I'm going to present this one without commentary. To parse it would be to meddle with its genius (genius that, if it's doing its job right, will haunt your dreams). I will however put a few things in bold that I think you should look out for:
Most people understand that shorting something means you'll make money if it goes down. Here's how it actually works:It's Saturday afternoon and you stop by your ex girlfriend's apartment to pick some of your old stuff. You guys are friends and all, so you just let yourself in. You're grabbing your clothes from behind the fridge and see that she's got a case of Budweiser sitting in the pantry next to it. You happen to be on your way to a pool party and you know that your frat boy friends will be out of beer by the time you make your "casually late" entrance.
So you "borrow" that case of beer from your ex. That's called the locate, and since you didn't get her permission then that'd be called doing it naked. (Hey, stay focused here and stop dreaming about your ex's great body. I'm learnin' y'all something right now.)
You get to the party and sure enough, your boyz are desperate for more beer, so you sell (read: short-sell, since it ain't your beer in the first place) them the case at a dollar a pop, and you just pocketed $24.
Sure enough, you ex calls you just then as she's got a new loser boyfriend who wants to drink some Bud and she wants to know why you've stolen her beer (naked shortsellers ALWAYS get in trouble).
The brilliant part of this particular trade is that you stop by the Safeway on your way to your ex's and pick up a case of bud for $15. And you've just "covered" your short sell at a nice $9 profit (you sold the beer at $24 and bought it back at $15, see?).
Hmm, trading beer...maybe there are some real arbitrage opportunities here that I've not realized before.
Shortselling Explained: How to Shortsell Your Ex-Girlfriend's Beer [The Cody Word]
Posted by guest , Aug 13, 2008 1:20PM
Im absolutely speechless right now. Can this guy be more of a disaster?? Who lets this guy on television??
Posted by guest , Aug 13, 2008 1:23PM
the only things worse than his hair are the comments people left on his blog. cody should start a HF and short his career...
Posted by John Carney , Aug 13, 2008 1:25PM
I have to say, I read "Most people understand that shorting something means you'll make money if it goes down" and thought Cody was going to go in a totally different, and dirtier, direction with this.
Posted by BSD , Aug 13, 2008 1:30PM
Cody is Wall Street's Borat, except that Cody doesn't realize it.
Posted by guest , Aug 13, 2008 1:41PM
Hey, cut the guy a break. As everyone at Fox knows, no one will ever pay attention to you unless you shout, you're a hot woman, or it has something to do with beer. Particularly when you're talkin about something as *boring* as stocks.
Posted by guest , Aug 13, 2008 1:52PM
@2 - FYI: he does run a hf...he has for years...CL Willard Capital
Posted by bank_teller , Aug 13, 2008 1:56PM
Shorting the shit out of BSC was just like what I do when I bring a sixer to my friend's bbq and then sell it to him, and both will raise all sorts of questions about me later.
Posted by guest , Aug 13, 2008 1:57PM
Cody forgot to mention the part when you go over to your ex-girlfriend's house, wind up laying some pipe, and then instantly regret it when she opens her annoying mouth.
Posted by guest , Aug 13, 2008 2:06PM
"Fuh...What????"
~Fake Geico Caveman
Posted by guest , Aug 13, 2008 2:07PM
Selling your buddies cans of Bud for $2 apiece? Fucking weak.
Posted by guest , Aug 13, 2008 2:11PM
#10...read much?
"so you sell (read: short-sell, since it ain't your beer in the first place) them the case AAT A DOLLAR A POP"
Posted by guest , Aug 13, 2008 2:17PM
Sounds more like breaking and entering as well as larceny at the apartment and impersonating an a**hole at the pool party.
Posted by guest , Aug 13, 2008 2:25PM
Um... I don't think that would be considered "impersonating" -- sounds like the real deal to me.
Posted by guest , Aug 13, 2008 2:27PM
what the hell. Reading that 'primer' on short selling confused the hell out of me.
Posted by guest , Aug 13, 2008 2:35PM
This is not naked shortselling. Naked short selling would be selling the beer to your friends at buck a pop and THEN going to store / girl friends house and buying / stealing the case for 15$.
What is described here is plain old larceny + fat profiteering.
Posted by BottomFellOut , Aug 13, 2008 2:36PM
what happened if Cody caught sight of himself in the hallway mirror...the beer would be warm and flat...
seems to rate himself...
Posted by Lowly Assistant , Aug 13, 2008 2:36PM
Totally plausible. I make certain to leave my clothes anywhere there's condensation, thereby alienating the people in this world who refuse to accept my musky scent. However, what the fuck was FBN's objective when they decided to throw Cody Willard on the air? Methinks he came at little to no price, save shooters of tequila at commercial break.
Posted by guest , Aug 13, 2008 2:39PM
made me thirsty
Posted by guest , Aug 13, 2008 2:55PM
Technically this is not naked short selling because he actually has the beer (eg he already located and borrowed the shares). It would be naked short selling if he went to the party, sold beer he didn't have, then went to the store to try to find the beer that was sold over the next three days.
Posted by guest , Aug 13, 2008 3:23PM
thats great except where's this "party" where you can sell stock at a huge premium to desperate boozehounds and turn around and immediately buy it back somewhere else at a discount (safeway)?
Posted by guest , Aug 13, 2008 3:40PM
Not to mention the fact that the beer is at room temperature because it is in the pantry and not the fridge. How lame are his "boyz" that they'll pay up for warm beer? I suspect his "boyz" are actually neighborhood high school kids.
Posted by guest , Aug 13, 2008 3:55PM
19. Thanks for repeating my statements (15)
Posted by chad , Aug 13, 2008 3:57PM
i smell FBN commercial material. who's bringing camcorder...
Posted by guest , Aug 13, 2008 4:00PM
warm beer = subordinated debt
boys = stupid poor people with no access to information (ie car, fake id)
Posted by guest , Aug 13, 2008 4:06PM
15/22: Sorry, got pulled away from posting and didn't refresh.
Posted by guest , Aug 13, 2008 4:06PM
15/22: Sorry, got pulled away from posting and didn't refresh.
Posted by BlackSwan06 , Aug 13, 2008 4:19PM
Mr. Willard -
What you've just written is one of the most insanely idiotic things I have ever read. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational explanation of short selling. Everyone on your blog is now dumber for having read it. I award you no points, and may God have mercy on your soul.
(with heavy borrowing from Billy Madison, of course)
Posted by guest , Aug 13, 2008 4:25PM
25 - repeating an earlier comment and then double posting your apology? things must be pretty rough down at dallas' equities desk.
Posted by guest , Aug 13, 2008 4:26PM
I'm more concerned by this, from the following post:
"Two weeks ago, Merrill’s stock had about a billion shares outstanding and was at $24 – a $24 billion market cap. The stock has gone up about 10%, $2 per share since then…but Merrill issued half a billion shares, which means it’s market cap has almost doubled to $40 per share. You really think diluting shareholders by 50% should make this stock double? I don’t and I’d be shorting Merrill."
Posted by guest , Aug 13, 2008 4:31PM
@ 27: (on behalf of Mr. Willard): Okay, a simple "wrong" would've done just fine.
I choose business ethics...
Posted by guest , Aug 13, 2008 4:33PM
market cap doubling is not the same as the stock doubling
goodjob
Posted by chad , Aug 13, 2008 4:40PM
actually, market cap doubling is the same as stock doubling.
Posted by guest , Aug 13, 2008 5:00PM
its just about 5 and all i see are the words beer, naked and ex-girlfriend.
Posted by guest , Aug 13, 2008 5:04PM
@ 31
chad is correct. in THEORY, if a company doubled the amount of shares outstanding, the stock should drop 50% so that the issuance of additional shares does not alter the market cap. however with mer this was not the case as the stock actually went UP upon the equity issuance, creating value for shareholders.
Posted by guest , Aug 13, 2008 5:09PM
32, 34 only if the # of shares outstanding stays the same, so Chad is def not correct. Hope you guys aren't the ones at your firms that are playing with live ammunition.
34 With regard to "creating value". What created value for ML shareholders was that the issuance increased their capital position, diminishing the possibility of failure of the firm. I would say that the whole episode really resulted in less value being destroyed, rather than value being created.
Posted by guest , Aug 13, 2008 5:11PM
@ 34
If the market cap refers to free float then it can go up without issuing of new stock and there will not be a radical change in stock price.
eg: Private investment in the company by a big shareholder is replaced with tradable common stock. There wont be a big change in stock price but market cap will be higher.
This could also happen if preferred stock in the capital structure is reclassified as common stock.
Posted by guest , Aug 13, 2008 5:18PM
Bud? Wrong party.
Posted by guest , Aug 13, 2008 5:22PM
What would be non-naked / covered short selling?
Borrowing the last case of beer from the host and then selling it to his/her guests for 5 bucks / bottle and then buying a new case from the grocery store for 60c/bottle.
Posted by Anal_yst , Aug 13, 2008 5:29PM
mmmm beer.
Btw anyone have any information about Cody's "Hedge Fund"? AUM, performance (or lack thereof), etc?
Posted by guest , Aug 13, 2008 5:49PM
Wouldnt it be naked short selling if a FRIEND of his had the beer, but there were three beers missing, and you borrowed money from a different friend to replace the missing beers and then you take all the beers, when you're done pounding them with yer buds you recycle the cans and that's your spread? I'm pretty sure that's how it works. The problem really is, like someone else pointed out, that beer's going to be warm, no one's going to want to buy it. That trade's not going to fly.
Posted by guest , Aug 13, 2008 6:02PM
Too complicated but will think about it further with several 16oz (only $2.50 and they're ice cold) on the platform in Grand Central.
Posted by guest , Aug 13, 2008 7:09PM
to 39
AUM was 5M year one, got up to !3M by the end
Posted by stockshotz , Aug 13, 2008 11:08PM
When I tune in to a business show, I want to learn something about the markets, not have simple entertainment. Cody's rant had entertainment value, but nothing else. We started our podcast to offer people a different form of market information. www.stockshotz.tv
Posted by guest , Aug 14, 2008 3:16AM
Too long, didn't read.
Posted by guest , Aug 14, 2008 3:16AM
Too long, didn't read.
Posted by guest , Aug 14, 2008 3:16AM
Too long, didn't read.
Posted by guest , Aug 14, 2008 11:56AM
Only problem was, it wasn't Bud. It was Schmitt's Gay.
Posted by guest , Aug 17, 2008 9:40PM
men drink whiskey
Posted by guest , Aug 18, 2008 5:48AM
whiskey drinks cody