Hinterlander

2 Comments

    • Moral of Bear Stearns Debacle: Don't Buy What You Can't Understand [view article]
      Being a conspiracy theorist, could it be insiders at JPM or elsewhere buying up the shares knowing full well that a higher offer was coming in? Mar 26 08:44 PM
    • Is Harvest Energy Trust's Premium Valuation Justified? [view article]
      HTE has now been on the Regulation SHO Threshold Security List for 25 days. That is the problem with this stock. The SHO List, maintained by the U.S. Government, is a list of stocks known to have been subjected to “naked short selling.” While the short sale is a legal – and legitimate – strategy, the naked short sale is neither legal, nor legitimate. Naked short selling involves selling stock without first borrowing (or sometimes even locating) the stock. If a naked short seller does not borrow the stock he sold, he will be unable to deliver that stock to the buyer to close the transaction. This is called a “failure to deliver” (FTD). Naked short selling is generally illegal, though market makers are allowed to temporarily naked short for the sake of bona fide market making. FTDs are always illegal when delivery failure exceeds 13 days. Exchanges do not disclose whether short sales are naked and supply no information on FTDs. Even worse, in transactions where shares are not delivered, brokerages issue stock IOUs called “share entitlements.” Retail customers’ account statements do not distinguish between real shares and share entitlements. FTDs create phantom shares that circulate in the system as real shares. Just as counterfeit currency dilutes and destroys value, phantom shares deflate share prices by flooding the market with false supply. Some short sellers use naked shorting and oversupply of phantom shares to manipulate stock prices downward. Because regulations are loose and enforcement lax, they are unafraid of failing to deliver.

       Mar 06 08:14 PM
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