outsider coming in and making a higher offer. The offer comes in and their response is to naked short 200% or 300% of the issue driving the share price down to pennies. Add negative comments from a few well placed journalists like Herb Greenburg and Joe Nociera. Get the regulators to eliminate the uptick rule and look the other way and Bingo! The offer disappears.

A company with a billion dollar market cap doesn't stand a chance against a cabal like that with Trillion$ to manipulate them.

But, this is not about me. It is not about Novastar, and it is not about OSTK. It is about systemic risk.

When Goldman Sachs conjured up something called the ABX index by bundling up mortgages into billion dollar batches and selling them into the market, the industry responded as it should have. The market rocked. Novastar kept to their conservative underwriting and contributed like the rest of the industry by funding those indexes. But then something strange began happening. Massive short interest and even more massive naked short interest built in the Novastar market. Millberg Weiss sued (and lost). Novastar dropped from a high of near $70 to around the mid $30s. Novastar was still making $$. Their portfolio was performing within the model. The dividend was huge. But that was just because those pesky shorts had overdone it with the share price. They would pay. It was certain........

Then Goldman Sachs started massively shorting the very same ABX indexes they had just invented and sold to their investors. The shorting was merciless. The ABX index was small. It was a piece of cake to dominate the market with short sales. The prices on the indexes dropped clear out of sight.

Perfectly fine indexes fully filled with Novastar, 70% average LTV and PMI down to 52%, mortgages, which were fully performing according to the model, were selling for 22 cents on the dollar. That effectively stopped any new money supply. Every subprime was under the naked shorting gun. That eliminated any chance of selling stock to fund new loans. The industry crashed. Thank God I was out but I was still watching closely.

So here we have a company which is performing to model. Making money and paying double digit dividends and waiting for the market to realize the true value. Then comes GAAP. GAAP required Novastar to mark to market its entire portfolio, including the almost $20 billion in mortgages not held for sale. The "market" was considered by GAAP to be that very tiny, heavily shorted ABX index. Oh My Gawd!!!!! Hundreds of millions of dollars in write downs. Paper losses. But the company is still making money. Right? Sooner or later the market is going to regain its perspective and Novastar will prosper again. Peers were dropping like flies.

Then it really got nuts. Every time Novastar had good news, it was hammered with millions of naked shares dumped into the market moving the supply curve further to the right and killing any chance of a share price advance. Investors watched, in real time, their share value being decimated. Tens of thousands of puts were being sold out of Chicago. Within minutes these options transactions were being followed immediately by the corresponding number of naked shares dumped out of the Phila Exchange into the float by the options MMs as a hedge. There were times when the trades were so blatant that, one time, 20% of the entire issue was dumped naked into the float in a single transaction by these MMs. See the link above. There were times when the shares issued naked by the market makers were more than 3 naked for every 1 real share issued by the company. What's wrong with this picture?

Everybody else was gone. Out of business completely with a very few exceptions. A very few companies got taken over. Novastar stood alone. The only player left on the field of battle. Using every trick in the book, Novastar protected their multi-billion dollar in-house portfolio and exists today on the millions of dollars per month in income it represents. The hedge funds had won the war and eliminated the entire industry and made huge profits along the way. Billion dollar bonuses were passed around to fund managers like cocktails at 21.

Only Novastar remained. A thorn in their side. It took billions and billions of dollars worth of bogus shares to get Novastar to where it is today. But the hedge funds are still on the hook for all those shares and the game ain't over yet.

But then, this is not about Novastar. It is about systemic risk. Flush with mega sums of cash. Living in new mansions in the Hamptons. Buying diamond studded skulls and rotting sharks which they though were art. Tons of money safely tucked away offshore, these hedge fund managers turned back to the market.

What to do next?

Well, the market is severely damaged. We still have no uptick rule. Regulators are still biding their time before they get cushy jobs in the hedge fund industry. The captured journalists are waiting for new instructions. They lost Milburg Weiss, but hell, they can do it without a buncha pesky small time lawyers. They got lotsa cash.

Fannie and Freddie are ripe for the picking. "Let's go for it".

Before we do, there are a few loose ends we need to clean up. It is a matter of the billions of naked shares out there that may still come back to haunt us. Let's start with Bear Stearns.................... http://www.sec.gov/rules/other/2008/34-58166.pdf

Then we are free to go after Fannie and Freddie.............http://www.mediafire.com/?nov34hjnbrr

Next, we get rid of LEH, Merrill, Goldman. Yup that will cover some more tracks and loose ends.

Yup. This naked short gig "been "veddy veddy gud to me".

Where to next................. How about the entire US Government and the Federal Reserve?????

$$$$ Trillions $$$$

Like i said, it is about systemic risk.

BT

[WinLoseOrDraw]

It will be official by market open - all market makers, whether working the underlying or derivatives thereof - will be exempt from the short-selling ban. It took a couple of knee-breaking CEOs from Chicago to fly to HQ and explain to the morons manning the SEC that they were about to cause a global market lockup - but it's done.

It boggles the mind to think the people supposedly responsible for regulating the markets could be so clueless...truly frightening.