Rande:
Just a couple of comments:
<<I really don't have the time to teach a lesson on how short-selling works globally. And as I've said dozens of times here, I have nothing against short-selling, when it does not break the law. Naked short selling exists, whether you choose to believe it or not. It is illegal most places and is even punishable by jail or death in some.>>
This somewhat sanctimonious starting paragraph is pretty much irrelevant to any of the points I brought up. You have failed to show that "naked" short selling, despite being illegal, is actually harmful, or any more harmful than heavy margin buying of stocks. As for punishable by death, which seems to make an impression on you, adultery in certain countries is punishable by death (Malaysia, cultural backwater that it is, might even be one), but that doesn't make me gasp at adultery, in concept or in practice.
Real life example. You short a stock at 10:00 a.m. without having borrowed it first. At or before 4:00 p.m. (close of trading) you will either have to a) "locate" that is borrow the shares from an existing account and have them sent to you by closing, 2 or 3 days hence, depending on the jurisdiction, or b) btc the shares for delivery within the same parameters. If not, your trade will "fail," and that's not good. I have yet to see the necessity of "pre-locating" the shares, on any sort of fundamental or economic basis. Recall, if you will, that on the long side you can go ahead and exceed your financial capabilities at 10:00 a.m. provided you trade out of the position or wire funds by 4:00 p.m. that day. That, for some odd reason, is not deemed dangerous. I know you're pressed for time, and existing in a state of shock, but when time returns and shock abates, you might give that a ponder.
<<It has already been proven that United and American airlines saw a dramatic increase in short-positions and puts on September 10th, the day before the attack. . . the same time the RE-insurers of the World Trade Center saw a sharp increase in short-positions. It is said that there were potentially billions of dollars made off the short-selling of U.S. companies ahead of the attacks.>>
More irrelevancies. No one knows yet what the source of the short positions and puts is. Besides, now you're discussing terrorism/insider trading--completely different from naked short selling. In any event, if you're a veteran of these markets people in the options business note immediately when volume on a particular issue rises and they will often join in, assuming that "someone must know something." (Sort of like joining a line in the old Soviet Union--you didn't know what they were selling but the safest thing was to get in line and hope for the best.) Perhaps that's the case with some or most of these puts. As for short interest on the airlines, look back to August financial reports to take the temperature of the airlines--they were doing miserably on their own (check Forbes). Again, it has nothing to do with your previous notes and the hilarious "patriotic" petition concerning short selling.
As for the idea that "billions" were made, that's the first I've heard of anything north of $1-5 million. The truth is, no one really knows at this point. Let's keep the hyperbole to a low roar.
I heard that at this point there are currently 3 trillion shares short U.S. stocks and certainly there is more short-selling going on right now than at any time in our lifetimes. The fact that so many of them are naked, places an artificial imbalance on the markets. I have heard of stocks having short-interest 10 times the public float. Tell me how that is fair and equitable.>>
You're blowing smoke with numbers. JDSU has 1.32 billion shares outstanding and, as of 9/1, had average daily volume of 24 million or so and short interest of 47 million (2 trading days). Long holders would have taken 55 days to exit their positions (1320/24) whereas Shorts would only have taken 2 days. Who cares?
Everyone went long, on margin, in the bubble. You're telling me (even if your numbers are right--maybe you could provide a link, and ponder the total number of shares issued and outstanding) that going short is a problem? It sounds reasonable in a falling market.
<<You asked about the SEC going overseas to enforce rules against naked SS or other types of foreign transactions. I am rather shocked that I would have to explain this to you or to anyone. When you trade a stock overseas, it does not physically trade to the foreign country, unless you call in your certs. The Nasdaq and the NYSE are still in New York. There aren't little Nasdaq kiosks set-up in third world countries. So the SEC, the NYSE and the NASD have FULL AUTHORITY over all trades of American stocks. They still say what can and cannot be done with American stocks.>>
Wrong. A German dentist who has an account with Deutsche Bank is governed by German law. His margin, trading rules, etc. are all covered by German law. When DT in its brokerage account (it doesn't disclose the sub accounts, Rande) buys 1000 shares of JDSU through its own account at Goldman Sachs or wherever, it may be subject to overall rules on margin for the gazillion stocks, etc., it owns in the GS account, but the German dentist is not. Further, neither you nor I know what the broker to broker rules are and how they are applied. The difference is I don't pretend to know them, and you do.
As I said, everyone is in a mad rush to prop these markets up, which will only avoid them finding their true bottom.
Regards,
Kb |
