Post by jannikki on Aug 23, 2007 0:11:44 GMT -4
STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud
Settlement Failures Abound in Bear Market - August 21, 2007
David Patch
The year was 2005 and Wall Street was in the midst of a breakout into a Bull Market. On January 3, 2005 the DOW was closing around 10,700 in the first trading session under Regulation SHO.
At the time of the first published threshold security list of published issuers with persistent settlement failures, the total number companies identified was 452. The NYSE accounted for 73 issuers while the NASDAQ accounted for another 102. By October 14th the list was down to a thin 229 with the NYSE accounting for 39 while the NASDAQ listed 75 of their issuers.
Since those days in 2005 the DOW has surged to record highs above 14,000 before letting the Bear loose and all the volatility that accompanies such.
Today, the threshold security list is an astounding 526 Companies, nearly 17% above what it was at the inception of a policy aimed at eliminating persistent failures. The NYSE today accounts for 120 of the 526 companies while the NASDAQ is peaking out at 162 companies.
Primary candidates for the threshold security lists are the mortgage lenders with nearly every lender identified as befallen on hard times being listed on the threshold security publication along with those involved in the housing markets.
American Home Mortgages, Anworth Mortgage Assets, Beezer Homes, Brookfield Homes, Deutsche Bank, Fremont General Corp., Impact Mortgage, Thornburg Mortgage, Novastar Financial, Home Solutions, and New Century Financial just to name a few.
It seems by the explosion of this listing at a time when the Bears are out and the financial sector is in turmoil that some players on Wall street are being provided ample opportunity to use the leverage of a settlement failure to drive markets lower and to profit off such transactions. It can't be a coincidence that we are at the devils triangle of record short sales, record settlement failures, and a volatile Bear market.
What we are witness to is that the SEC has lost control of the markets and of the settlement process as the agency fell into complacency during the recent bull market.
In 2006 the SEC provided insight that Regulation SHO was working and that settlement failures were being reduced. In a report drafted by the SEC's Office of Economic Analysis the public was misled into believing that settlement failures had been reduced by 34% and that the average number of threshold securities had declined by 38% pre vs. post SHO. The analysis was flawed as evidenced by further analysis using data provided under a FOIA request.
In May 2006, the termination of teh OEA analysis, the DOW was trading over 11,000 and the market continued to soar.
What the SEC missed in all their flawed analysis was that markets react differently between a Bear and a Bull environment. When the Bear wakes from hibernation the emphasis is on selling and the leverage of additional selling can create the panic and fear that generates volatility and profits for those that are afforded the luxuries of a settlement failure. Excessive selling creates the panics of a bear raid.
For SHO to be effective it needs to work in a Bear market as adequately as it would in a Bull market. In fact, it should work better so that the run on the market does not happen.
Today the professionals are taking every advantage of the bad times and are loading the boat with trades that generate excessive and persistent settlement failures. These trades create the losses that result in future economic ruin for our nations economy. The professionals are rigging the markets against the general public and the threshold security list is the evidence to support that fact.
Consider that in the late 1990's many lost their savings in the crash of the dot.com era. If you believe that history repeats itself the professionals in the late 1990's were operating without SHO, regardless of SHO's merits, and were most likely raiding stocks to a higher degree than what is evidenced today. The issuers we witnessed dropping 30, 40, 50% in a day during that crash were most likely advanced downward with selling that resulted in settlement failures. The SEC has admitted that they have no access to the data to verify or refute these claims.
Data that should have been considered when creating SHO.
If ever there was a need for bringing final closure to this issue it is now. The continued expansion of the Regulation SHO threshold security list and the negative perception that some players are selling what does not exist into this Bear market will take it's tool on investor confidence. It will illustrate the inability of the present regulator to stop a bear raid from manipulating our markets.
The SEC can not wait forever to address this issue. "Waiting out the storm" is not an option for those elderly and financially strapped individuals being forced to liquidate their investments today to survive. Liquidating into a manipulated market is a loss that can never be recovered and for some will become financially dangerous.
Today the number of issuers on SHO is 17% above that when we started some 2.5 years ago. Worse, it is more than double the levels seen in October 2005. The NYSE list is 64% above what it was in January 2005 and the NASDAQ is 59% higher.
This is not success, this is failure. The Commission staff needs to step up to the plate and be accountable.
For more on this issue please visit the Host site at www.investigatethesec.com (posted with permission)
Copyright 2007
An online newspaper reporting the issues of Securities Fraud
Settlement Failures Abound in Bear Market - August 21, 2007
David Patch
The year was 2005 and Wall Street was in the midst of a breakout into a Bull Market. On January 3, 2005 the DOW was closing around 10,700 in the first trading session under Regulation SHO.
At the time of the first published threshold security list of published issuers with persistent settlement failures, the total number companies identified was 452. The NYSE accounted for 73 issuers while the NASDAQ accounted for another 102. By October 14th the list was down to a thin 229 with the NYSE accounting for 39 while the NASDAQ listed 75 of their issuers.
Since those days in 2005 the DOW has surged to record highs above 14,000 before letting the Bear loose and all the volatility that accompanies such.
Today, the threshold security list is an astounding 526 Companies, nearly 17% above what it was at the inception of a policy aimed at eliminating persistent failures. The NYSE today accounts for 120 of the 526 companies while the NASDAQ is peaking out at 162 companies.
Primary candidates for the threshold security lists are the mortgage lenders with nearly every lender identified as befallen on hard times being listed on the threshold security publication along with those involved in the housing markets.
American Home Mortgages, Anworth Mortgage Assets, Beezer Homes, Brookfield Homes, Deutsche Bank, Fremont General Corp., Impact Mortgage, Thornburg Mortgage, Novastar Financial, Home Solutions, and New Century Financial just to name a few.
It seems by the explosion of this listing at a time when the Bears are out and the financial sector is in turmoil that some players on Wall street are being provided ample opportunity to use the leverage of a settlement failure to drive markets lower and to profit off such transactions. It can't be a coincidence that we are at the devils triangle of record short sales, record settlement failures, and a volatile Bear market.
What we are witness to is that the SEC has lost control of the markets and of the settlement process as the agency fell into complacency during the recent bull market.
In 2006 the SEC provided insight that Regulation SHO was working and that settlement failures were being reduced. In a report drafted by the SEC's Office of Economic Analysis the public was misled into believing that settlement failures had been reduced by 34% and that the average number of threshold securities had declined by 38% pre vs. post SHO. The analysis was flawed as evidenced by further analysis using data provided under a FOIA request.
In May 2006, the termination of teh OEA analysis, the DOW was trading over 11,000 and the market continued to soar.
What the SEC missed in all their flawed analysis was that markets react differently between a Bear and a Bull environment. When the Bear wakes from hibernation the emphasis is on selling and the leverage of additional selling can create the panic and fear that generates volatility and profits for those that are afforded the luxuries of a settlement failure. Excessive selling creates the panics of a bear raid.
For SHO to be effective it needs to work in a Bear market as adequately as it would in a Bull market. In fact, it should work better so that the run on the market does not happen.
Today the professionals are taking every advantage of the bad times and are loading the boat with trades that generate excessive and persistent settlement failures. These trades create the losses that result in future economic ruin for our nations economy. The professionals are rigging the markets against the general public and the threshold security list is the evidence to support that fact.
Consider that in the late 1990's many lost their savings in the crash of the dot.com era. If you believe that history repeats itself the professionals in the late 1990's were operating without SHO, regardless of SHO's merits, and were most likely raiding stocks to a higher degree than what is evidenced today. The issuers we witnessed dropping 30, 40, 50% in a day during that crash were most likely advanced downward with selling that resulted in settlement failures. The SEC has admitted that they have no access to the data to verify or refute these claims.
Data that should have been considered when creating SHO.
If ever there was a need for bringing final closure to this issue it is now. The continued expansion of the Regulation SHO threshold security list and the negative perception that some players are selling what does not exist into this Bear market will take it's tool on investor confidence. It will illustrate the inability of the present regulator to stop a bear raid from manipulating our markets.
The SEC can not wait forever to address this issue. "Waiting out the storm" is not an option for those elderly and financially strapped individuals being forced to liquidate their investments today to survive. Liquidating into a manipulated market is a loss that can never be recovered and for some will become financially dangerous.
Today the number of issuers on SHO is 17% above that when we started some 2.5 years ago. Worse, it is more than double the levels seen in October 2005. The NYSE list is 64% above what it was in January 2005 and the NASDAQ is 59% higher.
This is not success, this is failure. The Commission staff needs to step up to the plate and be accountable.
For more on this issue please visit the Host site at www.investigatethesec.com (posted with permission)
Copyright 2007