Posted on 08/25/2010 12:40:27 PM PDT by unspun
In shocking news, the New York Times cites figures that investors withdrew $33.12 billion from domestic stock market mutual funds in the first seven months of this year when billions of dollars should have been expected to be flowing in.
The New York Times blames this unusual development on “economic uncertainty.” One explanation is that the financial reform bill pushed by President Obama and passed by Congressional liberals was a complete fraud. The bill failed to protect invested capital, did nothing to stop the devaluation of our homes, and didn’t reform Fannie Mae and Freddie Mac, the government-sponsored mortgage entities involved in the financial crisis.
As Accuracy in Media has consistently reported, the basic problem is that the regulations that protected investors and their capital were removed, beginning in 2007 under the George W. Bush Administration, and have not been restored.
Zubi Diamond, author of Wizards of Wall Street, has released a new YouTube video highlighting what needs to be done and how the nation got into this predicament. He has focused attention on the notorious hedge fund short sellers who brought on the 2008 economic and financial crisis that paved the way for Barack Obama’s election as president.
These short sellers, such as George Soros, made billions of dollars betting on the collapse of the subprime mortgage industry as ordinary Americans lost their savings.
“They subverted our capitalist system economy in order to achieve a regime change in America. They looted the country and visited financial violence on the American people. American families bear the brunt of the destruction of capitalism and the installation of socialism in their country with job losses, home foreclosures, and retirement portfolio wipe-outs,” Diamond charges.
The major media, he said, have concealed the truth about what has happened from the American people.
He explained, “Most Americans cannot even imagine the fact that this calamitous crisis was deliberately engineered by enemies and traitors within our borders.”
Diamond urged the media to start educating the public about what is happening: “Most people do not know how capitalism works, in terms of the safeguard regulations which protected our capitalist economy. Once you unhinge and unscrew the nuts and bolts, and tear down the underpinnings and remove the safeguard regulations, you have succeeded in dismantling capitalism and killing the economic engine of growth. They are killing the goose that lays the golden egg.”
In response to the Times article about investors fleeing the market, Diamond said, “Who wouldn’t flee the market when you are being robbed every day by the hedge fund short sellers? They are targeting and preying on the small investors. The reality is beginning to sink in as more people and more people realize that the economy is in terrible shape, and it is not going to recover.”
A recovery is possible, Diamond said. But the Congress and the President have to restore the regulations that “protect the invested capital that is needed to create jobs, and to protect the value of our homes and assets. You must restrict short sale transactions, end mark to market accounting completely, restore the old circuit breakers, and restore the old uptick rule to their original condition without any modification.”
His recommendations include:
Diamond explained how the looting and destruction of the economy have occurred. “To short sell a stock is to sell a stock you do not own. Such a transaction should be governed by a regulation, designed to protect the owners of the stock, their assets and invested capital. That regulation which governed short sale transactions is called the uptick rule or short sale restriction rule.”
He added, “The Managed Funds Association (MFA), the association of hedge fund short sellers, successfully lobbied regulators and policy makers to remove that short sale restriction requirement, meaning they now have the government’s approval to sell what they do not own unrestricted, when they know very well that selling what they do not own is stealing. The only difference is that they are stealing with the approval of the government.”
“Our stock market is a broken market,” Diamond added. “There is no investor confidence because the invested capital is not protected. There is no uptick rule, no circuit breakers and no trading curb. There are no legal protections for the capital. There is no capitalism.”
The stock market, he said, has become “a money manufacturing factory. The commodities being processed are the small investors, retirement portfolios, and mutual fund investors.”
As a result, the small investors are experiencing diminishing returns and losing their appetite for risk.
The Times should explain to its readers the real reason why investors are fleeing the stock market, he said.
“Our publicly traded companies can now be held hostage by the hedge fund short sellers as they continue preying on investors,” he said. “They can evaporate any of the publicly traded companies in short order. They demonstrated that capability in the ‘flash crash’ of May 6, 2010, when they drove down the stock price of Accenture (ticker symbol CAN) from $44 per share to one cent per share in a 15-minute time period.”
The SEC is supposed to be an independent regulatory body to protect the integrity of the market but it is under the control of the Managed Funds Association. “They have rigged and primed the market for manipulation,” Diamond said.
In the past, ordinary Americans could analyze the market and individual companies and invest accordingly. Today, the situation is different.
“Without the short sale restriction regulation, the fundamental attributes of the companies are rendered useless,” he said. “The effective use of technical analysis has been nullified. When it does seem to work, it can be used by the hedge fund short sellers to manipulate the market as they set traps for investors at each fulcrum, resistance or support levels.”
He explained, “You have a market that is very difficult to trade or invest in. This is a market that can do anything, reverse, go up or down, or reverse again with increased volatility as the manipulators are on a search mission, preying on small investors, searching for investment capital to steal.”
Diamond compared the stock market to a Las Vegas casino, where the house always wins. The MFA is the house in today’s market. “They own the stock market and the stock market police—the SEC. Everything is stacked against the small investors. They operate with impunity.”
Diamond said the hedge fund short sellers use various techniques to accomplish their insidious goals. These include “dark pools,” in which their transactions are concealed from the public; flash orders; front running; insider trading; and collusion. He explained, “They raid companies at will, shorting stocks fearlessly without an uptick, colluding to determine the direction of the market. They trade fearlessly without risk, and they transferred all the fear, and risk of investment losses and capital losses to the small investors, regular investors, retirement portfolios and mutual funds.
As if the situation wasn’t bad enough, the so-called financial reform bill which Diamond warned against but passed the Congress exempts the SEC from the Freedom of Information Act.
“The documents that I was available to see to help me write the book Wizards of Wall Street will no longer be made available to the public or journalists. The SEC will now only release documents to the Congress and the courts. The MFA made sure that its lap dogs at the SEC are shielded from scrutiny and criticism as they cooperate with the agents of George Soros in destroying America and capitalism.”
Cliff Kincaid is the Editor of Accuracy in Media, and can be contacted cliff.kincaid@aim.org
George Soros...the ultimate inside trader.
Also see, “The Phoenix Economy”
http://gulagbound.com/3776/the-phoenix-economy-environmentalist-new-age-cloward-piven
The Failed State — planned and undergoing execution.
This is why Obama speaks of a one term presidency. They want the collapse of America to be so bad that GOP’ers in office, in 2013 won’t be able to correct it — all to bring in the global Marxofascist revolution.
401ks are being emptied by the unemployed to keep their houses and cars.
It may be the decade of our discontent...or even longer...the generations of our discontent.
Agreed. Poppy Bush was a dope too because he had Nicholas Brady who worked for Dillon Read on Wall Street. Brady was a sharp cookie. The father should have made sure GW had someone on Wall Street he trusted. Also someone at the SEC who knew what they were doing.
“The rampant unemployment is causing many people to dig into their financial reserves simply to stay alive.”
This is happening all over the USA. The goal of The Imam is to wipe out the middle class. The morons who watch TV are clueless and easily branwashed by TV - ALL of TV including Fox/Saudia.
Look at the drooling idiots who voted for McCain.
“Who wouldn’t flee the market when you are being robbed every day by the hedge fund short sellers?”
The people are fleeing the market because it stinks. If that were not the case, the short sellers would be getting killed. The economy is not expanding, taxes are going up along with regulation and government ownership of major sectors. Why shouldn’t short sellers be allowed to operate and make a profit (or loss). At least they are telling the political class that their policies stink.
As Accuracy in Media has consistently MISREPRESENTED , the basic problem is that the regulations that protected investors and their capital were removed, beginning in 2007 under the NABCI PELOSI - HARRY REID CONTROLLED CONGRESS, and have not been restored. There, fixed it...........
As Accuracy in Media has consistently MISREPRESENTED , the basic problem is that the regulations that protected investors and their capital were removed, beginning in 2007 under the NANCY PELOSI - HARRY REID CONTROLLED CONGRESS, and have not been restored. There, fixed it...........
Please put me on the list. Thanks.
Amen, amen, amen!
This is a one-sided article on short selling. Short sellers alone cannot cause the price of an asset to collapse and then stay down at collapsed prices. Shorts can drive the price of an asset way down, but if the asset has real value above that depressed price then buyers will appear who drive the price back up to reasonable levels and force the shorts to cover their positions. The value of mortgage-back securities collapsed because home buyers did not pay their mortgages and caused defaults on the MBS. Those defaults on MBS interest payments allowed short sellers to drive MBS prices down to a fraction of their original value.
Regarding the uptick rule, I’d like to see that rule reinstated but that rule alone does not stop short selling or long holders from bailing out of a stock. The best description I’ve heard of the uptick rule is that “it acts like a parachute and slows the price descent down to the same ultimate price level.” That’s basically all it does, but that slowing of the descent is highly beneficial to small investors because it gives them more time to make a decision to get out before the price totally collapses.
Short selling is actually highly beneficial in many situations and in no way is it “stealing.” It’s beneficial because it puts people on both sides of the market with substantial positions. That means when really bad news hits a stock, there are investors (the shorts) who make a big profit off the bad news and the plunge in the stock price. So at the time when the fear of buying is the greatest and nobody wants to buy a stock for a long position, who are the buyers who prevent a total collapse of the stock price and complete panic in that market? It’s the shorts who are buying while the longs are in panic. The shorts are taking their profits and stabilizing the price of that stock or bond, which is highly beneficial when longs are paralyzed by fear.
I’d have to agree, however, that the SEC allows too high of a percentage of stocks and bonds to be sold short and that percentage should be reduced. Shorts did a lot of excessive damage to corporate bonds back in late 2008 when small investors paniced and dumped bond funds, and that excessive damage was partly caused by the SEC allowing too many corporate bonds to be sold short.
The other benefit of short selling is that it helps to put a cap on wild speculative rallies that often draw in the least sophisticated investors who buy right near the top at ridiculously high prices, such as when the public bought tech stocks at absurdly high prices in the first half of the year 2000. Most shorts wait until prices are falling before they go short, but there are a lot of guys running long & short funds who will short right when a stock looks topped out and before it really starts falling because they are covered by their long positions against a broad market rally.
The main causes of the housing bubble and price collapse was excessively low interest rates and lax lending standards by the Fed, too much government support for the housing market by Fannie and Freddie, bad data out of those companies that caused other lenders to underestimate the risk of sub-prime lending, and general excessive bullishness and optimism about the housing market among most Americans which always happens near a final blow-off top in a market. The problem with this big market top is that is was fueled primarily with borrowed money and thus caused massive losses among mortgage lenders. But fundamentally it wasn’t much different from the stock market’s big overbought top in 2000.
Sometime back, boy king obama was interviewed by one of his media types about the shrinking economy. He giggled. Just wow.
"Nut" he may be. But are his statements below refutable?
“They subverted our capitalist system economy in order to achieve a regime change in America. They looted the country and visited financial violence on the American people. American families bear the brunt of the destruction of capitalism and the installation of socialism in their country with job losses, home foreclosures, and retirement portfolio wipe-outs,” Diamond charges.
The first two sentences don’t need to be refuted - they need to be proven. He hasn’t done that. Can you?
IIRC, Soros lost over two billion trying to scam Malaysia. He got beat, and admitted it. We should do something similar.
It’s all “unexpected”.....
Excellent post.
As always, there are two sides to any topic. Thanks for the clarity.
The SEC is independent of the Administration anyway. Bush had no hand in this decision.
All that should have been said is that it happened in 2007.
http://www.sec.gov/about/whatwedo.shtml
Agreed...
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