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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Casaubon who wrote (81199)	9/22/2008 11:53:05 PM
From: Dr. Voodoo	3 Recommendations Read Replies (1) \| Respond to of 94695

First, the implication is that the shorter must be correct, simply because they are short. There is no implication of correct or incorrect true value or false value. Fair value is a value that results in a trade. There is no such thing as "correct" value, long short or otherwise. Without two people agreeing on a fair value to trade (money for paper), there is no trade. The difference again, regarding panic and profiteering. In a panic there is no confidence that a buyer may be found for a particular offering. Without a market maker to sell short, no dice. No floor, and no chance of recovery, the offering has zero value. In LEH case and others, because short sellers entered the market, the market remained liquid probably longer than it would have without them. One can certainly make a case that panic can be induced by illiquidity of market for various items, including news. Had the markets been completely liquid in 1929 would we have had a crash? Impossible for me to say. The "float" is not increased by shorting, those shares are AVAILABLE TO TRADE and can be traded at any time. The effective supply, sure, BUT, if shareholders don't want to loan shares out they can put them in a cash account--end of story. Suggesting that it is difficult to control naked shorting? Just as many FTD's on the long side, and zero evidence that it has any effect on price movement. Certainly abuses exist, and those who get caught should pay. No argument. But I come down on the side of allowing short sales, market makers, and anything else that allows me to have a completely liquid market, hedge options positions and narrow spreads. So in this regard I think we must agree to disagree. Banning short sales will not avert a collapse, on this I can guarantee. Many of these financials are completely worthless, and will soon find themselves fairly valued only in a less liquid market. You are entitled to your beliefs, and I mine. Cheers, V