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                            TigerSoft Freedom News Service   7/16/2008     www.tigersoft.com
                                          News and Views you won't find in the corporate media.

revised on 7/20/08 to include discussion of "Enron Amendment".

                     Investing In A Perfect Storm  
                                                              (Part 3)


                                    Republican Phil Graham ("You're a nation of whiners")
                            created the Enron Amendment that let Enron Gouge
                            California Consumers in 2001 and now all US energy
                            users in 2008.

                          Spineless Democrat Harry Reid Won't Raise Margin
                                Requirements on Crude Oil Speculation.
                         Financial Institutions Gave Him More than $359,000


                SEC and FED Help Wall Street Insiders at The Expense of US Economy   

                Beware "The Fix" at the Securities & Exchange Commission (SEC).
                              as Well as at The Federal Reserve Board. (Part 1 and 2)

                                   The Biggest Buildings in Most Cities
                                 Are Owned by Banks and Brokerages.


                      Financial Institutions Are The Ultimate Insiders.  For Them,
                      It's More Important Who You Know at the FED or the SEC,
                      Than How Honest, Bright or Far-Sighted You Are.  No Wonder
                      They Couldn't Even Ask The Question: "What Will Happen if
                      Housing Prices Decline?"                       

by William Schmidt, Ph.D. (Columbia University)
                                            (C) 2008 All rights reserved.  Reproducing any part of this page without
                                                         giving full acknowledgement is a copyright infringement


                                                 Previous Related studies:

The SEC Is Not Really There To Regulate.
4/3/2008  Wall Street's Dirty Little Secret  
1/8/2008    It Does A Poor Job of Stopping Insider Trading
The SEC Is Slow To Challenge Heart of Wall Street's Power.
6/28/2007  Who's Guarding The Investor Hen House?

It's Real Mission Is To Help Wall Street Insiders
8/15/2008   SEC Lifts 70-Year Ban on Short Selling on Down-Ticks
                                       And Lets Hedge Funds Use Dangerous Bear Raids To Get Rich.
                                       Keep The Myth of Fairness Alive, Giving The Appearance
                                       That Wall Street Is A Level Playing Field for Investors

                      Original Research on Individual Stocks upon Request:  
                      Composite Seasonality Graph of Any Stock for $125.
                      Example of historical research NEM - Newmont Mining.   Order Here.


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                                      Plunging Confidence in Wall Street:
                   The SEC Is The Biggest Culprit


                                                                    by William Schmidt, Ph.D

                             America is being ruined by the SEC and its chairman. 
                      Chris Cox has been  a securities' industry lawyer by trade.  He is
                      a laissez-faire de-regulation ideologue by political convenience.  
                      Single handedly, his rulings are destroying trillions of dollars of
                      investor wealth.  By making short selling extremely easy for
                      professionals in several key ways ( wiping out the up-tick rule.
                      not requiring stock to be borrowed before a short sale and permitting
                      the trading in numerous, new ultra short sale ETFs) and by
                      letting imprudent investment banks more than double the amount
                     of leverage they use, COX bought the  dynamite and the ignition
                      switch that destroyed the Bull Market and caused the Crash of

                              Three weeks before the 2007 top,  Cox cancelled the most
                      important rule on Wall Street, a rule had prevented professional
                      bear raids since 1934.   Now a calamitous bear market has followed. 
                      Still, Cox refuses to meaningfully change his disastrously misguided
                      policies.   We will go from calamity to chaos if Cox'es de-regulation
                      policies are not reversed.

At the end of June 2007, before the market plunged,
                      the SEC, without legislative authority, broke the 1934 law
                      that created it, and cavalierly lifted the 73 year ban on
                      short selling on down-ticks.  The law was designed to
                      prevent rigged bear markets, created by wealthy insiders
                      who would create bad news, spread false negative rumors
                      and mercilessly sell the stock down to create a selling panic.

                             The 1929-1933 experience had taught that generation 
                      that this practice had to be banned.  It was socially too
                      destructive and dangerous.   Bush's SEC did not care
                      about such concerns.  They wanted to make their Wall
                      Street constituents more money.  No matter that the actual
                      companies and all their employees might suffer.  Bankruptcy?
                      They just didn't care.  What's the difference between the SEC
                      and Bush and Cheney?  None/  They just didn't care about the
                      consequences of what they did.   They wanted simply to
                      repay their sponsors.

                              So, the SEC caved into the relentless pressure from Wall Street
                       insiders who could see the top coming and who wanted to be
                       able to sell short easily and aggressively,  without waiting for
                       an up-tick and without needing to borrow stock.  Three weeks
                        after the SEC allowed short selling on downticks,  the
                        DJI peaked and started down.   It had fallenl more than 20%
                      until yesterday's rally, which the SEC prompted. See the chart below.

                                   Why Has SEC Allowed Naked Short Selling So Long?

                              Yesterday, July 16, 2008, the SEC decided that
                       the biggest financial stocks had to be protected from
                       the merciless selling caused by the banks' poor judgement
                       in making too many bad mortgage loans and being vastly
                       over-leveraged.    Finance stocks have been ravaged
                       after the Housing Bubble broke wide open in 2007-2008.

                             So, the SEC acted to protect their buddies in these banks.
                        It ruled Wednesday, that for a month 18 of the biggest banks
                        could no longer have their stocks sold short "naked".
                        Naked short selling means that the stock is sold short
                        aggressively without any existing shares having to be
                        first borrowed.  Naked short selling is necessary to
                        conduct a bear raid.  Many existing shareholders do not
                        keep their shares in margin accounts, where they can be
                        borrowed.    So, stock to borrow to sell short can become
                        quite limited.  To surmount this problem, short sellers break
                        the rules that require stock to be borrowed before it can
                        be sold short.  Such violations have been growing.  The
                        SEC took a very lax view of the practice.  It has refused
                        to penalize brokerages for breaking the existing rules
                        against naked short selling.   You can understand that
                        day traders, in particular,  who sell short at the opening,
                        or during the day, using only 25% margin, and then cover
                        their shorts by the end of the day, need a ready supply of
                        stock to sell short.  Allowing naked short sales
does away with
                        problem and takes brokerage firms off the hook for searching
                        for shares to borrow.

                                                                 COX IS A CROOK

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                                                                The most reckless and dangerous
                                                          public official in American history.

                                       The SEC's temporary new ban on naked short sales
                        should be universal and permanent.  It is not, because Cox
                        is the most crooked SEC chairman since that office was created.
                        He is in bed with the market makers on Wall Street.  He has
                        permitted the destruction of a whole industry, and soon it
                        will be the whole stock market, by how easy he has made
                        short selling for professionals.   Until yesterday, they did
                        not have to borrow stock and they could these phantom shares
                        on the lower bid and paint the tape red.   Significantly, Cox's new
                        ban very significantly does not apply to market makers
                        in stocks and options.  They can and are still going heavily
                        short stocks so that they can write lucrative put options.
                        The market makers control Cox.  He does not regulate them.
                        When the ban goes off, the market makers will drop the
                        stocks by hitting bids with phantom shares and cash in
                        on all the shares they are selling short while others cannot
                        do this.  (For more information see this source.)

                                         "(I)f you could jail someone for pure incompetence, Chris Cox would
                      be the first thrown in the clink.   History will be brutal when it comes to Chris Cox.
                      And to George Bush and the US Congress, who allowed this travesty to continue.

                      I have no idea what's driving Cox...Maybe he's short he market? Maybe he hates
                      America? Maybe he's part of al-Qaeda? Whatever it is, it's bewildering.
                     And it's sick. "

http://housingpanic.blogspot.com/2008/10/is-sec-chariman-chris-cox-single-most.html   )

                                      The SEC Itself Engaged in Insider Trading

Insiders, before the announcement,  got prior word
                        two days ago that the Securities & Exchange Commission
                        would announce before the opening the next day that
                        they would  ban "naked" short sales in key finance stocks. 
                        Today many of these stocks jumped 20% or 30%, in just
                        one day. 

                             What's the proof?  Look at the chart below.  The very,
                        very high volume after the long decline with side-wise price
                        action was the key to spotting the insider buying,  When you
                        have friends at the SEC who tell you what they are going to
                        do next, you don't have to be smart, just well connected.
                        It means that you're earning it the old fashioned way, being
                        one the boys on the inside.  No wonder, wealth is concentrated
                        in Wall Street not among the brightest, bravest and most
                        foresighted, but among those who break the insider
                        laws with impunity.   Look at TigerSoft's chart of Financial
                        Stocks.   Note the Buy signal the day before the rally and the
                        huge jump in trading without additional price weakness.
                        This was "high volume churning" at a key reversal point.

                                    --------- Tiger Index of Financial Stocks ------------

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Clearly naked short selling should be banned altogether.
                         It leads to economically destructive bear raids that have the power
                         to wipe out whole companies and cause great economic
                         hardship among shareholders and employees whose
                         jobs are ended.    But the Bush SEC has not wanted to
                         do the right thing, and ban naked short selling altogether.
                         It has been too afraid to offend the constituents is cares
                         most about.   It has not wanted to reduce or limit the big
                         brokerage commissions and profits at influential hedge funds
                         and the big firms' day trading teams.


   --------- DJIA - 2007-2008 ----------
  SEC lifts
  ban on short
  sales.                                     Naked Short Selling               DJI falls 22%
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                                                    Energy Price Bubble?
Energy prices have tripled in the last two years.
                        Initial Margin requirements on energy futures' contracts
                        are just 5%, even though the margin requirements for
                        stocks are 50%.  The commodities are just as volatile
                        as stocks.  Why are they so low?  Because the two
                        governing units of the Federal Government, the SEC
                        and the Federal Reserve Board have been much more
                        protective of the commodity trading firms and funds,
                        than public welfare.  Look at the price of Crude Oil.
                        Insider were clearly buying it, tightening their control
                        of it.  The Federal Reserve did nothing to stop the upswing.
                        It had the power to limit the rise by raising margin requirement,
                        but it chose not to do so,      

                             Energy Price Manipulation and California Blackouts

                              Commodities markets have become increasingly
                        unregulated.   90 percent of all commodities trades occur
                        outside of the traditional marketplace exchanges. In these
                        so-called OTC “Swaps trades”, parties secretly buy and
                        sell commodities with absolutely no one watching.  Speculation
                        can be intense.  Manipulation is much more common.  Oil futures
                        can be "cornered" without anyone knowing.  The Enron
                        Amendment of 2001 effectively hid OTC trades in commodity
                        futures so that manipulators could escape regulation and
                        gouge consumers.  It was designed by Phil Graham to
                        help Enron gouge consumers.  It worked.  Traders for Enron
                        were artificially able to drive up electrical power futures in
                        California.   Energy prices rose 50% in a few months.  Pacific
                        Gas & Electric went bankrupt.

                              Traders said that Enron's former president, Jeff Skilling,
                        pushed them to "trade aggressively" in California and to do
                        whatever was  necessary to take advantage of the state's
                        wholesale market to boost the price of Enron's stock/  "Skilling
                        would say, 'if you can't do that then you need to find a job at
                        another company,'" said one former senior Enron trader...
                        "He said we should go trade pork bellies if we can't be
                         aggressive."     Manipulation strategies were known to energy
                        traders under names such as "Fat Boy", "Death Star",
                        "Forney Perpetual Loop", "Ricochet", "Ping Pong",
                        "Black Widow", "Big Foot", "Red Congo", "Cong Catcher"
                        and "Get Shorty".[6]     Source.    For fuller description, see

                             Is the same thing is happening in the Mid-Atlantic states? 
                         states.   ."        
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                               the energy companies blamed heat waves.   But the absence of regulating by the
                               Federal Energy Regulatory Commission is strikingly similar in both cases.


        ider Accumulation is Very Obvious in TigerSoft Crude Oil Charts
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   Democrats Again Show How Spineless They Are.

                                         "The Best That Money Can Buy"

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           Harry Reid, Senate Majority Leader.
Biggest Campaign Contributors
Lawyers/Law Firms $1,334,740
Casinos/Gambling $738,313
Real Estate $423,961
Securities & Investment $359,360
Lobbyists $336,94


                                 A timid US Senate is taking up the issue.  A  month
                       ago Democrat Byron Durgon introduced legislation that
                       would compel the commodity regulators at the CFTC to
                       raise initial margin requirements from 5% to 25% for
                       speculators, as opposed to commercial hedgers like
                       airlines.      Walter L. Lukken, the CFTC's acting chairman,
                       drew criticism at the time for not responding more quickly
                       and wanting to waste time studying the proposal.  Since then,
                       the spineless Democratic leadership and Senator
                       Harry Reid, in particular, has chosen to leave the
                       proposal out completely an require the CFTC to study the
                       problem.    "I have seen sick jellyfish with more spine",
                       said one disgusted observer. 

                                   Republican Phil Graham's "Enron Amendment"

                                         Gramm was one of five co-sponsors of the Commodity Futures Modernization
                            Act of 2000[3]. One provision of the bill was referred to as the "Enron loophole"
                            because Gramm drafted it in cooperation with lobbyists for Enron Corporation. Critics
                            blame the provision for permitting the Enron scandal to occur.[4] At the time, Gramm's
                            wife was on Enron's board of directors.
                                       The "Enron loophole" exempts most over-the-counter energy trades
                      and trading on electronic energy commodity markets from government
. The "loophole" is so-called
                            as it was drafted by Enron Corporation lobbyists working with U.S. Senator Phil Gramm to
                            create a deregulated market for their experimental "Enron On-line" initiative.

                                        It allowed for the creation, for U.S. exchanges, of a new kind of derivative security,
                             the single-stock future, which had been prohibited since 1982 under the Shad-Johnson Accord,
                             a jurisdictional pact between John S.R. Shad, then chairman of the U.S. Securities and Exchange
                             Commission, and Phil Johnson, then chairman of the Commodity Futures Trading Commission.

   It is clear that the Fed and the SEC have the power
                      to make and break a bull market and stop a bubble.
                      It is not only with interest rates that they can change
                       the outlook for stocks.    But special interests rule

                      Want To Predict The Market?  Watch The Federal Reserve
                     and The SEC Closely as They Change Rules for Margining
                     Stocks and Short Selling. 
One of the common causes of the
                          Stock Market Bubble of the 1920s and the Housing Bubble of
                          the 2000s was the very low amount of money one had to
                          put down to buy a stock or a house.

In 1934, the SEC was charged with preventing short sales
                     on down-ticks and the Federal Reserve was given power to
                     change interest rates and margin requirements.
                    Initial Margin Requirement Changes Have Been Rare Recently
                    But you can get an idea from some of the examples shown
                    below that this is a powerful tool.

                        1) Margin Requirements were raised from 50% to 70%
                     on August 1958.   It took more than 10 months for the
                     DJI to top out after margin requirements were raised.
                     But the market went down significantly in 1960.

                                     DJI - 1958-1959
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                                             DJI - 1959-1960
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  2) June 1968, the margin requirements were raised from
                     40% to 50% to fight excessive speculation in lower priced
                     stocks.   In six months the stock market was falling from
                     984 to a low of 540 in May 1970.

                                     -------------- DJI  1970 -------------
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