22 Jul 2010, 02:13 AM EDT
Rating: Msg. 948522 of 948535
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Did Maheu Prevail on Behalf of CMKX Shareholders?
Sparky’s convinced that the answer to this question is an unequivocal yes; and in the paragraphs that follow he’ll try diligently to explain how he arrived at this conclusion.
To digress a moment, the processes through which individuals become “convinced” of anything are almost as unique as peoples’ fingerprints in that no two persons are likely to reach a given “conviction” for precisely the same reasons.
A typical jury deliberating a defendant’s fate serves as an excellent example of this truism. One juror, for instance, may be completely convinced of the suspect’s guilt based solely on the sworn testimony of a law enforcement official, and thus turn a deaf ear to any defense the defendant raises. But a fellow juror, perhaps one who has had even a single bad-cop experience, would perhaps hold prosecution witnesses to a much higher standard, might therefore find much fault in the very same testimony, and may therefore be more inclined to believe the defendant’s version of events.
In Sparky’s opinion, members of CMKM Diamond’s shareholder base have been deliberating for years now in much the same way jurors are supposed to. And much like individual jurors, shareholders each define words like “proof,” “factual,” and “evidence” quite differently.
Some shareholders found themselves convinced that CMKX was a sure win simply because they liked Urban Casavant, his crisp smile, his unique persona, and his stated desire to create a million millionaires. Others jumped blindly on board solely because Roger Glenn, of noted Sarbanes-Oxley fame, accepted a retainer check, briefly became the company’s attorney, and wrote a slew of opinion letters. Another sizable bunch became shareholders only because Robert Maheu, a former Howard Hughes confidant, joined the company’s Board, made some remarks about becoming compliant and maximizing shareholder value, and remained as a member of the shareholders’ Task Force. And others repeatedly added to their positions as each of these events, and more, transpired.
Yet at the same time, some shareholders tired very quickly of UC’s many promises; others felt that RG, who incidentally had absolutely nothing to do with drafting Sarbanes-Oxley, was only on board for the fast cash; and as months turned to years, several skeptics now even fear that IBM may have been “over the hill.”
Along similar lines, particularly in light of how much time has passed, many shareholders now fall firmly into one of two categories; they are either staunchly convinced they hold shares of a winner, the stock play of a lifetime; or they feel burned-out as optimists and now need concrete proof in order to restore their confidence.
Many of those in the former category have unavoidably become wishful thinkers; and all it takes to reignite their excitement or a conviction that “this is the week” is to have Acca show up in PalTalk and say it is – again. To them, it just doesn’t seem to matter that he’s never been right even once, that he’s a prolific liar; that his grammar and diction suck, that he’s not IBM’s nephew, or that their kid never got that CMKX racecar he promised.
But in vivid contrast, many who find themselves in the latter category, even though to date they have seen, heard, and processed the exact same information; have now become so leery of all that is said, written, and even filed; that they will never again believe they’re going to see a dime until said funds are literally stashed safely beneath their mattresses.
And while we’re on the subject of grouping people, it’s also safe to say that some will always be far easier to convince than others. On the one hand, there will always be a portion of any given population that is comprised of those who are generally optimists; types who always tend to be positive, and are inclined to overlook negatives. But on the other hand, there will always be pessimists; those who look for negativity and who could literally find fault with a lottery winning.
That all being said, Sparky finds himself as being squarely in the middle. And as an educated, experienced, and practicing analyst; Sparky tries diligently to make it a habit to maintain an open mind, to only formulate hunches that are supported by facts, and to rigorously test each hypothesis that he does formulate.
Having applied this analytical approach to the CMKM Diamonds matter for over six years now, Sparky presently finds himself more confident than ever that CMKX shareholders are going to be very handsomely rewarded for their lengthy wait; and that receipt of said compensation is much more likely to happen sooner rather than later.
Sparky supports this conclusion with facts, not just opinions – and can best explain his reasoning by discussing four distinct but still connected categories of evidence. These categories can best be described as Statistical, Economic, Political, and Professional Bashers.
Beginning in the second half of 1928, and more notably throughout 1929, a then little-known statistician by the name of Roger Ward Babson from Wellesley, Massachusetts was boldly predicting the near-term crash of US equity markets.
While Babson was far ahead of his time in terms of charting, and the use of moving averages, his upcoming market-crash predictions were based mainly on heightened aberrations in trading volume; aberrations that he had carefully measured employing a then relatively-new but now quite common statistical tool called a standard deviation.
Simply stated, standard deviations measure the degree of variation around a set of data points that comprise a population. And the bigger the population, the more reliable the standard deviation becomes as a way to measure variations around the population’s mean.
A good example of a data point, one Sparky has used before (http://ragingbull.quote.com/mboard/boards.cgi?board=CLB01247&read=30575), would be the average daily temperature of a city; let’s say San Diego, CA. And a good sized population might be 3,650 data points, which would be 10 years of daily temperature data.
For purposes of illustration, let’s assume the average (mean) daily temperature over ten years is computed as 70 degrees, and that the standard deviation around this mean is 12 degrees.
With a large population that contains 3,650 data points, it is safe to assume that the data points are normally distributed around this 70 degree mean; this as opposed to using let’s say a tiny and therefore possibly distorted ten-day population gathered in the summer, or in the winter. Accordingly, a statistician would conclude from this mean of 70 degrees and the related standard deviation of 12 degrees that 68.27% of all average daily temperatures fall within 12 degrees, or one standard deviation, of the 70 degree mean.
In other words using this example (which while it may be close is just an approximation); we could expect roughly 68% of all the average daily temperatures in San Diego to fall between 58 degrees (70-12) and 82 degrees (70+12).
Similarly; and again assuming a normal distribution, 95.45% of all average daily temperatures in San Diego would be expected to fall within two 12-degree standard deviations of this 70-degree mean; or between 94 degrees (70+[2x12]) and 46 degrees (70-[2x12]). A statistician would also predict that 99.73% of all average daily temperatures would be within three standard deviations of this 70-degree mean; or between 106 degrees (70+[3x12]) and 34 degrees (70-[3x12]).
And finally, one reviewing this same data would rather safely conclude that 99.99% of all the average daily temperatures in San Diego would be within four 12-degree standard deviations of the 70 degree mean; or between 118 degrees (70+[4x12] and 22 degrees (70-[4x12]).
Bearing the above example in mind, Babson had tracked the average daily trading volume in the shares of Wall Street’s biggest industrial and financial companies for over five years, he had meticulously adjusted these daily averages to reflect reported changes in shares authorized and outstanding; and without the luxury of computers, he had manually computed the related standard deviations.
So, when as early as late 1928 Babson saw the shares of the nation’s largest corporations and banks trading a volume levels five and six standard deviations above their means, he correctly concluded that some very unusual forces were clearly in play. After all, why else would an inordinate portion of a company’s float suddenly be changing hands?
Using the above average daily temperature example, it would be as if San Diego was suddenly experiencing an extended 130-140 degree heat wave!
At the time Babson speculated that the notably heightened volume he had detected was caused either by insider information being leaked to huge and influential investment groups then called syndicates (the same scummy sector we now call hedge funds); or by a dilutive, destructive, and greed-driven practice then called watering or counterfeiting (now known as naked short selling).
When Babson attempted to share his statistically-supported views with the financial community, he was predictably ridiculed by widely-read members of the financial press who were being clandestinely compensated by the syndicates. Nowadays we call these scumbags bashers. In fact, his assessment of then-current events and his resulting predictions were largely ignored in much the same way Sparky’s similar analysis and reporting of suddenly-heightened volume in the trading of bank shares in 2007 was largely ignored.
Want proof? Here’s an early Sparky post dated 03/10/2008, one that used standard deviation analysis exclusively, that warned the masses in no uncertain terms that the shares of Bear Stearns (BSC) were history: http://ragingbull.quote.com/mboard/boards.cgi?board=CLB01247&read=30353. Here’s a BSC update dated 03/13/2008: http://ragingbull.quote.com/mboard/boards.cgi?board=CLB01247&read=30418.
Here’s another Sparky post dated 03/17/2008 that accurately predicted that the shares of Lehman Bros (LEH) would crash just like Bear Stearns shares had, and that the shares of Fannie Mae (FNM) and Freddie Mac (FRE) were close behind: http://ragingbull.quote.com/mboard/boards.cgi?board=CLB01247&read=30523. And here’s a 03/27/2008 Sparky post that also accurately informed the masses that LEH shares would be next: http://ragingbull.quote.com/mboard/boards.cgi?board=CLB01247&read=30418.
Well, Roger Ward Babson not only accurately predicted the great Market Crash of 1929 and the infamous Depression that followed, but he also profited from them. Shortly thereafter he founded Babson College, which quickly became – and still is – one of the country’s most reputable and prestigious business schools; and, he also established Babson’s Reports, one of the nation’s first and once most widely-respected investment advisory firms.
Well anyway, to make a very long story short, Sparky here is not only a Babson College honor grad and with majors in both Finance and Investments, but he also thereafter worked as an Equities Analyst at Babson’s Reports.
Fast forwarding to 2005, after being persuaded by several investor friends, many of whom he met over the internet, Sparky applied the very same standard deviation analysis to trading in CMKX shares that Babson had used in 1928-1929 when monitoring trading in the stocks of major industrials and big banks.
And as those of you were then watching know, the volume was utterly absurd; not only relative to the shares authorized and outstanding, but also in light of the drastic and continuous slides in share prices.
Given the intensity of the demand for CMKX shares, an unprecedented frenzy that Sparky and his many accumulating associates witnessed firsthand; there is no other possible explanation than naked short selling (cellar boxing) that could come close to explaining why share prices just kept falling and falling and falling. Sure there were huge blocks of new shares continuously entering the marketplace for the first time, and granted this happened each time the level of authorized shares was hiked. But the quantity of these “new” shares, though huge, paled in comparison to the worldwide demand for CMKX shares.
And since the price kept sliding, all the way from $ 0.0004 to $ 0.00008, despite all this massive accumulation; what we were all observing was not “rotation,” but rather the inevitable consequence of naked short selling; the net price-eroding effect of an infinite supply of shares for sale.
Sparky won’t waste time getting into his actual statistical analysis of what happened, but rest assured it was just as obvious, and even worse, than what Sparky observed as many of the same Bad Guys cannibalized Lehman Bros and Bear Stearns.
Does Sparky have any evidence that some sort of a “sting” was involved? No; he does not. But has he satisfactorily established that CMKX was naked shorted into the ground? Yes; indisputably! If you don’t think so, then you obviously don’t understand the power, and uncanny accuracy, of statistics; and you should re-read the links above and this Statistical Evidence section a few more times.
It stands to reason that a sizable settlement would only be reached if there was a sizable naked short, and Sparky’s convinced that he has statistically established just that – there is/was a HUGE naked short.
Whether you listen to Talking Heads, or read the trash that the same agenda-advancing fools write; the financial and mainstream media has matter-of-factly concluded that beginning in 2007 the financial woes that collapsed economies around the world were caused by “sub-prime” mortgages. And they expect us to believe that because of these “bad” loans, equity markets worldwide saw over 50% or more of their values vanish, which wiped out years of retirement savings for millions; domestic unemployment soared from roughly 4.5% to 10%; housing starts plummeted from a seasonally adjusted annual rate (SAAR) of over 1.4 million units to a current SAAR below 600,000 units; real estate values crashed from record highs to levels not seen since 2003 & 2004; federal debt grew from about $ 9 trillion to over $ 13 trillion; and the Fed Funds Rate slid from over 5% to zero.
If you believe all this happened, despite trillions spent on TARP and stimulus crap, solely because a bunch of greedy bankers wrote a slew of sub-prime loans they shouldn’t have; then Sparky has a bridge for sale that might interest you.
For starters, by the first quarter of 2008, when US-based financials first began aggressively booking huge losses; there had not been a large-enough spike in loan defaults and foreclosures, even in the sub-prime arena, to justify even a tenth of the losses US banks recorded – even when adjusted for the risky leverage associated with the greed-driven securitization process.
And what’s more, real estate values back then had only fallen modestly; so even in cases of high loan-to-value (LTV) piggy-back loans (which granted, were often as high as 97% and 100% of purchase prices), the losses associated with foreclosures were peanuts compared to those that were being booked.
In a nutshell, it was all smoke and mirrors folks! Something much, much bigger was actually happening. Perhaps something like honoring the huge IOUs Robert Maheu had demanded, and that the banks had signed, years earlier. After all, how else could we bona fide shareholders have received certs?
And speaking of the economy in general and the US banking industry in particular; what about what’s happening, or not happening, right now? TARP was obviously a dismal failure, and if it wasn’t, then why are banks only lending to borrowers who have more on deposit than they are borrowing? And even though roughly $ 300 billion of $ 960 billion has been paid back, why are housing sales and prices still sliding? Why are US banks, when stripped of over-valued “window dressing” that is no longer marked to market still technically insolvent?
And what about all those stimulus dollars the Bush administration, and particularly Obama and crew, have blown at the expense of future generations – over $ 700 billion more to Fannie Mae, Freddie Mac, the FHA, the FDIC, the VA, and GNMA already this year? And obviously, none of this has accomplished squat. Sure, our elected elite have further stifled business with more regulations and by further expanding unionized government to the point where it now resembles a 15-pound tick hanging off a 30-pound beagle; but with the exception of iPhone sales perhaps, where else is there any real domestic growth, except in government payrolls?
Also, what about the millions of mortgages now in default but not being foreclosed against? Would Retail Sales, though still weak, be even as strong as they are now if so many people were not making their mortgage payments?
And what will happen to already-hurting real estate values if US banks do foreclose against this huge “black inventory” of delinquent loans, thereby adding all those units onto the already-swollen inventory of unsold homes? Or better yet, what will happen to the already-crippled balance sheets of US banks if they buy these value-deflated homes at their own foreclosure auctions, take them in-house as real estate owned (REO), and charge off the related deficiencies against already-hurting capital reserves?
Real estate values will plunge further, that’s what will happen. And that in turn will translate into even more homeowners being upside down, which will trigger still more defaults; even among borrowers with adequate heretofore excellent credit – the jingle crowd, so named because they send lenders keys instead of checks.
What a Faulking mess folks! And sadly, there is only one way out for the banks; and that is to re-inflate the Greenspan bubble that they collectively blew up between 2001 and 2007.
But how would they possibly do that? Unemployment is hovering just below 10%, which is crushing the disposable income needed to qualify for mortgages; credit scores have crashed from coast to coast, while lending standards have gotten stricter; down payment requirements have spiked upward, while available cash has dwindled; and costly credits to first-time buyers and seasoned homeowners recently ended.
There’s only way to re-inflate real estate values in America, which in turn will bring solvency back onto the balance sheets of US banks; and that is to inject back into the US economy the trillions in settlement funds that were extracted in 2007 and 2008. In a nutshell, that is the only hope for US banks, and the Fed, whose balance sheets remain completely cluttered with crap that is tied directly and irreversibly to US real estate values; and those in “power” know this! The only question that remains is “timing:” and that bring us to Sparky’s next category – politics.
Whether you are a Democrat, a Republican, or an Independent; if you’re content with what’s happened in America in recent years, Sparky doesn’t think you’ve been paying very close attention.
Perhaps it’s just a fault inherent in all democracies, but people striving to get elected, or to be re-elected, regardless of party affiliation, directly and indirectly “buy” votes by making campaign promises that they will unavoidably pay for with voter tax dollars. And while this may be nothing new, it seems that more promises are now being made than ever before, and that the cost of promises is clearly on the rise. What’s more, the costs of “new” promises keep getting piled onto the costs or “prior” promises.
To reuse the parasite-host analogy, more and more government, which produces no revenues at all and therefore relies on taxes charged against the base that it serves and regulates, closely resembles a 15-pound tick hanging off a 30-pound beagle. Sure, everyone loves the poor beagle and is genuinely concerned about its health; but each one of these campaign promises sucks more blood from the dog and ultimately adds to the weight of the damn tick!
The bottom line is that the ongoing trends of higher taxes, more regulations, and bigger and bigger governments at local, state, and federal levels simple must stop. Moreover, if America is to even maintain the lofty economic status it now enjoys around the world, this trend needs to not only be stopped, but also reversed.
As for President Obama, in Sparky’s opinion the biggest problems now facing his Administration are that his popularity is sliding, and steeply; that the Democrats could lose their majority in the House, and perhaps even the Senate; and that if the majority is lost in either chamber, heretofore loyalists may become far more centrist for self-preservation reasons, and to a point where vetoes could even be overturned.
If this were to happen, Obama may see his healthcare plan voted out of existence, the just passed financial regulation bill reversed, and less and less emphasis placed on amnesty for illegal aliens and more and more placed on border control.
Without deliberately being political, Sparky can’t help thinking that most of Obama’s popularity losses have to be associated with his engrained Chicago political style of saying one thing and doing another. The transparency he repeatedly promised when campaigning comes to mind as good example, for there has indisputably been zip in the way of transparency, and the masses know this.
Similarly, there were promises after promises that pork would not be tolerated, and that lobbyists would not be hired. But look what’s happened! The healthcare bill ended up being 2800 pages in length, and the financial regulation legislation the President signed yesterday was about 2300 pages.
To put these bloated bills in perspective, consider this: The Federal Reserve Act in 1913 was 31 pages, the Securities and Exchange Act in 1933 was 28 pages with 3 pages of Schedules, the Glass Steagal Act of 1933 was 53 pages, and Sarbanes-Oxley in 2002 was 66 pages.
Voters in Virginia, New Jersey, and Massachusetts ignoring Obama’s endorsements serve as additional recent signs that his presidency is in trouble. And even more recently, polls clearly and consistently indicate that the vast majority of Americans support Arizona in its efforts to control its immigration problems at the state level. Many states have also lined up in support of Arizona, and several have even filed legal briefs supporting its battle against Washington DC.
In Sparky’s opinion, what many voters are trying to say is that we don’t need new laws and regulations; instead, we simply need to start non-selectively enforcing the laws already on the books. And many, Sparky included, think that the same observation applies to Wall St and to the nation’s thoroughly-corrupted banking community.
That all being said, Sparky thinks that the only way the Obama Administration will ever see a second term is if there is some sort of huge Wall Street cleanup settlement that will be released within the next few weeks.
First and foremost, such a settlement would instantly stop the ongoing slide in real estate values, and would promptly begin to re-inflate prices. This in turn would automatically strengthen the now-pathetic balance sheets of US financials. Firmer and higher prices would also swiftly halt defaults that are now growing simply because the homeowners have no equity – the fast-growing jingle crowd.
What’s more, a huge injection of cash into the economy – not the government – would immediately stimulate retails sales, production, and employment; and stock prices would certainly soar as a consequence.
And let’s be real, if such a turn around were to happen between now and November, the Democrats now in control would fair much better, and would stand a far better chance to maintain control of Congress.
In a nutshell, if political reasons have delayed the disbursement of a settlement, and Sparky believes they have, they have now run their course, and further delays will become exponentially negative. In fact, if a huge stimulating settlement isn’t disbursed in the next few weeks, Sparky is of the opinion that this Administration is history, and that control of at least the House of Representatives will definitely be lost.
Professional Basher Evidence:
To the best of Sparky’s knowledge, the shares of CMKM Diamonds, Inc last traded about five years ago, on the grey sheets, and at a whopping price of quad eight ($ 0.00008), or $ 80 for one million shares. Yet still, there remains obviously-paid and professional bashers still bashing the stock on a 24/7 basis.
Of everything mentioned so far, this fact, in Sparky’s seasoned opinion, is the single-most compelling reason to believe that a huge settlement was reached between Robert Maheu and the Bad Guys.
Don’t, for even a minute, buy the crap that these thugs spew forth in the way of explanations. Like sure, we’re supposed to believe that they’re simply good Samaritans and that they hang out on penny stock message boards day and night, seven days a week, just to prevent other fools from being scammed? Yeah right!
When you take note of how many of them there are, the time they collectively spend on the boards, and the extent to which they understand the complicated history behind CMKX; only then does the oddness of their presence truly hit home.
So much has happened over the past seven years that even some of the brightest shareholders, some of whom own 100s of millions of shares too, have pretty much lost track of what’s actually going on. Many have completely missed major events, whether they are law suits filed by Attorney Frizzell in Tyler, by the SEC, or by Attorney Hodges. Others have totally lost track of the order in which events have unfolded. And still others have essentially given up the task of even lightly monitoring what’s going on.
But not the bashers! They have meticulous records, as evidenced by how quickly and methodically any one of them can dig up a specific post, take a line or two it contains completely out of context, and spatter it/them all over the place.
And what’s particularly odd in the CMKX arena is that these bashers, unlike most, are not trying to influence the price of a publicly-traded stock, at least not at this point. Most bashers, by constantly creating uncertainty, will prompt investors who have gains to sell prematurely, will prompt others who have losses to sell anyway so as to avoid bigger losses, and will prevent once interested investors from buying. In a nutshell, most bashers strive to always add to the supply (sell) side, and take way from the demand (buy) side; the net result being lower stock prices.
But just think about it: In the case of non-trading CMKX, why are they trying to create so mush uncertainty? If the shares never trade again, this uncertainty they are trying so desperately to create will obviously have no effect on share prices.
Sparky can speculate, but he doesn’t really have an explanation for this inconsistency; other than to say that there is clearly a lot of money at stake – a lot (bashers are not cheap) – and that there is clearly at least one upcoming decision that shareholders will have to make – and that the uncertainty-creating bashers are being compensated so that you will make the wrong decision.
To conclude, in Sparky’s opinion Robert Maheu prevailed; and if he did not, we’ll all be in bread lines anyway.
My best to all – Looking forward to meeting many of you in the Winner’s Circle, and soon too!