glassbox

FBI Investigates Victims of the Financial Fallout

jum92, I feel exactly like you. I've been in this capital markets for the last 18 years and gone thru a couple of other crisis - one of which is the Asian Financial crisis. The extend of unethical trading taking place these days is amazing, its even more depressing to hear that many of these traders (perhaps like monday1929 who posted before you) think that they are just being 'honest speculators'. Frankly, many of these 'honest speculators' who think they are contributing to market efficiency are just being used as pawns by those in the know to bring down a company. Its saddens mean to hear of people saying that they are 'investing' when they are shorting a stock. How can anyone use that word 'investing' and think they are building themselves a future - its complete fallacy.

FBI Investigates Victims of the Financial Fallout

Tom, thank you for putting everything into perspective so eloquently and in language people can understand. It amazes me that no one has dared say the things you are saying now. Perhaps part of the problem is that no regulator would like to say that they were wrong to start with. Certainly hope that a few good men are still around to stand up for what is right!

Paulson/Bernanke: $700 Billion at 'Hold to Maturity' Pricing

I am not an American citizen but am interested in what is going on simply because American's financial system is so interwined in this global system that what happens there also happens to where I come from.

I lived through the Asian crisis - right in the middle of it. Whilst small in size vs the current crisis, I am amazed at how lacking a leadership and urgency the American people and Congress has showed in dealing in this whole affair. I watched the hearing last night and it came across that most were more interested in putting blame rather than finding a solution. There is still a lot of self denial going on and intention to fix a blame rather than find a solution.

On just looking on the various articles and comments from SA's forums, it seems like most Americans have lost hope and have turned very cynical. Yes, perhaps its right and natural to turn cynical on misdeeds of the past but with such attitude, how do you expect your regulators and leaders to act in the country's best interest. In fact, I see that many commentators likes to continue to paint a doom and gloom scenario - yes, perhaps its time America went down the drain and perhaps its constituents deserve it - not for the lack of ideas to deal with the current crisis - but for the lack of hope and respect in herself and ability to deal with it in the future and this insatiable need to keep looking back and pinning blame.

At this rate, the US will definitely be in the Great Depression - in fact, with the attitudes I see displayed here at SA, its already here.

Moral Hazard: A Danger to Our Financial System

Tom, this is a very good article. But I'm afraid not many of the generation that has not retired (i.e. those 55 years and younger) actual understand the meaning of 'moral'. Sadly, I think its a lost principal in many business dealings these days. Hence, a blow up almost every few years....

For many, the law of the jungle rules, so caveat emptor....

Fannie, Freddie Default Swaps Big Non-Event

Question: what would be the impact of this on the bond insurers? If any?

Who's Buying Financials?

Banking 101 - the multiplier effect. $1 given to the bank allows the bank to lend up to $10. The point on banks is not so much the leverage but how they balance their maturity and liquidity gaps. As long as banks are able to refinance their fundings, they will continue to remain solvent - even if their leverage is high.

Banks: Is This the Biggest Bear Squeeze in History?

I have just signed the petition on www.petitiononline.com.... Its high time we shareholders start exerting our property rights!

Mother of All Short Squeezes?

you know why there is such a big resistance to short selling especially on sites like SA and coming from many fund managers, esp hedge fund managers.... Because if rationality and logic has its way, running a hedge fund is going to less profitable, market makers will no longer be able to make as much markets and brokers cannot earn twice on their margin business (first from lending you money and then lending your shares).

How High Leverage Has Brought Down the Whole Banking Industry

The whole financial sector is going to get another huge leverage boost again if nothing is done to regulate short selling (or ban it). Short selling is another form of leverage - instead of borrowing money, you borrow shares. The difference is that you can probably multiply money easily but you certainly cannot multiply shares.

Selling the Short Sellers Short: Another Sign of Trouble

flashrob, well, I'm sorry if you are making losses on your shorts. But shorting is a dangerous game and if you managed your risks well, you should have know that there is this risk known as regulatory risk - the risk that regulators can change rules and therefore your holdings (short or long) will have its price affected. I don't see anything wrong here with them changing rules - they are regulators after all. Its just part of the capitalist system. If they listen too much to the big money guys and the shorts, then they would not be listening to the longs. You see, shorts and longs are on opposite sides. You cannot want to be a long and also want to borrow that same stock to short. If you want to take the latter view, then you should just sell what you have. Meanwhile, the one who wants to short the stock without the stock has no business in the whole affair and if he claims he is just part of the efficient market system - let me tell you he is just meddling with it.

Selling the Short Sellers Short: Another Sign of Trouble

The shorts are typical sour grapes at this point. They are obviously hurting playing a leveraged game - the very same risk that banks took which the got them into the trouble that they are in now. Don't they know that short selling is a derived position - a position they are allowed to hold only on the dispensation of shareholders of the company. Now they are crying foul, that the SEC changed rules blah blah blah. Come on, wake up, shorting is dangerous, so eat your losses. What hypocrites!

Newsflash: SEC May Slowly Start to Enforce the Law

Short selling (naked or not) is a derivative. Its derived from the willingness of the shareholder to lend you the shares. Many forget this and even argue that its an essential part of the efficient market. Because its a derivative, like all derivatives, regulators must be very clear on the risks involved. Sadly, the current framework (even with this latest move) is just so sadly lacking in protecting the rights of the shareholders. I really hope SEC's investigation would extend into a comprehensive review of the real risks surrounding short selling.

The SEC Panics

The world starting with no short selling. Its the figment of imagination created by investment and custodian banks. The world can continue with out them. If its extraneous and superflous, there is a high chance that it is also unnatural.


On Jul 16 01:57 AM Takayama wrote:

> Prohibiting short sellers may distort the market, in favor of the
> bulls, helping them to push up market prices artificially. Shorts
> provide a balanced and free market. Without shorts, is to allow markets
> to be manipulated.

The SEC Panics

OregonRain, I have my views on the value short sellers add to companies. Assuming the short seller stays, then the current disclosure and pricing framework in short selling and scrip lending is again so skewed towards 'those in the know' that the general investing public has no sense what is happening. And when that happens, you will inevitably get crooks who will exploit information asymmetry - all in the name of making the market more efficient.


On Jul 16 01:26 AM OregonRain wrote:

> Glassbox, to the extent that you are saying that you need to actually
> borrow the shares to short...I agree. No issue. Seems to me that
> "naked shorting" is or should be stopped (illegal) for all companies
> not just the ones like Goldman who have friends in high places...like
> ah Paulson to start with.
>
> To the extent that you are saying that shorting should not be allowed...like
> I said...that is nutty. I realize that this is not the best of times
> for those in the "financial community" but from out here in tree
> land it looks like it should have occurred long ago. Good companies
> do ah good.. Companies that are poorly run by imperial CEO's like
> the guy at Bear for one (he was out playing bridge when the company
> was burning I seem to recall) deserve what they get and actually
> deserve a good deal more...and I am not talking about a larger severance
> deal.
>
> People are starting to pay attention to this as it has finally come
> to affect their lives. It has gone on way too long. We shall see
> if we have a melt down or not...we are way too close. But, judging
> from the comments here and in tree land the "rabble" will not be
> pleased until those responsible are held accountable. When the Democrats
> sweep in they will be more than happy to provide the political circus
> for the people.

The SEC Panics

Like I said, stock prices can come off too when shareholders sell - we don't need the short sellers to do it for them. Its the crazy notion that many shortists have that they have a 'right' to short sell. Come on, you are borrowing stocks from shareholders - please get it right.

On Jul 15 08:53 PM OregonRain wrote:

> Sean makes a lot of sense to me. It is one of the clearer things
> I have read on all this.
>
> The notion that short selling should be "banned" or such statements
> are insane. Are you people real? It must come from people on Wall
> Street who want securities to go only one way...up....and that sounds
> a lot like what people were thinking about ah...housing