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Strategies & Market Trends : Dave Gore's Trades That Make Sense -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (12365)	9/17/2002 8:50:06 PM
From: The Vet	Respond to of 16631

short $ always do more DD than hype nonsense misheldo, I think this is more of a myth than reality. Shorts, especially professional shorts and short market makers have a huge advantage over longs. Market Makers can short naked under a rather obscure rule that allows this activity in the "making of a orderly market". In fact these short positions are never disclosed nor do they ever need to be covered, unless the MM is pressed to actually deliver the stock. As most investors rarely ask for stock certificates the MMs can, and do, maintain huge "invisible" short positions. Their risk is almost zero. At any rise in the stock they simply short more gaining cash in their accounts offset by a equal liability. The cash can be invested and becomes a nice source of income for the MMs. Imagine how well you could do if you could sell something you don't own, don't have to buy in, costs you nothing and you can generate at will in unlimited supply. Then you could invest the proceeds and earn a return on that money indefinitely. Unless all of the investors demand certificates and remove their stock from street name there is no need nor compulsion to cover, ever. There is no limit as to how many "phantom" shares they can create; there is always a limit as to how much money the longs can come up with, so the short MMs always win these battles. If a squeeze develops it is the retail shorts who get squeezed not the MMs who control both the naked short position and the flow of borrowed stock for the legitimate retail short positions. This "naked short" position is a well kept secret known to the SEC and NASD but because of the NASD rules as they presently exist, and the way reporting is presently done, the regulators can do nothing. It isn't even against any rules for MMs to do this unless it can be proven that they are manipulating the market for their own gain rather than shorting in the interests of making an orderly market. A rather tall order and one I don't think the regulators are prepared to tackle. I am currently invested in a small OTCBB stock GMXX with a limited float that is suffering from "naked shorting" by MMs. In this case the MMs have overdone it, as many long stock holders, at the urging of the company, have asked for certificates to be delivered, and the real shares remaining in the market is rapidly approaching zero. The company has also removed the stock from the DTC another potential source of abuse in "creating" phantom stock for shorts. A classic corner now exists and it is interesting to watch the antics of the MMs as they confront this situation.

To: mishedlo who wrote (12365)	9/17/2002 9:29:34 PM
From: Dave Gore	Read Replies (2) \| Respond to of 16631

Mish, I am shocked at your post. I understand shorting if a stock is overvalued or if there is a high probability of stuffing the channel to make numbers or high debt with a probablility of a credit downgrade, but you CANNOT tell me with a straight face that shorts were attacking ESST because there was strong evidence that their business was going to go downhill in 6 months. Nobody shorts that strongly, THAT early. This was manipulation and a concerted attack, imo. That fact that they were right (6 months later) is like me predicting the Market was going to hit 1600 on the Naz next week, but in actuality it took until April of next year. Actual EPS 0.37 0.37 0.37 0.20 Estimated EPS 0.34 0.27 0.27 0.16 Before any honest shorter "shorts", he or she would look for things like the following: Margins being reduced, not expanding. Earnings going down, not beating by 10 cents. The shorts were already in full swing the day that ESST beat earnings by 10 cents and margins had doubled in the current quarter, a sign that business was strong. Another quarter went by with earnings and business strong. Nope. Mish, you are wrong buddy.