Matt Blackman

Playing for a Bounce?

Sorry, here is the correct link to the naked short selling article entitled The 'Phantom Shares' Menace by John Welborn
www.cato.org/pubs/regu...

Playing for a Bounce?

Found another good article that explains the naked short selling problem..
www.sec.gov/comments/s...

Playing for a Bounce?

Greg;
Interesting article but it is clear from your last comment on the SEC's recent action "banning" naked short selling that you do not understand what naked short selling is. It is ludicrous to make the statement that by banning the practice which was "banned" in January 2005 with the Regulation Short Sales rules (RegSHO) that the government is "making it illegal for stocks to go down."

However, for some reason, the SEC decided not to enforce the RegSHO rules until recently.

Naked short selling is the destructive practice of selling a stock short without having to first borrow it like everyone with the odd exception of market makers, brokers and hedge funds have to do.

This action by the SEC does not "make it illegal for stocks to go down" as you state, it makes it illegal for those who short stocks to do so without having to first borrow the stock. This practice by the way, effectively allowed those few players the ability to counterfeit the stock which hurts everyone. I explained naked short selling in my March 23, 2007 newsletter at tradesystemguru.com/co.../

There was an excellent 25 min documentary done by Bloomberg in March 2007 entitled Phantom Shares that everyone should watch (which hopefully still works). The link can be viewed at the bottom of the page at tradesystemguru.com/co.../

I don't dispute the fact that with its recent action the government has crossed a dangerous moral hazard threshold in socializing markets but let's not start making charges that simply aren't true.

Subprime Write-Downs More Than 50% Done? Write-Ups Coming Next?

Write ups next Vikram? I'll take the other side of that trade.

Not long ago Bernanke estimated that total subprime writedowns would not exceed $100 bn. Now more credible estimates put that number in excess of $1 trillion and even that number assumes that home prices level off (see seekingalpha.com/artic... ). At last estimate more than 8 million Americans have mortgages exceeding their home's value and for the first time in history, home equity has fallen below 50%. Home prices are so far down 10% but this occurred in the absence of recession. If we enter a recession which is looking increasingly likely (see tradesystemguru.com/co... ) home price declines will accelerate.

The old market adage is to buy when their is blood in the streets but it overlooks one important reality to avoid catching a falling knife. I prefer to wait till there is some evidence that the blood flow has been stopped and is starting to dry up first.... but then again I'm not a value investor who believes in buying on the way down....