glassbox

Making Sense of the Brokerage Bust

You forgot something - all this busting will mean that 'trust' is going to be scarce commodity. Technology will taken over what used to be 'trusted' but now cannot be trusted. But there will always be one part of the business that needs the human touch.

On Short-Sellers and Dishonest Executives

I think its a given that naked short selling is a menace, as much as lying executives are a menace. The better argument and debate to have is which is the greater menace - lying executives or short selling in general. Until short selling is addressed, its pointless arguing the demerits of naked short selling (and trying to compare all other market menace to it) and the merits of short selling.

On Short-Sellers and Dishonest Executives

Markham, short selling and lying executives are 2 mutually exclusive events. I don't really understand why you are linking them both in your arguments as a point that those against short selling are so called 'ignoring the bigger threat.

On Short-Sellers and Dishonest Executives

Short selling is like you borrowing someone else's gun and turning around to shoot the guy who lent you. You will return it only if the fella is dead or handicapped. Tell me, which shareholder will lend you shares to short a stock knowingly if he knows that by doing so, you are driving the stock price downwards? If he is not selling what he has, its his perogative - he wants to take the risk of holding through the tough time and he will have his reasons of bearing with 'lying executives' as the author puts it. What right and what position would a 'short seller' who is an outsider to this relationship between the shareholder and the management have to justify his action of borrowing the stock only to have it sold?

The problem with all who justify the merits of short seller (including this author) is that not a single one has said anything about fair disclosure on who is lending and who is borrowing. Also, nothing has been addressed on how the cost of borrowing is determined which reflects the full market value of borrowing shares. When these 2 issues are fully addressed, can I say truly that short selling is fine. Under the current system, short selling is just so skewed to the advantage of the shorter that the longs have been taken for a ride and many don't even know it.

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.