Jeff, both you and Tom are correct. From where I sit it looks like you stand only about a buck apart. Tom's right that no one shorts a penny stock at CYJ's level. And you're right that people do short penny stocks. It's all a matter of price. In order to short, a member of the public (as we all are, as far as I can tell, with the exception of brokers Frank, THE GURU, and Mike Harris of PaineWebber), has to have a margin account. Stocks that trade at $0.75 or $0.50 or thereabouts are not marginable -- you simply cannot get a brokerage house to margin stock at those prices. (If you think differently, you could try calling a dozen or more VSE member brokerage firms and tell them you want to short a stock at CYJ's price level. Most likely not only will you end up smiling, they'll probably get a good chuckle out of the suggestion, too. And if you ever do find some firm that will accept such an order -- post the info here, it'll be a first as far as I, or any of the Howe Street players I canvassed today with this issue, know.)
When you're talking about a penny stock that trades at something like $2.00 a share or more then it's a different matter. You can then get margin. And when penny stocks go to $5.00 or $10.00 or $25.00 a share (when, technically, they're not really "penny" stocks), of course, there can be pitched battles between the longs and shorts.
But anyone that would try and tell you that there is a significant short position in true "penny" stocks like Chandeleur Bay probably falls into one of two categories: 1) they either doesn't know much about how the junior markets work here: or 2) they're intentionally b.s.ing. The conjuring up of a short-selling conspiracy is a favourite and standard tactic of VSE promoters and touts and their broker partners. It deflects attention from the real fundamentals of a stock issue and helps foster the "us versus them" mentality that creates the sort of emotional loyalty in shareholders that can make them blind to common sense and facts. It's all part of the smoke and mirrors.
You can stake your retirement funds on the knowledge that there is not now, nor has there ever been (at least not since the 1970s), a big short market in issues that trade under a buck a share on the VSE. Public players cannot get brokerage margin and you need a brokerage account to sell shares -- so it just can't be done. The pros (i.e. brokerage company insiders) can bend or get around trading obstacles that exist for public citizens, but then again -- but no smart pro that I've ever known would bother shorting a $0.50 or $0.75 deal. The price downside is too minimal in relation to the upside potential is to make it worthwhile. If someone really wanted to short CYJ or other penny issues in any significant way, they would wait until the stock price was much higher -- at least a couple of bucks to make the cost-benefit analysis reading positive.
I've heard that the broker at PaineWebber, Mike Harris, who follows CYJ (and may or may not be the same Mike Harris as others know) is hyping the shares and talking loudly about the major short position and how the shorts are going to get it "big time". Being a broker, Mr. Harris should know better. And he probably does.
That pitch, in this instance, you'll find is just b.s.
By the way, the Canucks won their game tonight. Congratulations to Canucks' coach Tom Renney on his first NHL victory. |
