wpe50.jpg (1913 bytes)     TigerSoft News Service    11/19/2008      www.tigersoft.com    

                           WALL STREET VERSUS MAIN STREET


                      The Role of "ULTRA" ProShares ETFS

                                in The Bubble and The Crash




                                                            by William Schmidt, Ph.D.                             
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Wall Street versus Main Street



                                                                           by William Schmidt, Ph.D.
                                                                (Taken from TigerSoft's Hotline for 11/18/2008)

                                      The Bush Administration's failure to regulate the financial market is the
                            biggest cause for the suffering now being experienced around the world.   And it
                            is VITAL that we point fingers.  If we do not know what caused the current disaster,
                            we cannot hope to have it fixed.  The Australian contained the following editorial:

                                          "ANYONE who believes the US stock market, without a temporary
                                            ban on short selling, can solve the problems of the financial system
                                            by itself relying on market forces is talking through their own book or
                                            needs to revisit the history of the Great Depression

                                      Derivatives and program trading  were largely responsible for the 1987 Crash. 
                            Mutual funds sold short SP-500 futures mechanically with computers.  There was
                            no countervailing buyers in the short term, and so markets crashed. Now one
                            has to wonder how much of the market's weakness is because of how easy it is
                            for gangs of short sellers to drive prices down, with naked short sales, and short selling on
                            down-ticks and the use of highly leveraged, ultra-bearish vehicles used supposedly only
                            to insure retirement accounts.

                                     Right wing free-market ideologues, like Larry Cutlow, dare to say"Bankruptcies
                            are as American as cherry pie".  How heartless.  How cruel.  It is definitely NOT
                            what America stands for.  America represents  Hope, Progress and Opportunity.  
                            Fluctuations are part of capitalism.  That's normal.  Unregulated finance capitalism
                            brings manic bubbles and  tragic busts.  The lessons of the Great Depression must
                            be re-learned.  No to know history, is to needlessly make horrendous blunders.
                            Lazy C- Bush failed to read the history of the war in Viet Nam.  He failed to read
                            about the causes of the Great Depression.  America deserves and the world
                            requires much more!    

                                     Our Blog has reported on the failures of the SEC repeatedly.  The urgency of
                             change their is clearer than ever.
TigerSoft Blog - 7/18/2008 - The SEC's Bear Market.
                                                  TigerSoft Studies of   Rampant, UnRegulated Insider Trading
6/28/ 2007  Who's Guarding The Investors' Hen House?SEC Chairman Cox?

                                    Something a lot worse than the 1987 Crash is what we are setting up for!

                         =========================   DJI 1987 Crash ====================
                                                                              30% DJI plunge in 3 weeks!
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                              Selling Short Has Been Made Too Easy

                                      Look at the Ultra-Short ETF for Financials - SKF.  It can be margined. 
                            Its trading volume  has surged.  Each time SKF is bought, more short sales
                            are put out on financial stocks.  And now down-ticks may be sold short without
                            even borrowing any stock.  These ProShares are regulated by the exchanges.
                            But they are very dangerous to America.  No one challenges them!  No one
                            in Obama's entourage seems to see how much Exchange Traded Short Funds
                            are exaggerating price moves, to the detriment now of millions of Americans
                            and the whole Global Economy.   SKF was started in February 2007, the top
                            for bank stocks.  on 2/1/2007, Washington Mutual was 45.  It is no bankrupt.
                            In the DJI-30, Citicorp was 54.73.  It is now 7.

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                                                                     BEAR RAIDS
                                        "A trader's attempt to force down the price of a particular security by
                                  heavy selling or short selling. In the case of short selling, the trader then makes
                                  a profit by buying the stock cheaply to cover the short position. Bear raids
                                  are often carried out by large groups of traders together, since an individual
                                  trader might not have a large enough trade to influence market price significantly.
                                                        ( http://www.investorwords.com/444/bear_raid.html )

                                    "A bear raid is a type of stock market strategy, where a trader (or group of traders)
                                  attempts to force down the price of a stock to cover a short position. This can be
                                  done by spreading negative rumors about the target firm, which puts downward
                                  pressure on the share price. This may be a form of securities fraud. Alternatively,
                                  traders could take on large short positions themselves, with the large volume of
                                  selling causing the price to fall, making the strategy self perpetuating."
                                                        ( http://en.wikipedia.org/wiki/Bear_raid )

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                                     The economic and financial ramifications of a felling stock are very clear.
                                  The company cannot raise needed investment capital with new offerings of stock.
                                   New projects are stopped cold.  The management of the company feels the pinch
                                   from shareholders and starts laying off people to control costs.  Other companies
                                   may decide not to work in partnership with the company that seems to be faltering,
                                   judging from its falling stock. 
Bear raids, therefore, have lasting effects!  And if
                                   they can drive a company out of business, the bear raiders never even have to
                                   buy back their shares.

                                     All this was fully appreciated by 1934 when Congress created the Securities
                                   and Exchange Commission and made participating in a "bear raid" a crime.   
                                   See JK Galbriath's
The Great Crash

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                                           See Jesse Livermore's Reminiscences of a Stock Operator

                                      They have made short selling too easy.  The Securities Exchange Commission
                            could care less.  The man who runs it is a  Bush "free-market" ideologue who does not
                            believe in anything but bare-bones regulation of Wall Street.  See Chistopher Cox,
                            a Fox in the Wall Street Hen House.  Cox even bowed to Wall Street pressures in
                            July 2007,  three weeks before the 2007-2008 Crash began,  and struck down the
                            74-year old ban on short sales on down-ticks that had been in place since 1934.  That
                            ban and the ban on naked short sales, which the SEC has lifted de facto,  were set in
                            place by Congress and FDR, in the aftermath of the Crash and Depression to prevent
                            widespread and very pernicious bear raids by Wall Street gangs who also organized
                            the spreading of false rumors to bring down stock prices and destroy companies and jobs.   
                            Read about Jesse Livermore's nefarious Wall Street operations.

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                                    UltraShort ProShares ETFs had a rationale, of course.  They were instituted
                             to let traders and investors hedge against beg declines.  But the tail is now
                             wagging the dog.   The market's are being pushed to extremes by the ease
                             with which traders can employ them.

                                    SKF has a flat top.  It may, indeed, next breakout.  That means many more financial
                            stocks may fall still further.  I am no friend of bankers, but this extra pressure
                            on them is artificial and pernicious.   This madness is not being challenged.
                            The SEC is clearly in cahoots with the gunslingers on Wall Street that
                            have pushed these vehicles.  The inmates run the asylum.  No one from
                            Obama's group mentions the dangers of these SHORT ETFS. Until they
                            are banned, why would the market not go to even more of an extreme.



            Here is a partial list of Ultra-Short Funds.
ETF Age (sessions)
ProShares Ultra Dow30 407
ProShares Ultra MidCap400 407
ProShares Ultra S&P500 407
ProShares Ultra QQQ 406
ProShares UltraShort Dow30 392
ProShares UltraShort MidCap400 392
ProShares UltraShort QQQ 392
ProShares UltraShort S&P500 392
ProShares Ultra SmallCap600 258
ProShares UltraShort SmallCap600 258
ProShares UltraShort Russell2000 258
ProShares Ultra Russell2000 258
ProShares Ultra Oil & Gas 253
ProShares UltraShort Oil & Gas 253
ProShares Ultra Technology 253
ProShares UltraShort Health Care 253
ProShares Ultra Health Care 253
ProShares UltraShort Industrials 253
ProShares UltraShort Financials 253
ProShares UltraShort Real Estate 253
ProShares UltraShort Semiconductors 253
ProShares UltraShort Consumer Goods 253
ProShares Ultra Consumer Goods 253
ProShares Ultra Utilities 253
ProShares Ultra Semiconductors 253
ProShares Ultra Financials 253
ProShares UltraShort Technology 252
ProShares UltraShort Consumer Services 252
ProShares UltraShort Basic Materials 252
ProShares Ultra Consumer Services 252
ProShares Ultra Real Estate 252
ProShares Ultra Industrials 252
ProShares Ultra Russell1000 Growth 239
ProShares Ultra Russell2000 Growth 239
ProShares Ultra Russell MidCap Growth 239
ProShares UltraShort Utilities 225
ProShares UltraShort Russell1000 Value 208
ProShares UltraShort Russell MidCap Growth 201
ProShares UltraShort Russell2000 Value 201
ProShares UltraShort Russell MidCap Value 201
ProShares UltraShort Russell2000 Growth 201
ProShares Ultra Russell1000 Value 201
ProShares Ultra Russell2000 Value 201
ProShares Ultra Russell MidCap Value 201
ProShares Ultra Basic Materials 201
ProShares UltraShort Russell1000 Growth 198
ProShares UltraShort MSCI EAFE 68
ProShares UltraShort MSCI Emerging Market 63
ProShares UltraShort MSCI Japan 58
ProShares UltraShort FTSE/Xinhua China 58
               Banning all short sales would have an immediate and positive impact on
            the financial collapse.    The SKF got absolutely hammered recently when the SEC imposed
            a temporary short sale short sale ban on financial stocks. 

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