[The following is excerpted from Bill Cara's Daily Report]
I would agree with the person who wrote me the following letter that the meeting Thursday night between Treasury Secretary Paulson, Fed Chairman Bernanke, SEC Chairman Cox and the Congressional leaders shows the U.S. at a crisis point. In fact, I think the leaders of America are having a collective nervous breakdown.
This is pathetic to watch, but we must be on guard because our rights are being taken from us. Make no mistake about that. I received the following letter Thursday night from someone who follows this stuff much closer than I. I hope you read this material and participate in the dialogue.
Bill, This is near surreal. In 2004 Dateline NBC was filming an expose called “Financial Terrorism in the USA”. It outlined naked shorting, offshore accounts and money laundering for organized crime and terrorists. They scraped the story after market members and DTCC threatened them. Today Jim Cramer came out and discussed his conversations with various short sided hedge funds. They all claimed they were not shorting the financials. They called it a stupid move with all the attention focused on them. Jim identified that the shorts taking place were engaged in financial terrorism by people who wanted to take down the US markets. I had a similar call and discussion earlier today. An individual close to all these big funds stated near identical story. The big funds are on lockdown. They said that with all the attention they did not want to risk jail for this stuff. They are also pissed because these moves being made will actually hurt them. I have also been informed that some of these big funds have contacted the 9/11 Commission/Homeland Security to discuss the possibilities since these guys are not involved. I am at a loss as to what to say…but now you know what I know. It would also explain this sudden next step.
The following article shows just how far the U.S. has gone berserk. Its leaders are now out of control.
BY MICHAEL WEBSTER: INVESTIGATIVE REPORTER Sept 18, 2008 1201 PM PDT
U.S. government law enforcement agencies including the SEC, FBI and DOJ are on alert and are believed investigating terror and other related short selling illegal manipulation of the market place.
It was reported that between August 26 and September 11, 2001, groups of speculators, including Middle Eastern country investors, some reported connected to terrorist such as Al Qaeda and the Ben Laden family, these groups were believed connected to predicting the demise of certain airline and buildings including the New York Trade Center. Still others were identified by the American Securities and Exchange Commission as Israeli citizens, who sold "short" a list of 38 stocks that could reasonably be expected to fall in value as a result of the pending 911 attacks. According to the reports these speculators operated out of the Toronto, Canada and Frankfurt, Germany, stock exchanges and their profits were specifically stated to be huge. Apparently none of the suspicious transactions could be traced to bin Laden because this news item quietly dropped from sight, leaving many people wondering if it tracked back to American firms or intelligence agencies.
The feds have seen possible similar trends operating on Wall Street recently and no end to the panic selling on Wall Street. US corporate regulator, the SEC, is seeking to ease the terror by implementing emergency rules relating to short selling.
This possible action will be stronger than the recent use of the emergency powers that the SEC invoked in July to slap a temporary ban on "naked" shorting of 19 companies, including the mortgage insurers Fannie Mae (FNM) and Freddie Mac (FRE), and a number of major investment banks and commercial banks. The new aim will be to stop "unlawful manipulation" of American companies and their stock and to hopefully help to maintain orderly markets. Just how much damage has been done is not known but is believe catastrophic.
Short selling of stocks involves the opportunity to gain large profits by passing shares to a friendly third party, then buying them back when the price falls. Historically, if this precedes a traumatic event, it is an indication of foreknowledge. It is widely known that the CIA uses the Promis and other cutting edge software to routinely monitor stock trades as a possible warning sign of a terrorist attack or suspicious economic behavior. A week after the September 11, 2001 attacks, the London Times reported that the CIA had asked regulators for the Financial Services Authority in London to investigate the suspicious sales of millions of shares of stock just prior to the terrorist acts. It was hoped the business paper trail might lead to the terrorists.
The US Government as a result of the recent falling market has now nationalized Fannie Mae and Freddie Mac, by investing American tax payers' money to hopefully bail them out. US Government has also nationalized the world's largest insurer, American International Group, (NYSE:AIG) which was not on the SEC's list. That so far has cost the American taxpayer an additional 80 million for an 80% ownership of the shares.
This nationalization of massive American institutions is a socialization of America. The government claims placing them in what it dubs as "conservatorship" will give the American people the opportunity to make money should the government be able to turn it around.
However, even should they make money on the deal it is hard to see how the American people could benefit from it, according to Wall Street insiders? All this while two of the major investment banks on the SEC list have now disappeared -- Lehman Bros (LEH) and Merrill Lynch (MER).
"Naked" short selling practice is technically not illegal, but dealer-brokers are required to have "reasonable grounds" to believe the securities can be borrowed to enable settlement.
The SEC has long held the power to make emergency orders, but it is only now that they are invoking orders that will be unprecedented. Such orders may become permiant.
The SEC has also adopted a rule that makes it fraudulent, and a violation of the law, if short sellers deceive broker-dealers or any other participants as to their ability to delivery securities within time for settlement.
The new rules apply until October 1 unless further extended. Their introduction follows strong lobbying by the American Bankers Association to clamp down on short selling amid concerns that the price of their stock was being manipulated.
"We are concerned about the possible unnecessary or artificial price movements based on unfounded rumors regarding the stability of financial institutions and other issuers, exacerbated by naked short selling. Our concerns, however, are no longer limited to just financial institutions," the SEC said.
"In addition, we have become concerned that some persons may take advantage of issuers that have become temporarily weakened by current market conditions to engage in inappropriate short selling in the securities of such issues," it added.
In regard to the few remaining Wall Street financial institutions left, like Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS) may have fallen victim to such practices. The feds are worried and have become concerned about "sudden and unexplained" declines in the prices of securities, which could create questions about the underlying financial condition of an issuer, which in turn could create a crisis of confidence without a fundamental underlying basis. This crisis of confidence could impair the liquidity and viability of an issuer "with potentially broad market consequences".
Washington Mutual (NYSE:WM) and other deposit banks are in jeopardy. Other sectors like American car makers and other and related industries are all venerable to short selling techniques and the SEC is committed to stop this dangerous type of maneuvering.
The real controversy over naked short selling, however, concerns price manipulation. Here the fear is that a maverick trader could spread false rumors about a company while massively shorting its stock. Such aggressive actions would allegedly push the price down, allowing the trader to reap a guaranteed profit from his self-fulfilling prophecy.
The matter of 911 is still under investigation and none of the government investigating bodies -including the FBI, the Securities and Exchange Commission [SEC] and DOJ -is speaking to reporters about insider trading. Even so, suspicion of insider trading to profit from the September 11 attacks is not limited to U.S. regulators. Investigations were initiated in a number of places including Japan, Germany, the United Kingdom, France, Luxembourg, Hong Kong, Switzerland and Spain. As in the United States, all are treating these inquiries as if they were state secrets.
Given all of this, at a minimum the government regulators who are conducting the secret investigations have known for some time who made the options puts on a total of 38 stocks that might reasonably be anticipated to have a sharp drop in value because of an attack similar to the 9/11 episode.
The silence from the investigating camps could mean several things: Either terrorists are responsible for the puts on the listed stocks or others besides terrorists had foreknowledge of the trouble that was about to strike Wall Street or may have even contributed and used that knowledge to reap a nice financial harvest from the instability of the market place.
Federal investigators are continuing to be so closed-mouthed about these stock trades, and it is clear that a much wider net has been cast, apparently looking for bigger international fish involved in dubious financial activity relating to the world stock markets.
There was unusually heavy trading in airline and insurance stocks several days before September 11, 2001, which essentially bet on a drop in the worth of the stocks. The same is suspected being done on some recent failures and weakness like Lehman Brothers Holdings, Inc., Morgan Stanley and others.
In reference to 9/11, just a month after the attacks the SEC sent out a list of stocks to various securities firms around the world looking for information. Many of the same firms who failed this go round were also on that list. At that time the list included stocks of American, United, Continental, Northwest, Southwest and U.S. Airways airlines, as well as Martin, Boeing, Lockheed Martin Corp., AIG, American Express Corp, American International Group, AMR Corporation, Axe SA, Bank of America Corp, Bank of New York Corp, Bank One Corp, Cigna Group, CNA Financial, Carnival Corp, Chubb Group, John Han*** Financial Services, Hercules Inc, L-3 Communications Holdings, Inc., LTV Corporation, Marsh & McLennan Cos. Inc., MetLife, Progressive Corp., General Motors, Raytheon, W.R. Grace, Royal Caribbean Cruises, Ltd., Lone Star Technologies, American Express, the Citigroup Inc. ,Royal & Sun Alliance, Lehman Brothers Holdings, Inc., Tornado Reality Trust, Morgan Stanley, Dean Witter & Co., XL Capital Ltd., and Bear Stearns.
Leadership in America seems to have disappeared, replaced by paranoia as well as real concerns. Thursday night I had a reasonable request about the new short selling rules. I am certain many others are also in a dizzy state over all this. As for our concerns, maybe we can work on this together.
Bill, Would you please address this below in your morning comment section? I am currently invested [heavily] in ultra shorts [(NYSEARCA:QID) & (NYSEARCA:TWM)]. Does this mean they go to zero? I must admit after all that has happened with the bailouts and this crazy rally and now the possible banning of short selling, I am extremely worried.
"The U.S. Securities and Exchange Commission intends to temporarily ban short-selling, The Wall Street Journal reported Thursday night. It's unclear if the commission has approved the move, the Journal reported. SEC Chairman Christopher Cox, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson were briefing congressional leaders Thursday night. The U.S. move would follow a similar action by U.K. regulators on Thursday."
Yes, the SEC will most likely place a temporary ban on the financial markets. Traders need to voice their concerns and to have the SEC explain to you how the investing public will not be harmed by such a move.
Based on their news release Thursday, getting a straight answer out of the SEC is likely near impossible. However, I would urge investors to contact the SEC office Friday morning (202) 551-4120, ask for John Heine, and ask for an explanation as to what impact this will have on these positions. John will not likely have the answers, but it’s his job to run it up the flag pole.
Another contact number is:
Office of Investor Education and Advocacy
Kristin J. Kaepplein, Director
Based on my single personal experience in an SEC conference call with Ms. Kaepplein, I believe you will find her views and mine at odds. In our discussion she took the position of the media over the people she is in place to educate and advocate for. However, maybe I’ll be pleasantly surprised.
Americans in this community do need to call John and Kristin and report back.
Friday is Quadruple Witching. I think the horror show started a day or two early.