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No Quick Recovery for Stock Markets

Manipulations in the stock market , feeding in expense of the US economy , are the fuel of the vicious cycle that spirals into an eventual financial destruction .

Naked shorting , an unlawful manipulation , where short sellers may borrow astronomic amounts of stock shares for selling while the lenders have only samll quantities of those .

The well capitalized short sellers may drive down any stock to any low point , for the fact that there are unlimited supply of stocks to borrow .

Drastic drops would naturally attract panic sales at a loss .

The average investors would lost heavily and some of my friends once well to do , consequently , fell behind in their mortgage payment .

Foreclosures jumped more than double since October , 2007 when the financials started to fall .

Should the financials be made to fall by naked shorting , while the rescue plan being legislated , the confidence of the average investors would be completely destroyed .

The financials and thereby the economy of USA would then be routed to destruction .

This is the crucial time to buy against the short sellers .

SEC made " emergency measures " to curb naked shorting but nullified its effect by exempting market makers to the measures .

Financials fell drastically while the Bush Administration stated that the rescue plan would be legislated .

The drastic drops strongly support that naked shortings are still very active .

Average investors invest in the future and thereby would not sell at the said announcement by the Administration .

The US economy cannot turn around unless the naked shorting can be eliminated .

SEC can simply require delivery of the borrowed stock shares within one or two days .

The lenders have to have the stock shares to be delivered .

Naked shorting would then be naturally be extinguished without any extra paper work or confusion .

Why does SEC not using such simple but effective measure to curb naked shorting ? We don't know .

Buy against short sellings until SEC put its acts togather .

U.S. Markets: Is it Time to Throw Caution to the Wind?

Yes , the investors are unconvinced .

The Administration , the Treasury and the Senates are making big plans in response to the rising foreclosures and depleting financial stocks .

It is notorious that " naked " short sellings intensify to a huge extent on the depletion of financial stocks especially that of the regaional banks .

SEC has revised the rules in policing " unlawful manipulation through naked short selling that threatens the stability of financial institutions " .

Such rules become effective tommorow , July 21 , 2008 and yet these rules don't protect regional banks .

Regional banks have very little exposure to the subprime and yet their equity were in general depleted about 60% in the last three months .

Such banks have originated a lot of mortgages for Americans when they establish their homes .

For instance , Regional Financial (RF) is a profitable local banking network , which has been dedicated in Charity and community works , in addition running their banking business .

The stock pricing for RF was depleted from $23 in April to $ 7 in July . The stock price came back some last week and yet it is at a 56% discount from that of April , 2008 .

One invested in such banks on a long term basis and not for a quick profit , would find oneself losing so much that one could not even afford his mortgage payments .

No wonder , foreclosures are on the rise .

SEC would help to stablize the financials in a meaningful way by protecting all banks from the " unlawful manipulation " .

I trust that SEC would extend this protection rule to all banks at the soonest .

Otherwise , it would be a disgrace and a snap in face of USA .

Historic Financial Collapse Underway?

The " learned " author suggested that Fannie / Freddie due to worth zero dollar while the US dollar should slide .

The author , impressed me that salvaging Fannie / Freddie , the two government sponsored entities ( GSEs ) is like a " crime " .

I heard one said that the recent foreclosures stem from two sources :

1 ) the subprimes alleged to be fraud related ; someone organized to inflat property values by fraudulent appraisals and then mortgaged same to banks under the names of individuals with poor credit ratings ; the walking away would reap good profits for the organized criminals while leaving the banks with huge expenses and over valued properties .

2 ) the severe drop in price of the financials since October , 2007 have left traditional investors broke and unable to make mortgage payments . Foreclosures thus extended to the real people .

The " naked " short sellers intensified the damages on the economy .

Judging from the history of loss incurred by Citigroup (C) , the subprime issue can be speculated as over or almost over ; loss from over 10B in the 4th Q , 2007 to the 2.5B in the 2nd Q , 2008 .

The main hurdle now is the foreclures inflicted with the traditional investors or the good guys who lost all by confronting the unreasonably sharp drops in bank prices since October , 2007 .

Say , Regional Finance (RF) , a profitable regional banking network which has little or no exposure to the subprime , went down from $ 23 to $ 7 from April to July or in just three months .

Oh , RF has about 1.5% non performing assets (NFA) which are lands good for home construction purposes .

The real estate maxim tells us that land by nature , appreciates in value . Such NFA is in fact valuable asset to the bank and the same leaps when the real estate market becomes normal .

Investing into the future and thereby invest in financials .

When financials go back up to a reasonable level , the good guys would have their savings back to update their mortgage payments .

As a result , foreclosures would be reduced and the real estate market would be back to its normal functioning .

Some article indicated that Fennie / Freddie were told by the US government to loosen up their policy in accepting mortgages at the time when the subprime problem had surfaced while banks then generally raised their standards .

Such " startegy " was an attempt by the US government to boost up the real estate market at the time .

That attempt failed for the loose rules would naturally , invite more fraudulent subprimes .

Fannie / Freddie ended up with mortgages that they would not accept under their own policy .

On viewing the year 2001 / 2002 downturn , Fannie / Freddie flared better than or comparable to strong pretigeous banks like Bank of America .

Fannie / Freddie have proven themselves to be effective and profitable when being allowed to use their own standards in assessing mortgage applications .

Even being handicapped , the combined loss to date for the two GSEs is about 10B which is about the same as what Citigroup has lost in its 4th Q , 2007 .

Such quantity of loss is obviously manageable under today's standard .

Freddie's CEO has repeatedly told the media that their retained earnings are sufficient to finance the GSE through this crisis .

The shoring up by the US government is more for gaining back public confidence since half of the US mortgages are guarenteed or owned by the two GSEs .

Yes , substandard policy attracts frauds and eventual mortgage failures .

Published articles indicated that the substandards were used by subsidaries of investment banks and not regional banks .

The two GSEs straddled into these substandards reluctantly on a demand by the government to salvage the real estate market .

One would trust that the two GSEs would be more than happy when being allowed to go back to their own lending practice proven to be effective and profitable .

The " learned " author accepts that the economy would completely collapsed should the two GSEs fail .

The shoring up of the two GSEs would avoid such collapse .

The author however , suggested that a complete collapse in economy would best serve the US people as oppose to the backers' claim that the US people would benefit when the two GSEs or economy being uplifted .

People do have difference in opinions .

Dollar Falls to Record Low Over Fannie and Freddie

USA is losing severely in a financial attack .

It is true that there is the subprime problem .

Short sellers pull down financials would only fuel the vicious cycle that spiral the economy from bad to worst .

Sure , the short sellers are strong and concerted .

All financials could go down more than 5% or even 10% in one or two hours time .

The concerted strength can only be released by some conspired power .

Such conspiracy is a crime .

As well , it certainly would successfully push a panic button to the general investors who may only want a quiet life when retired from long years of work .

Cutting the equity of bank stock by pulling down their prices would of course put the bank in a credit crunch .

The short sellers are fed in expense of the bank's equity .

The only way to savage this economy is to buy against the short sellers so that the financial equity or pricing can be raised to a reasonable level .

Fannie / Freddie ( FNM / FRE ) are the stocks of most strategic importance .

Should a strong defender step in to buy against the short seller so that the pricing can be maintained at a reasonable level .

The whole financial market would be at the start to be stablized .

FNM / FRE would need the equity or reasonable pricing in order to facilitate the passing of the mortgage rescue law .

The mortgage rescue plan would effectively stablize the housing market on a permenant basis .

I knew for the fact that some government encountered a similar financial cresis with the short sellers .

The same government buy against the short seller to maintain a reasonable price level , by using a trust funds being set up with the taxpayers' money .

The trust funds then owned a pile of the stock purchased from the open market without diluting the corporation at issue .

The stock price then grow back to normal and the trust funds made huge money for the taxpayers .

The short sellers lost a huge chunk of money and disappeared .

The bad news used by the short sellers disappeared as well .

Can the bulk of people , general investors and public inclusive , win this financial war against a small group but organized short sellers ?