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Technology Stocks : Globalstar Memorial Day Massacre -- Ignore unavailable to you. Want to Upgrade?

To: Mr. Adrenaline who wrote (173)	5/13/2000 11:52:00 AM
From: Mama Bear	Read Replies (3) \| Respond to of 543

"A lot of longs are concerned about what is happening to their stock." One of the cardinal rules of successful investing is to never worry about someone else's portfolio, which is precisely what is happening when worrying too much about people shorting. I thought I explained the restriction wrt serial hypothecation of shares. The shares come from a pool, and there is no such critter. But here is the long version. Assume for a moment there are 10000 shares outstanding. There are 2000 shares held in a way that makes them unavailable for shorting. We also assume only one clearing house, for the sake of this example. There are 10 shareholders, each with 1000 shares. Shareholder 1 holds shares 1-1000, shareholder 2 holds 1001-2000, etc. Short seller #1 borrows 1000 shares, and sells to shareholder #11. Short seller #2 also borrows 1000 shares and sells them to Shareholder #12. These shares did not come from any of the specific shareholders, but rather from the pool of 8000 shares held in aggregate by shareholders #3-10. Shareholder #3 decides to remove his shares from the pool of available shares. This will not effect either of the shortsellers, as there are still 5000 (7000 - 2000) shares in the pool available for short selling. The newly created longs of shareholders #11 and #12 do not increase the pool of shares available to borrow, as they are deducted from the pool when they are borrowed. Share that are sold must be delivered. Even those who have offshore 'no borrow' accounts have to be able to deliver what they sell, or face forced buy ins. In exceptional circumstances, there can be very brief periods of time where short shares can exceed the number of longs, but this situation can't last more than 3 days. As far as short sellers 'creating credit', that's nonsense on it's face. Regards, Barb