Tom, When you sell a stock short, whether a Web or a CEF or IBM, somebody pays cash for it. Your broker holds that cash as a guarantee that you will buy back the shares some day. They earn interest on that cash. Of course, you are taking all the risk. Now, if you are The Bass Brothers or Soros, you walk in to Merrill Lynch and you say, I want the interest. They can't give it all to them, as there is often a tiny fee to borrow the shares. But the big guys get 95 to 99 pct. of the interest that cash generates.
If you are not a big guy, the brokerage firm steals all the interest that should be coming to you. Some will give a good client a rebate of 70-85 pct. on short sales of liquid issues. On CEFs, you are lucky to get 25-50 pct., as they are harder to borrow and keep borrowed. Without a rebate, I do not recommend that anyone sell short.
Even worse, some brokerage firms are so crooked that they CHARGE you interest on the short sale. Those brokerage firms should not only be fired, but fire-bombed. -g- I am not really an anarchist. But I hate their slimy guts when they do that sort of thing.
MB |
