Wednesday, February 4, 2009
(Cont'd from above)...

Jim (cont'd):

Well, let’s see… let’s calculate it… the last time we were at the lows before January 20th when the index last hit its closing low on November 20th, the SKF closed at 262... yesterday it closed at 148... if you hedged yourself… if you bet against the financials or hedged yourself by using this… how did you do during this period… not made… you lost 43%… and if you had bought the intra day high… you would have lost 51%… lost… you would have taken a tremendous loss if you held on… despite the stunning decline… used it as a hedge… let’s see… you would have lost money owning the banks… but more important, if you had hedged with this product, which is how most people understand it… is supposed to go up when the banks go down… you lost even more… this is a double whammy against you… no one knows this… if the SFK was a drug and we found out that instead of treating the disease, it actually made the disease worse if you took it for a long period of time… the FDA would pull it off the market immediately… the SEC needs to look at the data… and just do that… it was approved in 2005 by one guy, who did no work, no research, no understanding of the product, we have got to repeal that, it is like a bad FDA approved it… because clearly this product doesn’t work as the public thinks it does… it is no good for hedging your financial positions… and it is no good for betting against them for any time that is longer than a day… even though we are getting lots of emails saying it is a perfect hedge for your 401K or your IRA… we just told you that is completely untrue… that is totally wrong.

What is this product good for then… well, I think it is great for hedge funds that want to destroy the financials… because every time someone buys a share the manager of this ETF has to bang the financials down… the way I see it the SKF has helped to get around the margin rules, to aid short sellers in crushing every stock on a basically daily basis… in short, despite what the SEC said in its letter approving this nonsense… it is a manipulators dream come true… how can the SEC not see that… what the SKF is not however is a way to bet against the financials for more than a day… now the people who use this ETF of mass destruction will tell you it just has to be used responsibly… that it works if you use it for short term holding periods… but even in the last ten days the financial index that you are betting against is up 7.8%… so you would expect double inverse right, that the SKF would only be down 15.6%… it is actually down 24.2%… you lost more than 8.6% more than you should have if the product actually worked… this is clearly not a financial drug that exists for responsible users.. it is aimed at long term abusers who’s savings it destroys… and it is aimed at market manipulators… who destroyed everyone else’s savings as well as the capital in the bank stocks… a national emergency… I am not getting… if we had a real Treasury Secretary, a real SEC Chairman… they would look at this and they would pull it… what is the purpose of a fund like the SKF… that according to it’s advocates is only meant for day trades.

Suppose some pharmaceutical company marketed a drug that was only meant to taken once, but was highly addictive and damaging if used over time… would the FDA let them release this drug without adequately disclosing the risk… no of course not… the FDA could get in trouble if they released a product like this… while the SKF is just like that drug… if the SEC had the same standards as the FDA… and it should… then this product would never have been allowed on the market… and the way I see it, lots of people including you are getting ripped off… the bank stocks themselves should complain about it but they are not sophisticated enough… the owners, the people who run banks are not sophisticated enough to do this calculation… I am sorry, I do not mean to slam them, but this is something that I used to do for a living… I get it… thing of this product like smoking cigarettes… worse and worse for your long term health… the longer you use and doing damage to others thru second hand smoke… allowing the SKF to exist… allowing leverage short selling outside the bounds of the margin rules… rules which are there to protect the markets health… something the SEC has done by improving this product is like making it legal for people to smoke in hospitals, in schools, in retirement homes… it just makes no sense… and it hurts everybody except the prevaiers and merchandisers of the products… the tobacco companies of our stock market… the SEC has to start protecting us against from these repatious products… the same way the FDA protects us from bad drugs.

If you need any more data on the falice of this pro ultra product… a product that supposedly experts, advisors in the media still recommend that people use… any one who tells you to own this is a quack… prescribing cigarettes to help your health… not to mention all the other proliferations of the travesty… I want you to go to RealMoney.com, it is part of TheStreet.com family, where I am chairman… and read the work of a man by the name of Eric Oberg, who brought this to my attention… he knows derivatives just about anybody… having toiled in the derivative vineyard of Goldman Sachs for 17 years, and then retired as a managing director, I am cribbing his work because it is the best, it is the most methodical… and it is the most rigorous… as her first action Mary Shapiro must recognize that manipulation thru the SKF must be stopped… this ETF tail is constantly wagging the financial dog down… she must ban this product… just as surely as the head of the FDA would pull a drug even if it had already been approved.. because it is being misused or because it doesn’t work… Madam Chairwoman do not be persuaded by those who thrive on this product… the brokers who promucate it… and the short sellers who use it to manipulate it stocks down… ban the product… stop capitalism from itself… what am I doing here… I am blowing the whistle on this product… I know it has been the subject of multiple outrages.. but I will keep going until the SEC does something about it… is the SEC even listening… or are they going to turn a deaf ear to me… like they did with Harry Markopolos, the guy who blew the whistle on Madoff multiple times and just spent the whole day testifying before Congress… they did not care what he said before… they did not care what I have said before on this… they have got to listen… or maybe they will just turn a blind eye like Marco Polo… because after all this unlike Markopolos’ whistle blowing is on TV.

This SKF it goes on every day… they are going to act like they don’t understand… the brokers don’t want to get rid of it cause it is huge commission… and just because I have… if I didn’t have a darn TV show I would be more affective at getting rid of this… because I would be down there… and people would say, oh he is not just a clown…I have traded more derivatives more than just about anybody else in their lives… I know what I am talking about.

[verbatim recap]

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Jim went on after this segment to take questions from callers, and responded with his comments...

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Q:    In light of the recent exposure of the shocking failure of the SEC, shouldn’t we go back thru all the approvals that the SEC signed off on? Such as the highly manipulative in ultra shorts…

Jim:    Well, I think a combination of things has to happen… we need a special prosecutor to clean up the people who knew what was going on and sold and sold us down the river… and we need to redo and rethink everything that was approved of during the Cox administration SEC… because it was an unsophisticated, unrigorous SEC that didn’t really understand the stock market… and has contributed mightily for the billions, the trillions of dollars that people that have lost… until the actual people stand up and demand accountability everything that this SEC approved…every rule change needs to be reexamined… because they were the enemies of capitalism… as surely as Marx wrote, as Lennon acted, as Stallon implicated… the Christopher Cox SEC destroyed our capital markets… and it is a sin… it is a ridiculous… they have no right to even call themselves Republicans.

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Q:    Well, Mr. Harry Markoplos was testifying on Capital Hill today, he basically revealed the ineptness of the previous administrations SEC. My question is, what can the new chairwoman, Mary Shapiro, do differently to restore confidence to the market?

Jim:    First she has to admit… she has to come out and say that the previous SEC did a terrible job… but it was mandated from the top… which turned a blind eye to everything…not just this level of chicanery… she has to reputiate not the actual people who were doing the cut and dried stuff… but the top people who really let this country down… then we need show trials… refer stuff to the justice department who did this… out all the people in the SEC who failed to regulate Madoff… I want to know their names… they shouldn’t be able to just hide behind the government shield… if you screwed up you own it… let’s prosecute them… I am outraged.

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[verbatim recap]

[end of segment]

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