Financial Crisis

[lannarebirth]

In the main it is the dam_n fund managers managing the assets on behalf of Joe Public in the pension schemes, or other funds.

<snip>

at the expense of the long term investors.

it has been a ponzi scheme with all the 401k investors as the mugs - I don't know that they have woken up to the reality of how they have been scammed yet though.

and 20+% unemployment means markedly less for the ponzi bucket.

That's true enough, but the ponzi scheme involves those buying questionable investments, not those who point out there may be little to no value in these investments.

[lannarebirth]

Make short selling illegal? You know the ban on shorting financial stocks is why the market can't find a bottom, don't you? Short sellers are the buyers at intermediate and long term bottoms. Longs have already shot their bolt by then. Might as well make selling stocks illegal and require that each buyer pay more than the previous "owner". Makes as much sense.

I have read a lot about short sellers.

These guys say that they are only the messenger, and that the company was already in trouble before they make a strike.

However, what they do is to "borrow" the stocks by paying a fee and then sell them in the market in the hope that this will drive the price down, so that they can buy the stocks back at a lower price and return them having hopefully made a profit. But who is "lending" the stocks and who actually owns the stocks being lent? In the main it is the dam_n fund managers managing the assets on behalf of Joe Public in the pension schemes, or other funds.

So the short seller makes money, the "lender" makes his fees on a percentage of the transaction but the real investor has lost out, both on the lending fee and the loss in value of his stocks. There has also been a rapid move down in the stockmarket, as shares have been sold that would possibly not have been put on the market.

The whole process of short selling is another casino game run at the expense of the long term investors. It adds more much volatility into the markets, which the traders like, but the long term investors, who would prefer to see less swings and more stability, hate.

Short selling is another leveraged financial bullshit product which destabilises the market for the benefit of the few who can act quick enough at the expense of the majority who can't and so should be banned.

I prepared a nice point by point rebuttal of all that, but when I hit "send" I realized my ISP was down. If I find the energy I'll prepare another one. In the meantime, try to find a market, anywhere, which didn't plunge directly after the banning of short selling. NOBODY likes a fixed market.

[Naam]

However, what they do is to "borrow" the stocks by paying a fee and then sell them in the market in the hope that this will drive the price down, so that they can buy the stocks back at a lower price and return them having hopefully made a profit. But who is "lending" the stocks and who actually owns the stocks being lent? In the main it is the dam_n fund managers managing the assets on behalf of Joe Public in the pension schemes, or other funds.

So the short seller makes money, the "lender" makes his fees on a percentage of the transaction but the real investor has lost out, both on the lending fee and the loss in value of his stocks. There has also been a rapid move down in the stockmarket, as shares have been sold that would possibly not have been put on the market.

the "lender" is screwed too 12Chang. the fee he receives is a fraction of what he loses caused by successful shortselling. serves the lenders right!

[lannarebirth]

However, what they do is to "borrow" the stocks by paying a fee and then sell them in the market in the hope that this will drive the price down, so that they can buy the stocks back at a lower price and return them having hopefully made a profit. But who is "lending" the stocks and who actually owns the stocks being lent? In the main it is the dam_n fund managers managing the assets on behalf of Joe Public in the pension schemes, or other funds.

So the short seller makes money, the "lender" makes his fees on a percentage of the transaction but the real investor has lost out, both on the lending fee and the loss in value of his stocks. There has also been a rapid move down in the stockmarket, as shares have been sold that would possibly not have been put on the market.

the "lender" is screwed too 12Chang. the fee he receives is a fraction of what he loses caused by successful shortselling. serves the lenders right!

Its usually the brokerage that lends and takes in the fee, and the actual stockholder sees none of it as he signed his rights away when he opened his account. He may however stipulate separately that the shares he owns are not to made available for loan out. few investors ever do this however.

[12DrinkMore]

I prepared a nice point by point rebuttal of all that, but when I hit "send" I realized my ISP was down. If I find the energy I'll prepare another one. In the meantime, try to find a market, anywhere, which didn't plunge directly after the banning of short selling. NOBODY likes a fixed market.

Try using the back button, the text may still be there. Anyway, I hope you recover enough energy to hit a few keys.

But my point is we shouldn't have short selling at all, so that there would be NO swings from it, whether they are due to the introduction of a ban or, as what happened, the swing once the ban is lifted. By banning it entirely a destabilizing factor is removed from the equation. This is not "fixing the market", it is reducing the dam_n leveraging which is killing us all.

Hah, and that was a joke, when our Darling got himself a little upset because nobody told him that his ban on shorting the banks was due to expire. And then the shares plunged again. Stupid idiot can't even use a personal organiser.

[lannarebirth]

I prepared a nice point by point rebuttal of all that, but when I hit "send" I realized my ISP was down. If I find the energy I'll prepare another one. In the meantime, try to find a market, anywhere, which didn't plunge directly after the banning of short selling. NOBODY likes a fixed market.

Try using the back button, the text may still be there. Anyway, I hope you recover enough energy to hit a few keys.

But my point is we shouldn't have short selling at all, so that there would be NO swings from it, whether they are due to the introduction of a ban or, as what happened, the swing once the ban is lifted. By banning it entirely a destabilizing factor is removed from the equation. This is not "fixing the market", it is reducing the dam_n leveraging which is killing us all.

Hah, and that was a joke, when our Darling got himself a little upset because nobody told him that his ban on shorting the banks was due to expire. And then the shares plunged again. Stupid idiot can't even use a personal organiser.

Tried the back button, nothing there anymore.

Anyhow, I have to disagree with your premise. short selling is not inherently destabilizing, in fact its just the opposite. It is one of the mechanisms that helps markets have liquidity. Liquidity is the most stabilising influence of all in markets. Leveraging plays no part in whether it is good or not. The same leverage applies whether short or long. More often than not excessive leverage hurts the trader and not the market, whether short or long. You could make a good argument for banning or limiting leverage, and I might rally to your side, but that is an argument separate from banning of short sales.

Edited March 12, 2009 by lannarebirth

[lannarebirth]

I would add, there ARE institutions that involve themselves in illegal short selling activities, just as there are the long "pump and dump" artists. I'm not defending them when I defend the short sale practice.

[AlexLah]

I am sure there will be some who will instantly jump up to discredit this information

and probably ridicule the low standard of the newspaper in which it was written but

at this stage it seems some people are considering news and information from all sources...............

House prices 'could drop another 55%' and leave Britain bankrupt

The report leaked yesterday from financial analysts Numis Securities says that the collapse in house prices is not 'anywhere near over'.

It also predicts a deep recession lasting throughout next year and a 'very real probability' that Britain will go bankrupt.

http://www.dailymail.co.uk/news/article-11...n-bankrupt.html

Just for the record, March 13-15.

So I did remember it correctly when I asked if someone else had seen that secret memo of 60% drop in housing prices. They just changed the original article from last year. Better make more screendumps of staggering news articles.

13-15 still standing according to latest signals.

There is an interesting testimony from a company that was sort of destroyed by these short sellers and he showed exactly how they did it. Will post linky when I find again.

[flying]

Perhaps if the uptick rule was left in place shorting wouldn't be seen as such an evil vehicle

But really at the end of the day it seems the whole system is so sick I do not see it getting better

anytime soon. We will see if & when confidence ever returns.

I get the distinct impression too many have seen too much of how polluted the financial world is. It may be a long time IMHO before confidence returns.

Of course there will always be those waiting & chomping at the bit on the sidelines. With the thought that they will jump in & beat the rush to ride the train back to the top. But without the confidence of the majority I wonder if it will be the same. Interesting times indeed.

[lannarebirth]

Perhaps if the uptick rule was left in place shorting wouldn't be seen as such an evil vehicle

The uptick rule should never have been dispensed with and will be reinstated soon I'm sure. That said, it's not too all that important except as a talking point.

[12DrinkMore]

Anyhow, I have to disagree with your premise. short selling is not inherently destabilizing, in fact its just the opposite. It is one of the mechanisms that helps markets have liquidity. Liquidity is the most stabilising influence of all in markets. Leveraging plays no part in whether it is good or not. The same leverage applies whether short or long. More often than not excessive leverage hurts the trader and not the market, whether short or long. You could make a good argument for banning or limiting leverage, and I might rally to your side, but that is an argument separate from banning of short sales.

- If short selling was not a destabilizing force, then why was it banned in several countries for banking shares?

- Is the extra liquidity added by bringing more shares onto the market just to force the price down really needed? The market will in any case reach an equilibrium between the buyers and sellers. Just look at the volume of shares traded on any stock market. It is HUGE, far far more than anyone who examines it would think reasonable. And the reason is that banks make a profit on every single transaction, so they have a vested interest in making extra and unnecessary transactions, just to charge the shareholders a bit more. It is all a massive scam. Short sellers are taking leveraged bets hoping that they will help cause the price to go down. This is not investment, it is betting.

- If the excessive leverage hurts the trader more than the market more often than not, there would be no short selling.

The more I think about the leveraged derivative markets, and I have worked in trading rooms for over a decade, the more I realise that it is NOT about risk minimising, but much more about bonus and fee maximising and screwing the most out of the investors funds.

I never really trusted the banks, and this crisis justifies my fears completely.

[flying]

I never really trusted the banks, and this crisis justifies my fears completely.

I bet your not alone with that thought.

[lannarebirth]

Anyhow, I have to disagree with your premise. short selling is not inherently destabilizing, in fact its just the opposite. It is one of the mechanisms that helps markets have liquidity. Liquidity is the most stabilising influence of all in markets. Leveraging plays no part in whether it is good or not. The same leverage applies whether short or long. More often than not excessive leverage hurts the trader and not the market, whether short or long. You could make a good argument for banning or limiting leverage, and I might rally to your side, but that is an argument separate from banning of short sales.

- If short selling was not a destabilizing force, then why was it banned in several countries for banking shares?

To placate long only investors. In every instance where short sales have been banned, I think you'll find markets have plunged. Correct me if I'm wrong please.

http://www.nytimes.com/2008/10/08/business/08short.html

- Is the extra liquidity added by bringing more shares onto the market just to force the price down really needed? The market will in any case reach an equilibrium between the buyers and sellers. Just look at the volume of shares traded on any stock market. It is HUGE, far far more than anyone who examines it would think reasonable. And the reason is that banks make a profit on every single transaction, so they have a vested interest in making extra and unnecessary transactions, just to charge the shareholders a bit more. It is all a massive scam. Short sellers are taking leveraged bets hoping that they will help cause the price to go down. This is not investment, it is betting.

I can't disagree that it is all a massive scam, but short sellers are no more guilty than are long participants. Equities are a scam in general, that's why many people only trade them rather than hold them long term. It's a huge huge scam. Nice tax bereaks for holding long term, so you won't think about selling while the people who convinced you to buy it are selling theirs. Lobbyists.

-.

If the excessive leverage hurts the trader more than the market more often than not, there would be no short selling.

Well, I'm only speaking from first hand experience here.

The more I think about the leveraged derivative markets, and I have worked in trading rooms for over a decade, the more I realise that it is NOT about risk minimising, but much more about bonus and fee maximising and screwing the most out of the investors funds.

Sometimes it's about hedging, sometimes its about leveraging.

I never really trusted the banks, and this crisis justifies my fears completely.

I would stretch that to include the entire military, industrial, finance, political complex.

Edited March 12, 2009 by lannarebirth

[12DrinkMore]

To placate long only investors. In every instance where short sales have been banned, I think you'll find markets have plunged. Correct me if I'm wrong please.

http://www.nytimes.com/2008/10/08/business/08short.html

From that article

Whether the ban worked, given the market plunges that followed, is a matter of debate.

“If there had been no ban, would they have gone down even more?” said Mozaffar Khan, a professor who as studied short-selling at the Sloan School of Management at the Massachusetts Institute of Technology. “Normally the studies that we do are in normal times, and we just don’t know in a state of panic what the outcome would have been.”

The article appears to have been written on behalf of hedge funds and other gamblers.

Nasdaq studied the changes in the market during the week before and the week after the short ban and found that the percent of selling in the market that was short-selling dropped to 16 percent, from 44 percent, for financial companies. Even nonfinancial company stocks saw less shorting.

So I would rate the ban as being a positive stabilising influence if almost half the market was geared towards short sellers.

Mr. Fishman said short-selling has been wrongly blamed. The real problem, he said, is the weakness of financial institutions.

“You can never change the path of a stock,” Mr. Fishman said. “If it’s going to go down, it’s going to go down.”

Absolutely, but does it have to be artificially accelerated and then overshoot the downward side just to keep the dam_n hedge funds happy? I still maintain that the volatility should be kept out of the market by banning the short sighted and short term betters.

The stock markets came into existence to provide a means to raise long term funding from investors prepared to risk capital for the long term return on their investment. It has degenerated into a roulette wheel where the original investors aims have become secondary to the greed of the short term fund managers.

[lannarebirth]

Absolutely, but does it have to be artificially accelerated and then overshoot the downward side just to keep the dam_n hedge funds happy? I still maintain that the volatility should be kept out of the market by banning the short sighted and short term betters.

The stock markets came into existence to provide a means to raise long term funding from investors prepared to risk capital for the long term return on their investment. It has degenerated into a roulette wheel where the original investors aims have become secondary to the greed of the short term fund managers.

No one hates the hedge funds more than I do, but I think you'll find they're the same ones that took Yahoo to $600/share and I didn't here anyone complaining then. The volatility is from the leverage, it is not from being short or long specifically. Long holders who are leveraged are the ones who send the markets screaming down. The HAVE TO get out. Do short sellers benefit from that? Yes they do but they are not the cause of that deleveraging.

I agree with your final paragraph in every respect except I would probably insert the word ignorant between original and investor. The past 15 years the"market" has been the derivative that has created the economy. A false economy.

[jcon]

I think shorting has been a kind of scapegoat here in the financial crisis. I would tend to side more with lanna on the issue - it provides liquidity in the market, and liquidity is always good. Remember when Bear Stears was bitching about the short sellers taking down the company? Well, any company that has been "shorted to death" was actually pretty darn deserving of it thus far... the shorts just accelerated the process, which is a good thing - clear the market. (isn't there another rule that you can't short under 5 dollars anyway?)

As an aside: what happens in the options pits when short selling is banned/restricted in their respective underlying? Floor traders have to manage their 'greeks' and by limiting their ability to hedge by selling short when buying calls or selling puts, they are in an awkward and dangerous position of being long/short delta. I haven't spoken to my floor trader buddies since I left the floor, but this just made me wonder how they hedge under short restrictions...?

Also, even if you ban the 'practice' of short-selling, or restrict it somehow, there are plenty of ways to short an underlying. It's a part of the market, I'd say an essential one at that, and thus it is required for liquidity and functionality. To make everybody just be a long - aka buy stock - is even more scary if you think about it...

[12DrinkMore]

To make everybody just be a long - aka buy stock - is even more scary if you think about it...

Well, I've thought about it and it doesn't seem at all scary to me, but the trillions of debt do seem very scary.

If everybody could only be long on stock they would all have a very vested interest in the success of the underlying companies. There would be much more responsibility from both the management of the company and the shareholders, and we would have a much more stable economic situation.

And a huge advantage would be that we wouldn't need hundreds of thousands of neurotic imbeciles in the banks, shorting, buying and selling options on options in order to make an extra 1%, an in the process making the whole thing so complicated that nobody has a clue who owes who what. The whole system has evolved to enable a few to make a lot of money at the expense of the rest of us. And without manufacturing a dam_n thing with added value.

All these instruments are only necessary if you consider that the self serving markets are necessary. Maybe the question to be considered is "what is the whole point of the financial markets?"

Is it to facilitate the manufacturing industry and trade, where real people with real jobs are making real products?

Or is it to enable people who don't actually manufacture anything to award themselves massive financial awards for gambling away 50 trillion Dollars that don't exist, completely removed from the real world? And then taking down the economies of whole countries due to utter greed.

I hope that as part of the aftermath of this current crisis the role of the banking industry in the economy will be earnestly debated, and whether "investment banking" as it currently exists, really has a future in its current form.

[Hairy]

There is an interesting testimony from a company that was sort of destroyed by these short sellers and he showed exactly how they did it. Will post linky when I find again.

I couldn't find where you mentioned this before in this thread, but I'm going to take a flying leap and assume it was OSTK, Overstock.com. The CEO of that trash-heap, Patrick Byrne, has been whining about short sellers for years, including nearly continuous bitching about "naked shorts" somehow destroying his worthless company. I made a good chunk of change off buying puts on his stock last year. It's another Martha Stewart Omnimedia or Amazon.com, both of which were/are horrendously overvalued in large part because their founders are former Wall Streeters who are masters of stock price manipulation. Martha has gotten her comeuppance, and I think Bezos will over the next year or two as reality sets in.

Anyway, getting back to Overstock.com, OSTK has made almost no profits over the years, yet the CEO seems to think it should be valued like a dot.com stock at the height of the bubble in early 2000. It's not going to happen unless he can actually show the world that he can turn a profit by selling remaindered merchandise that nobody wanted in the stores.

Hilariously, the day his stock price finally started its harshest collapse was the day that it was taken off the Regulation SHO list (the list of stocks for which naked shorting was occurring). In other words, when the shorts finally gave up and went away, the stock's value dropped around 66% over the next few days.

Another much smaller, and nowadays less vocal, candidate might be Research Frontiers, REFR, which was touted by Manuel Asensio as being an excellent short candidate back during dot.com days. He was right, too. I wish I'd listened to him instead of the lying bastards who run that company. In my opinion, they should all be thrown in prison just like Madoff is about to be.

The uptick rule should never have been dispensed with and will be reinstated soon I'm sure. That said, it's not too all that important except as a talking point.

There was never any real point behind the uptick rule. Unless a stock is collapsing hard at that very second, it will bounce up and down anyway, so a short will be allowed within a few trades. Open up a Yahoo Finance page on an active stock and watch the little numbers flash red and green if you don't believe me. Every green is an uptick. Utterly meaningless.

- If short selling was not a destabilizing force, then why was it banned in several countries for banking shares?

- Is the extra liquidity added by bringing more shares onto the market just to force the price down really needed? The market will in any case reach an equilibrium between the buyers and sellers. Just look at the volume of shares traded on any stock market. It is HUGE, far far more than anyone who examines it would think reasonable. And the reason is that banks make a profit on every single transaction, so they have a vested interest in making extra and unnecessary transactions, just to charge the shareholders a bit more. It is all a massive scam. Short sellers are taking leveraged bets hoping that they will help cause the price to go down. This is not investment, it is betting.

- If the excessive leverage hurts the trader more than the market more often than not, there would be no short selling.

The more I think about the leveraged derivative markets, and I have worked in trading rooms for over a decade, the more I realise that it is NOT about risk minimising, but much more about bonus and fee maximising and screwing the most out of the investors funds.

I never really trusted the banks, and this crisis justifies my fears completely.

You have absolutely no understanding of what you are blathering about.

Short selling is simply a bet that a given stock will go down. Buying a stock long is a gambling bet that it will go up. They are mirror images of each other with no practical difference whatsoever between them, UNLESS you're the one doing the investing, in which case shorting is a lot riskier and could result in your going bankrupt if you screw up a bet, due to the market's natural tendency to go up over time (due to inflation, corporate growth, and so on) and because someone who is short a stock can be subjected to unlimited losses if the stock skyrockets (e.g., gets bought out by a competitor for double the stock price, or worse, pulls a Netscape or Global Crossing or Apple or Microsoft and does a moonshot). Shorts really have to know what they're doing with respect to any company they short, or else they will get boned hard.

The reason some countries have banned the practice is because their politicians are illiterate bumpkins with even less understanding of markets than a tapeworm. I could analogize that further. . . .

As far as your repeated use of the word "leverage", this just goes to show how thoroughly ignorant you are. A straight short isn't leveraged; his bet moves at a 1:1 ratio with the stock price. Leverage is when you gain or lose more than what a simple pricing mechanism would give you, usually by borrowing money.

Now, most brokerages link shorting to MARGIN accounts, and with MARGIN, you can get some leverage (usually limited to 1.5:1 or at most 2:1). But that's an entirely different bucket of fish. There is no inherent reason to tie shorting to margin.

Some people also look at ordinary options as creating leverage, in which case leverage might be said to be when you can gain or lose more than what a simple pricing mechanism would give you. For example, you buy a call option on a company's stock at a given strike price in the belief that their earnings report will be spectacular, allowing you to get far higher returns on your investment than merely purchasing shares of their stock would allow. Say Apple stock is at about $96, and you buy a call for $200 against 100 shares of Apple, strike price $100, because their earnings are coming out tomorrow. That $200 would have bought you two shares, but instead you control 100. Notice the significant premium of almost $600 ($100-$96 times 100 shares, plus $200 more, all in time and volatility premiums) that that bet incurs; you have to be seriously correct to get that money back. If the earnings report is spectacular and the stock goes to $110, your call is intrinsically worth $1000 (plus any remaining time premium). Had you bought two shares, you would have made twenty bucks (with which you could buy many peanuts, because money can be exchanged for goods and services).

By the way, shorting provides a much-needed buffer. When share prices start to fall, shorts step in to cover by BUYING BACK THE SHARES. That means that the stock falls less than it otherwise might. In other words, it can prevent or at least slow total collapse, giving a little breathing time so that companies can arrange an emergency buyout, or go to the public with open balance books to show that they really aren't in as bad a shape as people think, or even -- hey, here's a thought -- the executives can demonstrate high confidence by announcing that they're going to buy a huge chunk of shares.

[Chaimai]

Short selling is simply a bet that a given stock will go down. Buying a stock long is a gambling bet that it will go up. They are mirror images of each other with no practical difference whatsoever between them, UNLESS you're the one doing the investing, in which case shorting is a lot riskier and could result in your going bankrupt if you screw up a bet, due to the market's natural tendency to go up over time (due to inflation, corporate growth, and so on) and because someone who is short a stock can be subjected to unlimited losses if the stock skyrockets (e.g., gets bought out by a competitor for double the stock price, or worse, pulls a Netscape or Global Crossing or Apple or Microsoft and does a moonshot). Shorts really have to know what they're doing with respect to any company they short, or else they will get boned hard.

The reason some countries have banned the practice is because their politicians are illiterate bumpkins with even less understanding of markets than a tapeworm. I could analogize that further. . . .

As far as your repeated use of the word "leverage", this just goes to show how thoroughly ignorant you are. A straight short isn't leveraged; his bet moves at a 1:1 ratio with the stock price. Leverage is when you gain or lose more than what a simple pricing mechanism would give you, usually by borrowing money.

Now, most brokerages link shorting to MARGIN accounts, and with MARGIN, you can get some leverage (usually limited to 1.5:1 or at most 2:1). But that's an entirely different bucket of fish. There is no inherent reason to tie shorting to margin.

Some people also look at ordinary options as creating leverage, in which case leverage might be said to be when you can gain or lose more than what a simple pricing mechanism would give you. For example, you buy a call option on a company's stock at a given strike price in the belief that their earnings report will be spectacular, allowing you to get far higher returns on your investment than merely purchasing shares of their stock would allow. Say Apple stock is at about $96, and you buy a call for $200 against 100 shares of Apple, strike price $100, because their earnings are coming out tomorrow. That $200 would have bought you two shares, but instead you control 100. Notice the significant premium of almost $600 ($100-$96 times 100 shares, plus $200 more, all in time and volatility premiums) that that bet incurs; you have to be seriously correct to get that money back. If the earnings report is spectacular and the stock goes to $110, your call is intrinsically worth $1000 (plus any remaining time premium). Had you bought two shares, you would have made twenty bucks (with which you could buy many peanuts, because money can be exchanged for goods and services).

By the way, shorting provides a much-needed buffer. When share prices start to fall, shorts step in to cover by BUYING BACK THE SHARES. That means that the stock falls less than it otherwise might. In other words, it can prevent or at least slow total collapse, giving a little breathing time so that companies can arrange an emergency buyout, or go to the public with open balance books to show that they really aren't in as bad a shape as people think, or even -- hey, here's a thought -- the executives can demonstrate high confidence by announcing that they're going to buy a huge chunk of shares.

Thank you. That was the most comprehensive, yet clear, definition thus far.

[Naam]

You have absolutely no understanding of what you are blathering about.

but you have to admit that most of the postings of '12drinkmoreChang' are in line what many others are (right or wrong) thinking and quite entertaining moreover, they are his ideas, wrapped in his own words and quite refreshing in comparison with those utmost boring (selected according to individual beleifs) copied and pasted quotes or links "this one said this, that one said that"

[Nouf]

Nowt wrong with short selling, the only gripe most have is the naked type, i have issues with selling naked, when you simply dont have enough to cover the postions

i Know of examples in the US treasury market on Bonds

its a self fullfilling cycle, if a share gets smashed lower from short sellers, they can loose their potential to obtain credit, and then get downgraded by the credit agencies, therefore a good company gets destroyed

if a company gets "bear raided", it can destroy good companies, its a two edged sword, the short sellers, find the weak companies, but they can also ruin good companies, as confidence is lost

If the company does not have a strong cash flow, its cant either buy back stock to defend itself, or its invites more shorts to pile on

Blame can also be sought to the pension and mutual funds that loan out the stock, for a fee

The funds complain that stocks are gettting destroyed by short sellers yet the idiots are loaning out the stock

Are they thick?????

the premise of short selling is that you are supposed to find stock so you can borrow ie its a loan to Bet on it going lower

Naked short selling

This is what Patrick Byrne from Deep capture suggests is what is happening, personally i hapen to agree with him, the Rich elite own the US government, its not the other way around

if it was, where the criminal charges????? wheres the indictments??? Rember the Tech Bubble, its the same people robbing the public once more, which is why i think we are not likley to see those highs seen on the US markets for a very long time

all those retirement plans just went up in smoke,

http://www.deepcapture.com/

That is one of the floors on the market place, its great when it works for you, try finding shares to buy back when you have a vicious rally

thats when you have you head handed to you

the system (market) is full of naked positons, and thats part of the corruption in the market place, but that`s also part of understanding who and what you are dealing with

the Whole US system is run by a bunch of corrupted individuals, (anyone thinks different errrr Madoff, Stanford etc)

there is more corruption to be found if the SEC digs hard enough, infact corruption is part of the whole US system for the best part of 20 years and and a loss of confidence in the whole US system is a potenial in the coming days/weeks ahead

This is not a attack on the US system, look at the UK as well, the corruption is rife its the facts, and it has been for years, Only now they want to be seen to do something about now

Funny how when everything was fine and dandy the corruption was ignored, yet everyone is getting their ass handed to them via there 401Ks, the public now want justice

still better late than never

you only have to look to the deals between congress and the rich elite

Only yesterday Barney Frank (one of the biggest corrupted members of congress) wants to have a hearing with law inforcement officials to go after the corruption

Yea right!!! i beleive that when i see it, sounds like more jaw boning

Selling short provides a BID in the market place

i remember a personal conversation with a highly regarded Market newsletter Analyst, back in Sept 08 just after the SEC banned the financials to be shorted, he suggested no one would sell i said if the shorts were out of the game, the market would have no floor

Last Sept/Oct was the result of having NO BID, there was simply no one to help buy financial stocks and put a floor under the Financial stocks hence you had a meltdown and crash

the Shorts sellers are a part of the market, as they provide liquidity to the market place just like Long holders do,

Look and see what happend when you have a "long only" market, seen the Hang seng

recently we have had a moon short of a rally, alot of short covering, but it helped find a floor to the market, 3 days of rallying and the media are proclaiming the start of a bull market

without that forced short covering the market was bleeding, take away the short sellers, chances are you see a 3 handle on the SPX

(3 handle means 300 or so)

Shhhheeeessshhhhh the Media,they are worst than the corrupted

Edited March 13, 2009 by Nouf

[lannarebirth]

Yep, all true, except I think I would insert the word "global" between rich and elite. Both foreign and domestic lobbyists have found extremely good returns on their investment when funding the campaigns of US poiticians.

[midas]

Could another possible indirect dampening affect on future home prices on both sides of the Altlantic

be the threat of greater government scrutiny of mortgage applications? i.e. accuracy of information

How many home sale transactions occurred in the boom times would never have taken place

had those mortgage applications been based on true and accurate information?

The FBI studied three million mortgage loans and found that 70 percent of early payment

defaults can be linked to misrepresentations in mortgage loan applications.

In today's Times it says " Alistair Darling will suggest that the Financial Services Authority and its

counterparts elsewhere should monitor the overall financial positions of banks and other

institutions to preempt irresponsible behaviour ".

Could this be the beginning of a new draconian monitoring of mortgage applications?

In Texas a new state law was passed last year that holds borrowers accountable for the information

supplied on mortgage applications and borrowers are now required to swear that all of the

information they supply is correct. Lenders who suspect they are being told lies must

report borrowers to new task forces that are being set up specifically for this purpose.

But what is even more interesting is that borrowers who are reported will have no idea

what is going on until it is too late because lenders are not allowed to notify borrowers

that the task force has been contacted. Borrowers who are caught lying or inflating income could

face up to 99 years in jail and a $10,000 fine.

Edited March 13, 2009 by midas

[AlexLah]

Hairy,

Patrick Byrne has been fighting against NAKED short selling, he has nothing against legal short selling.

If I remember well there is estimated about 6 Billion USD (Please correct if I am wrong) worth of FTD's (Fail To Deliver) each day, that is massive.

Another example he gives is of that company that makes those v shaped troop carriers that can withstand I.E.D's and because of naked shorting the share price went from 60 to 4 USD. So people die because some greedy people that use illegal practices like to drive a ferrari and have a nice house with 26 bathrooms for a family of four.

The people that invented, allowed and approved those CIA financial instruments that are now killing us should be rounded up and put in jail for the rest of their lives preferably in isolation.

Institutes that provide money for mortgages should go back to the old practice of lending not more than 2.5 times annual salary to people that can provide all legal documents that show a steady income that follows inflation figures for at least 3 years.

It should also be forbidden to provide a second mortgage based on presumed rise in value, a second mortgage could be provided when improvements are planned and made to increase the value of the house.

Mortgages should not be traded as investments that are repacked sliced into pieces and then rated triple A just because some rating agency is rated as AAA.

Insurance company's should have at least the amount of money available of the value of the assets they insure in case things things go bad (not sure how to say this but I think you know what I mean).

Paper money should be backed by something, whether it is gold or rice whatever.

[Naam]

Paper money should be backed by something, whether it is gold or rice whatever.

unfortunately that is not possible Alex as the backing cannot be verified.

[samuibeachcomber]

Could another possible indirect dampening affect on future home prices on both sides of the Altlantic

be the threat of greater government scrutiny of mortgage applications? i.e. accuracy of information

How many home sale transactions occurred in the boom times would never have taken place

had those mortgage applications been based on true and accurate information?

The FBI studied three million mortgage loans and found that 70 percent of early payment

defaults can be linked to misrepresentations in mortgage loan applications.

In today's Times it says " Alistair Darling will suggest that the Financial Services Authority and its

counterparts elsewhere should monitor the overall financial positions of banks and other

institutions to preempt irresponsible behaviour ".

Could this be the beginning of a new draconian monitoring of mortgage applications?

In Texas a new state law was passed last year that holds borrowers accountable for the information

supplied on mortgage applications and borrowers are now required to swear that all of the

information they supply is correct. Lenders who suspect they are being told lies must

report borrowers to new task forces that are being set up specifically for this purpose.

But what is even more interesting is that borrowers who are reported will have no idea

what is going on until it is too late because lenders are not allowed to notify borrowers

that the task force has been contacted. Borrowers who are caught lying or inflating income could

face up to 99 years in jail and a $10,000 fine.

totally over the top and unnecessary imo.the original bank guidelines re lending ought to suffice.It was n't until congress and the clinton administration tore the rule book allowing lending institutions to lend without the usual credit checks(because there was so much money in the system)that the problem finally came home to roost when the bubble burst.And if the govts.of the USA and UK had refused to bail out the banks,the banks would have learnt their lesson re borrowing requirements.

[flying]

Paper money should be backed by something, whether it is gold or rice whatever.

unfortunately that is not possible Alex as the backing cannot be verified.

That makes me wonder

What is verifiable in this mess we call out financial world?

[AlexLah]

Alex running around the room waiving his fly swatter, trying to hit Naam.

Found Naam on a security camera:

http://www.youtube.com/watch?v=PzpwoVwnYBI&eurl

Edited March 13, 2009 by AlexLah

[Naam]

Paper money should be backed by something, whether it is gold or rice whatever.

unfortunately that is not possible Alex as the backing cannot be verified.

That makes me wonder What is verifiable in this mess we call out financial world?

NOTHING as the last two years have proved

[midas]

In Texas a new state law was passed last year that holds borrowers accountable for the information

supplied on mortgage applications and borrowers are now required to swear that all of the

information they supply is correct. Lenders who suspect they are being told lies must

report borrowers to new task forces that are being set up specifically for this purpose.

But what is even more interesting is that borrowers who are reported will have no idea

what is going on until it is too late because lenders are not allowed to notify borrowers

that the task force has been contacted. Borrowers who are caught lying or inflating income could

face up to 99 years in jail and a $10,000 fine.

totally over the top and unnecessary imo.the original bank guidelines re lending ought to suffice.It was n't until congress and the clinton administration tore the rule book allowing lending institutions to lend without the usual credit checks(because there was so much money in the system)that the problem finally came home to roost when the bubble burst.And if the govts.of the USA and UK had refused to bail out the banks,the banks would have learnt their lesson re borrowing requirements.

It may only be over the top if you can be sure at least one party to the loan application

will always act honestly- and that evidently hasn't been the case.

Many people in the UK and USA have described how mortgage brokers, banks and loan officers

in financial institutions were complicit in mortgage application fraud because they needed to meet a quota.

http://www.wpix.com/landing_fact_finders/?...amp;feedID=1128