glassbox

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).

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

The SEC Panics

Ops did it again, houses are for people to stay in - they affect real lives and real families. Its high time the high brow, finance type get off their condescending attitude to attitude real issues and stop making a casino of every asset they can get their hands on.


On Jul 15 08:40 PM Ops did it again wrote:

> My guess is that we would not be in the mess we are if it had been
> possible to "short" houses in the first place. Funny thing about
> the SEC is that they only understand ever increasing prices. Like
> the rumors thing. People are acting on rumors because the rest of
> the "official" news are mostly lies so what's left but rumors? The
> SEC would do much better by going after the pumpers

The SEC Panics

Salmon, its all the chic these days to hollered from a high horse that regulators are panicking. Shouldn't they? The markets have all lost its integrity. What they are doing has been long overdue. They are all trying to claim back the integrity of the public markets before the likes of Ackman gets elevated to 'saviour' status.

I've always questioned the value of short selling - naked or not. They don't add any value to the overall scheme of things. Someone suggested it makes the market more efficient by identifying bad stocks - what a load of rubbish. A company which is badly run will not survive in the long run anyway - its shareholders will want accounting from its management and shareholders who cannot take the risk will sell the stock anyway. What do non-shareholders or short sellers positively add to the situation in this instance other than to act like a vulture circulating round what could potentially be a dying victim. Short sellers' intent is to hasten the death, not prevent the death, and that to me, is the most non-value adding activity of all time. Over time, this will serve only to crim free enterprise and prevent healthy risk taking.

Some elevate short selling to taking risk. What noble risk do you take when you borrow someone else gun only to shoot the guy you borrowed from? What is wrong with this current generation? Well, its no wonder the market is losing its integrity - just ask heads of listed companies - who gives them bigger headaches: their major shareholders or short sellers? I'm sure its the latter and I wonder, as a minority shareholder, why anyone would waste time with someone who has a short position on the company.

The SEC should ideally not just ban naked shorts but all shorts. In addition, they should also have disclosure rules that make sure everyone knows who holds beneficial ownerships to short positions, just like everyone knows who holds beneficial ownerships to long positions. All shareholders should be specifically educated and told that their shares will be used for scrip lending business by the custodians and brokers and be given an option to opt out as well as to determine their price and tenor of lending.