Posted by guest, Sep 19, 2008 12:36PM

Does Crime Stoppers have jurisdiction over the SEC?

Posted by guest, Sep 19, 2008 12:41PM

Maybe I'm not as sophistimicated as some of the hedge fund CEOs that comment here (I'm just a retail broker in Virginia), but I fail to see why short sellers should be viewed by the investing community as some sort of protected species and naked shorting viewed as the bulwark between free market capitalism and big brother government socialism.

I mean, the vast majority of Americans participate in the market on the long-only side. The investing public, for the most part, buys stocks and holds on. The fact that hedge funds and investment banks are no longer going to profit while the market collapses doesn't strike me as a lamentable event. I could really give a shit if millionaires and investment banks aren't able to glean huge profits while the rest of America worries about having to put retirement off another year.

Posted by guest, Sep 19, 2008 12:42PM

Cox is a fool. Blocking all shorts? Is that to say they don't play a vital roll in the markets?

He is an even bigger moron for having gotten rid of the old regs in the first place.

Posted by guest, Sep 19, 2008 12:42PM

There is no way Cox can seriously believe this nonsense will work. If he does, I weep for my country.

Posted by guest, Sep 19, 2008 12:45PM

I'm shorting Cox!!!!

Posted by guest, Sep 19, 2008 12:46PM

If you have an options position, you can't hedge your delta. If you're short, you're required to buy. In other words, they made it illegal for the market to open down today.

Posted by guest, Sep 19, 2008 12:50PM

This is just another movement towards socialism...pull out your commie hats, we're f**ked...and Obama will make the same mistakes Hoover did, his policies will slide us deeper into this sh!t...but on the bright side, the new socialistic programs will provide work for all the laid off wall street workers. We will get our bridges, water and sewer lines rebuilt...we'll have a workforce to build the border fences and all of these 'savior' wind farms!

Posted by guest, Sep 19, 2008 12:51PM

Damn! What is Tim Sykes gonna do now ?

Cox just made his MO illegal!

Posted by guest, Sep 19, 2008 12:51PM

What happens to short positions generated from option exercises today. Are they grandfathered or subject to the same 3 day settlement window?

Posted by guest, Sep 19, 2008 12:51PM

#3 market makers cant hedge. thats a huge problem. and while the vast majority of americans are long only, they represent a miniscule and fairly insignicant portion of the real market

Posted by guest, Sep 19, 2008 12:51PM

in before the lock

Posted by guest, Sep 19, 2008 12:53PM

Dealbreaker, what about the car exhibit next to Merrill Lynch in World Financial... I think the people holding that event should be interviewed to see how well the event is doing this year.

Posted by guest, Sep 19, 2008 12:53PM

It's a political rule.
The public and the media think short sellers are evil, and they have zero understanding of the markets.

This is regulation in the wrong place, and the Fed/SEC/Treasury is clearly trying to add a different support level on the S & P.

Interesting they have no desire to investigate failures to delivers- that have happened in the past. Or investigate insider trading, or take come down hard on the ratings agencies, or for the street to admit their analysts are sheep and not worth the money they are paid.

Posted by guest, Sep 19, 2008 12:53PM

We should investigate the government for gaming the market. Buy AIG then make a rule saying markets can only go up two days later. Maybe the goal is to turn a profit on that deal to help pay for everything else.

Posted by guest, Sep 19, 2008 12:54PM

#3-

What you're failing to grasp is that markets are not here just so you have something to sell (with egregious commissions) to unwitting, long-only "investors." Markets are here to perform a much more crucial role-- to allocate capital efficiently as possible. When you take away the ability for some market participants to bet against companies, you're creating distortions that will ultimately lead to gross misallocations (capital flowing to bad managers, business models, etc.) So while it might seem like only wall street "millionaires" (how trite) benefit from short sales, all of society actually gains via better capital allocation and ultimately a rising standard of living.

Posted by guest, Sep 19, 2008 12:54PM

@11 The market makers part I understand. But as to your second part, are you sure about that? What about mutual funds and pension funds? The vast majority of MFs are long only, and the ones that aren't usually only take limited short positions as a hedge.

Posted by guest, Sep 19, 2008 12:55PM

can we ban the flyover state guys who bring politics into every discussion. us ballers in charlotte would rather discuss the impact of these rules on our trading positions

Posted by guest, Sep 19, 2008 12:55PM

#11: uninformed comment. read the ruling. market makers are not included.

Posted by guest, Sep 19, 2008 12:56PM

so why not just ban naked shorts and let those who can borrow proceed to short? why is it all or none?

Posted by guest, Sep 19, 2008 12:58PM

Argh, it's lunch time!!! Where r you scallywags gettin' some chum? Methinks ARGHBYS!

Posted by guest, Sep 19, 2008 12:59PM

@ 21 - Why ask why?

Posted by guest, Sep 19, 2008 12:59PM

Where it Spitzer? He should really come out of hiding and aid in investigations

Posted by guest, Sep 19, 2008 1:00PM

The biggest issue long term may be requiring short disclosure. After discovering GS or MS are shorting his stock, what CEO is going to use their services? Perhaps 3 of 5 wasn't enough.

Posted by guest, Sep 19, 2008 1:00PM

I'm a Canadian who's glad that the True North remains Strong and Free!

If you believe in free markets, come to Canada!

Did you ever believe that the Canadian government would be smaller than the US government? And we have public health insurance, too!

Posted by guest, Sep 19, 2008 1:01PM

If you do not allow shorts you've ended an effective way for put writers to hedge themselves. But hey, those guy drive down solvent companies to the bring too, right?

What a fucking joke. The buying of the rmbs-esque type paper may be necessary as no one wants to touch it. However, if we are going to continue the sausage factory we're going to have to move that market to an exchange! If we are going to keep this Level 3 pricing, let's make sure we always have up-to-date price information. The current pricing situation is some fucked up repugnant shit!

Also, let's get some fucking ratings agencies who know what the fuck they are doing!!! If anyone should be nationalized, it should be them (though I'd bet they'll find a way to link themselves to the issuers again). How about we get someone else in their modeling this shit other than bobo the dancing monkey.

Furthermore, how about ENFORCING lending standards that the lenders claim they uphold.

Posted by guest, Sep 19, 2008 1:02PM

@23 b/c it's baffling to me. Do you know why? One could just as easily ask Why Not?

Posted by guest, Sep 19, 2008 1:03PM

#17:

Number three here. I appreciate the condescending attitude you fucking prick. Not that it's any of your damn business, but I work for 1% AUM, not under commission.

Perhaps I am short sighted, but fancy explanations of "efficient allocation of capital" don't quite seem to cut it when regular people are watching retirement savings melt away. Maybe you should get your head out of the clouds and spend some time in the trenches dealing with real people and not with textbook definitions of capital markets.

Posted by guest, Sep 19, 2008 1:04PM

What are SEC associate bonuses this year?

Posted by guest, Sep 19, 2008 1:04PM

"What is remarkable about the SEC's recent announcement is its pointlessness. All it does is prohibit naked short sales on nineteen "important" financial companies. In other words, even if a trader intends to short (say) Citigroup shares and to buy them back within an hour, the brokerage must first locate and borrow the shares before allowing the sale. Inasmuch as large brokerages pledge to make whole any customers who are counterparties to a short sale, the restriction apparently does nothing except require more paperwork and reduce the attractiveness of short selling. (Because of the extra delay, share prices might move before traders can short sell them.)"

Posted by guest, Sep 19, 2008 1:05PM

Shouldn't the rating agencies be putting the US Gov on Watch Neg right about now? Given the US Gov's recent actions and increasing deficit, any company in that position would've been cut already.

Posted by guest, Sep 19, 2008 1:05PM

So how much are taxes going to increase? I read an article a few weeks ago from the WSJ that mentioned Obama's plan to be 55%. I guess that will be the start at this bailout price.

Posted by guest, Sep 19, 2008 1:05PM

"What is remarkable about the SEC's recent announcement is its pointlessness. All it does is prohibit naked short sales on nineteen "important" financial companies. In other words, even if a trader intends to short (say) Citigroup shares and to buy them back within an hour, the brokerage must first locate and borrow the shares before allowing the sale. Inasmuch as large brokerages pledge to make whole any customers who are counterparties to a short sale, the restriction apparently does nothing except require more paperwork and reduce the attractiveness of short selling. (Because of the extra delay, share prices might move before traders can short sell them.)"

Posted by guest, Sep 19, 2008 1:05PM

Argh, pirates commute in RVs!

Posted by guest, Sep 19, 2008 1:06PM

Shouldn't the rating agencies be putting the US Gov on Watch Neg right about now? Given the US Gov's recent actions and increasing deficit, any company in that position would've been cut already.

Posted by guest, Sep 19, 2008 1:08PM

*Can we please put a stop to evolution as well? I dont think it is fair that some species flourish while others flounder.

-C

*Note this offer not valid in those markets run by intelligent design.

Posted by guest, Sep 19, 2008 1:08PM

@23 Wasn’t that the tag line on an Enron ad from years back? Something involving three blind mice if I remember correctly?

Posted by guest, Sep 19, 2008 1:08PM

@ guest 12:55pm

Actually, if you read the document, options market makers are only exempt from the rule today. So, after expiration, this could be a serious issue for options market makers who are really only trying to hedge trades.
Anyone who thinks that this was a great idea, which provides "liquidity" and helps the little guy should look at the trading range for a few stocks today. I'll give you one good example:
ZION opened at 54 and traded at 121.90 before it went back down to 38. This is bank stock that had an $80 trading range. That's absurd. That kind of volatility is not good for any long term investors. It just reinforces that this is a trader's market.

Posted by guest, Sep 19, 2008 1:10PM

A pirate and bartender are enjoying a discussion at the local watering hole. Suddenly, the bartender notices something odd near the pirate's crotch. A steering wheel, he wonders?

"Excuse me, but do you have a steering wheel on the front of your pants?"

"Argh, why I sure do, mate!"

"Why, I don't get it?" replies the bartender.

The pirate chokes back a bit more rum and exlaims, "I don't know, but it's driving me nuts!"

Posted by guest, Sep 19, 2008 1:10PM

Short Cock

SPODE

Posted by guest, Sep 19, 2008 1:14PM

@ 21 & 28 - The why ask why was sort of a joke. Why ask a question that really there is no logical answer to?

Honestly, I have no idea why they do what they do... because it makes no sense... like I said earlier, it's like your playing hold'em against a rookie, you lose to a 7-2 because they don't know what they are doing.

Posted by guest, Sep 19, 2008 1:15PM

@40
Goddamn that's funny.

A pirate
A pirate
A pirate says Argh

http://www.youtube.com/watch?v=IpC0I7zZbe4

SPODE

Posted by guest, Sep 19, 2008 1:15PM

# 31/34

It is Sept 19, 2008 NOT July 16, 2008.

Thanks for coming out now go back to sleep until christmas.

Posted by guest, Sep 19, 2008 1:17PM

Andy Sewer on CNN (Fortune)is the biggest douchbag in America. BIGGER THAN SYKES.

Posted by guest, Sep 19, 2008 1:17PM

I ran into a pirate this morning on the A train, and asked, "Where's your buccaneers?" The pirate yelled over the subway noise, "Along me buckin' head!"

Posted by guest, Sep 19, 2008 1:17PM

@ 38 - Yes it was.

Posted by guest, Sep 19, 2008 1:19PM

Aarrrggghhh! Levitt and Pitt be spreadin' the nastiest o' rumors 'hind Cox' back. "That grog sniff'n' blowfish 'as been sidelined by the Treasury an' the Fed. He's standin' 'round cock in 'and pickin' scurvy lice out 'is pubes while they loot and plunder the riches of international insurance and walk bankers off the gangplank. If 'e don't do some'n quick, it'll be down to Davy Jones' locker for the commission's reputation and authority. Aye, the man ain't fit fer swabbin' the poop deck."

Dead Shorts tell no tales.

Posted by guest, Sep 19, 2008 1:19PM

So, I can't short BRK or FIG but I can short CIT, AMEX and COF? Okay, makes sense. Got it now. Just in, it appears companies can petition to be added to the "no short" list. CIT is petitioning to be added. What a freakin' joke.

Posted by guest, Sep 19, 2008 1:20PM

I hate when I feel hungover and haven't been drinking.

Posted by guest, Sep 19, 2008 1:21PM

*** Breaking News ***

Yahoo Finance annouces a bail out plan for its former posters.
--details to follow--

Anyone who has left for DealBreaker will be able to return to Yahoo Finance immediately. The plan reportedly won't cost tax payers a penny and will allow posters to discuss finance on a level they actually grasp (sort of).

Posted by guest, Sep 19, 2008 1:22PM

@16 The Gov is playing us all in a pump n dump?

Posted by guest, Sep 19, 2008 1:22PM

SHORT SELLING IS FOR CAPITALIST PIGS

Posted by guest, Sep 19, 2008 1:23PM

good luck, i am out of here and going to party like it's 1929 one week early. Noone is bigger than the market......

Posted by guest, Sep 19, 2008 1:24PM

Aarrrggghhh! Levitt and Pitt be spreadin' the nastiest o' rumors 'hind Cox' back. "That grog sniff'n' blowfish 'as been sidelined by the Treasury an' the Fed. He's standin' 'round cock in 'and pickin' scurvy lice out 'is pubes while they loot and plunder the riches of international insurance and walk bankers off the gangplank. If 'e don't do some'n quick, it'll be down to Davy Jones' locker for the commission's reputation and authority. Aye, the man ain't fit fer swabbin' the poop deck."

Dead Shorts tell no tales.

Posted by guest, Sep 19, 2008 1:28PM

Equity Privat, Bess-

What happened to the quality of posts on this site? It's not even readable. You guys do a great job, but maybe JC called this market, so to speak.

Posted by guest, Sep 19, 2008 1:29PM

#3/#29-

Hi, #17 again.

Maybe if YOU and your kind spent more time with textbooks, and less time in the trenches, we wouldn't be in this mess!

(Haha...just kidding.)

Look man, I didn't mean to come off as a condscending d-bag, but I think its a high crime for someone working in the financial industry to be unable to see the benefits of short selling. While some of your clients' balances might be suffering, they probably all live in houses with air conditioning, plumbing, the internet, etc etc. They have cars, kids with iPods, and almost definately live pretty comfortable lives in the hunter/gatherer sense of human existence. Also, if they're diversified and not using leverage their portfolios will bounce back.

Finally, short selling had nothing to do with the falling asset prices in their portfolios. Banks made bad loans based on the premise that home prices could only go up. Simple. End of story. The capital of these banks will be (have been) wiped out, and will now be in the hands of people better suited to deploy that capital. Humanity will march forward.

Any other misconceptions you'd like me to clear up?

Posted by guest, Sep 19, 2008 1:30PM

Keep all traders away from high story open windows.

Posted by guest, Sep 19, 2008 1:34PM

@8 this is a republican administration, how does Obama factor into your worthless opinion

Posted by guest, Sep 19, 2008 1:34PM

57 Not 3 or 29 here, but maybe you could at least acknowledge the root of the current evil, namely naked shorting. I agree with you generally - shorting is part of capital allocation - but only if you stick to the rules and make sure you've borrowed the underlying shares. Otherwise its just a casino.

Posted by guest, Sep 19, 2008 1:35PM

Meanwhile what-me-worry of 1 Penn. Ave was seen at TJ Max looking for short sales.....

Posted by guest, Sep 19, 2008 1:35PM

Go long morons.

Posted by guest, Sep 19, 2008 1:36PM

So much for free markets, In my opinion this so called financial short sale moratorium is a feeble attempt by the Commission to appear that they have done something to calm the markets. The whole thing is sad, the market is being regulated by a group of people that really don’t have a understanding of how the markets work.

Posted by guest, Sep 19, 2008 1:36PM

@8 this is a republican administration, how does Obama factor into your worthless opinion

Posted by guest, Sep 19, 2008 1:42PM

OPTIONS CLEARING CORPORATION: NEWLY EFFECTED SEC BAN ON SHORT SELLING COULD BE A POTENTIAL DISASTER FOR OPTIONS MARKETS
- Notes that US equity markets may suffer severely

Posted by guest, Sep 19, 2008 1:43PM

@57

"regular people are watching retirement savings melt away."

You must be a green banana. Risk... that's why it's called investing and not winning."

You get your feelings hurt with a 20% pullback in the market. I can assure you, you are in the wrong business.

Go tell your sad mom and pop story at finance.yahoo.com

"Finally, short selling had nothing to do with the falling asset prices in their portfolios. Banks made bad loans based on the premise that home prices could only go up. Simple. End of story. The capital of these banks will be (have been) wiped out, and will now be in the hands of people better suited to deploy that capital. Humanity will march forward."

Stop already! You must think that series 7 is fire from mount Olympus. Well it is at finance.yahoo.com

SPODE

Posted by guest, Sep 19, 2008 1:43PM

As if convertible arb wasn't having a bad enough year (worst performing strategy)... now the Socialist Republic of USA goes and sticks it's dick in a little further.

I know it's only 2 weeks (possible 30 more days), but this dramatically affects the strategy as you can not hedge positions anymore. Gonna have to start trading gamma with the actual position and just leave the hedge unadjusted...

Posted by guest, Sep 19, 2008 1:47PM

# 3 tough crowd today.

The facts of the situation are that legally shorting is a valid viable tool used by many in the financial world that have no interest in driving stocks to zero.

You short a stock when you don't believe the underlying fundamentals support its high price. The same as you go long a stock when you believe that the underlying fundamentals should support a higher price in the stock.

Short sellers punish bad management groups in the same manner that long buyers reward good management groups.

On a factual basis short interest as a percentage of the float of MS and GS is less than 5%. For reference purposes both Ford and GM have 25% short interst as a percentage of their respective floats.

Short sellers in this market are not the problem they are the scapegoat.
Banning short selling at this point is akin to banning long buying when market was at its highs.

The problems are fundamental and systemic.

Posted by guest, Sep 19, 2008 1:49PM

#18, obviously mutual funds are for the most part equity long. i was referring to americans as individual investors and as a group, their impact is minimal. anyway, that point is irrelevant to the shortselling issue at hand

#20 - get a clue and come back to me

Posted by guest, Sep 19, 2008 1:49PM

@ 57:

Me again. I understand the theory of short selling providing liquidity and punishing companies that hurt shareholder value. I'm behind it and it makes sense. What does NOT make sense is this systematic destruction of shareholder value through the abusive practice of naked shorting as shown by the hedge funds and institutions over the last few weeks.

C'mon: LEH goes down, and then the hunt is on for MER. After that, it was AIG. After AIG, is was WB, WM, and MS. You can't seriously expect people to believe that one day these firms were all hunky dory and the next it was Armageddon. I mean, AIG was taken out in what, two days? Then it was MS and WB on Wednesday, right in line. WB has doubled in value since yesterday. Has the fundamental prospects of WB improved to such an extent in 48 hours?

How is this not considered abusive and completely out of line with fundamental value? Perhaps I'm an old fogey because I believe in fundamental analysis!

Again, I'm not trying to pick a fight (and I'm glad that it looks like you're not trying to either), I'm just looking for a reasonable basis to defend naked shorting in this environment.

Posted by guest, Sep 19, 2008 1:50PM

again: "legally shorting". But people are shorting without borrowing the underlying shares, which is disruptive. Maybe prohibiting shorting takes things too far, but it recognizes that there is a problem.

Posted by guest, Sep 19, 2008 1:52PM

I'm shorting Verne Troyer

Posted by guest, Sep 19, 2008 1:54PM

@19 "ballers in charlotte" omg that is just too funny. i really hope you are kidding. you must be feeling pretty good now that your job at wachovia is looking a tad more stable. move to nyc and get a job at a real bank/hedge fund before you rip on the fly over states

Posted by guest, Sep 19, 2008 1:55PM

#3...you have articulated what most of america is feeling today

in fact most of America wants to go on a huge witch hunt and get the money back from every CEO,CFO who was in any way involved in this crisis...

I guess people are a little testy when their property is down in value and they are paying the mortgage on said property at the original value and they are wondering why the appraiser didn't catch the little fact that the property was over valued.

so, yep, Americans really do want to see some headd, many heads roll and do you blame them?

Posted by guest, Sep 19, 2008 1:56PM

Hi #62, this is #57/17...

Personally, I don't fully grasp what the big deal is with "naked" shorting. You can only sell as much as your clearer will allow you to. Also, you eventually have to buy it back, so net-net your activity should not have made any economic difference.

If Warren Buffet were to wake up one morning and say "today, I'm going to short GS into oblivion" (this is very much hypotheical, my appologies to Warren for using him in this example.) I don't think he could do it. It would go a lot lower, but eventually he'd run out of money, and he'd get his face taken off when the stock came back.

In the futures markets (where I ply my craft), you don't need to borrow anything, you can just sell away, and the futures markets are not rife with operators selling things to zero.

Again, I stress, shorting is not the problem. If you had $1,000 to your name and borrowed 30k to buy a car, and a week later the car was only worth 10k, I'd sell your enterprise value down to zero just as quickly.

It's easy for us, as humans, to want to find "a bad guy" in all of this. It's much easier to think that all of this could have been avoided if not for a few "greedy" hedgefund managers. This line of thinking is nonsense. It's much harder for us to accept that this whole thing has come about as a result of a very abstract set of skewed incentives for many different players.

Posted by guest, Sep 19, 2008 2:02PM

#77 you may be having a problem understanding the problem with naked shorting because, well simply put, you are honest.

If you let you imagination run wild and think of the monkey business which could occur with naked shorting well then you might see what they may have been afraid of. At least if my understanding of shorting is correct.

Posted by guest, Sep 19, 2008 2:02PM

@ SPODE:

You quoted someone else in your post there, bub. Nice try but try to deploy your insults a little more effectively next time.

I don't hold myself out to be a finance genius, but I try and learn. The reason that I come here is for that very reason. I'm sorry if my basic questions offend your sense of exclusivity on a public internet forum.

I'm certain that I'm wrong in my assumptions, and that's why I'm asking these questions. It's my job to interface between arcane financial goings-on and the general public. Insights as to why the SEC rule is in fact wrong allow me to see both sides more effectively. Again, sorry if a guy without an MBA and CFA asking questions is offending your genteel sensibilities.

Posted by guest, Sep 19, 2008 2:08PM

I don't think that shorting will be gone forever. But, they just might strengthen and enforce the laws currently out there. I do think they will do away with naked shorting.

I think what no one is mentioning is that computers have taken over this industry at a record clip. If you are computer savvy and want to cause a problem would it be an easy thing to accomplish?

Posted by guest, Sep 19, 2008 2:15PM

Can't we just buy put options to bet on decreasing security prices?

Posted by guest, Sep 19, 2008 2:17PM

-72,

#57, 17, etc etc again.

Upon first glance, the successive price drops in the companies you mentioned does look suspicious. It is easy to imagine some sort of wolf pack getting together and blasting these things.

As easy as that is to imagine, it's not what's going on. As another poster mentioned, the short interest in these names is really not that high. The problem for these stocks is not the shorts, but people who owned the stock are selling too. Big time. I think when people saw LEH go out of business, they probably said to themselves, whoa, there is a lot of risk here, I don't want to be holding, WM, MS, GS, etc, when I can just have cash instead. Another part of the problem is the lack of transparency involved with these banks. If you can't see inside the black box, and another black box just went bankrupt, you're probably going to assume the worst about the one you own.

Finally, if its so easy to short broker dealers to zero, why doesn't this "naked shorting gang" start shorting other businesses to zero? Why limit themselves? In the end, the declining share price is a symptom, and not a cause, of the problems.

Posted by guest, Sep 19, 2008 2:18PM

Can't we just buy put options to bet on decreasing security prices?

Posted by guest, Sep 19, 2008 2:20PM

83 You can. And that's not abusive, since supply / demand is impacting the price. Unlike a naked short, where you're trading thin air.

Posted by guest, Sep 19, 2008 2:23PM

@84 Short selling is subject to supply/demand too, isn't it? Somebody needs to buy if you want to short sell.
Anybody can look up on bloomberg to see if put option volume on financial stocks has increased?

Posted by guest, Sep 19, 2008 2:24PM

Breaking News:

U.S. TREASURY TO ENSURE GOOD WEATHER ALL WEEKEND

Posted by guest, Sep 19, 2008 2:25PM

@85/propdesktrade(?)
If the the stripper wasn't toxic you are s.o.l., but if you'retoo big a pimp to fail (TBAPTF)then you might be OK.

Pimpin aint easy,

-C

Posted by guest, Sep 19, 2008 2:25PM

@ 82:

Thank you for that reasonable response. That's what I was looking for.

Would the reintroduction of the uptick rule be a good idea or not? Would it help to prevent prices falling so precipitously, or are prices falling not indicative of a problem that needs correcting in the first place?

Posted by guest, Sep 19, 2008 2:29PM

I am from Canada. We have been thru this before.
Income trusts were very popular in the last 20 years. It helped the retirees and many others to invest in oil,real estate, different types of business.
The CONservatives promised they would not change the law effecting trusts, and wouldn't you know, the first major law passed was to cancel income trusts.
US is only playing catch up.

Posted by guest, Sep 19, 2008 2:30PM

#89- please dont take this wrong way.

Stop with the + tick conversation… it DOES NOT matter!!! If we still traded in 1/4's it might matter but when stocks are moving multiple price points in milliseconds it’s like pissing in the wind. Maybe the regulators should question the transparency of the firms? Maybe they should question why firm are leveraged 33 to 1? NOT THE SHORT SELLERS

Posted by guest, Sep 19, 2008 2:31PM

86 Yes, someone has to buy what you're selling, but in naked shorting you're able to sell something you don't have and at the same time profit if the price goes down. Which will happen if there's more selling going on than buying. Neat trick: you control the selling volume and you profit from the price drop that occurs as you see it increase. The usual limiting mechanism is the need to have to first borrow the shares before selling. With naked shorting though you avoid that, which makes for abuses.

Posted by guest, Sep 19, 2008 2:33PM

@83, @85, Like @86 says you can certainly buy puts but if the writer of those puts wants to hedge, he has to replicate the option by creating synthetically by shorting the stock.

This rule just castrated option market makers. I mean how many financial companies trade in the S&P 500. How in the fuck are they going to properly hedge short index futures positions?

Posted by guest, Sep 19, 2008 2:35PM

@72 - brovo, well said.

@82 - Agreed with you that shorts are not the entire part of the equation, stockholders are selling as well. Why are they selling do you think? Did Morgan Stanley's fundamentals make an about turn in 24 hrs even after they posted a profit? But this is what happens, entities X, Y and Z shorts 5% of Morgan Stanley stock driving prices down, rest of the long see this, panics, and dumps their holdings. You can fill in rest of the picture.

Why broker dealers can be driven to zero and other companies probably cannot be is 'fear'. It has nothing to do with fundamentals. Goldman Sachs for example was probably not even in top ten in the subprime market, they are not the ones holding toxic debts, but it really doesn't matter, when fear dictates the market, logic is irrelevant. Fed/Treasury is trying to calm the markets. They are not going to ban short selling forever.

Posted by guest, Sep 19, 2008 2:35PM

Economics 100 argument showing why this ban is totally ridiculous:

Market is a group of buyers and sellers.

When sellers outnumber buyers, prices decrease (supply outstrips demand)

However, when you limit the number of sellers (AKA only those who curently hold the stock can sell it) but the number of buyers remains constant, you immediately cut supply, meaning that you increase the price and decrease quantity traded.

Proof: GS price, up 20%, volume of 33.6 MM

Yesterday, volume was 114 million.

Price down, quantity up.

The government is fixing a market that isn't broken. It's perfectly fine to step in when the market for MBS and CMBS runs out of buyers and there is a glut of supply that drives prices down for liquidity reasons, and there is good reason to believe it. Fixing broken markets is ok, breaking good markets for PR value is appalling.

The fair value of these banks is significantly affected by credit risk (which the market perceives as high). So, you have to allow people to sell them and for their stock prices to drop. Right now, the prices of these stocks are only reflecting the opinions of a small part of the market - those who hold and/or want to buy the stocks. The rest of the market participants that would want to sell are held out, so markets do NOT fully reflect available information

The government has just created an upward-biased inefficient market in financial stocks.

-Carnegie Mellon Undergrad

Posted by guest, Sep 19, 2008 2:35PM

3/79, etc.

Quit trying to understand things that are waaaaay above your pay grade and get back to your job--time to convince your sheeple that it is a buying opportunity. That phone isn't going to dial itself. There are plenty of good numbers in that zip code directory.

Coffee is for closers.

Posted by guest, Sep 19, 2008 2:36PM

@77

if a short seller doesn't have a lender for shares that actually exist, then theoretically a Short seller can continue to short shares until demand for the security is exhausted. Theoretically the lower prices should bring out more buyers. But that assumes the buyers know what the shares are worth with certainty. If the share price is the expected value of the future free cash flow. And the cash flow is generated by borrowing money. And borrowing money is based on ones ability to pay it back. Then once the shares fall a certain amount a lender will become uncertain about the likely hood repayment and charge more to lend.

Once the lender charges more people will expect the firm to make less money. Once they expect the firm to make less money they will sell more shares, or at least refuse to buy more. At which point the short sellers come into the market as sell more. Very soon it will cost you more to borrow money than you can make lending it to other "riskier" people. Then my friend you have entered what we call the "death spiral". You are levered 30x and every turn of debt must be serviced cash must go out but less and less will come in. To raise cash you will need to sell assets. But for every asset you sell the other similar assets you own are worth less and less. Less and less valuable assets, generating less and less cash flow, well you can see where is going...

However, if your old CEO happens to be in charge of the National Printing Press, then you're cool, cause you can just wait for everyone else to wither on the vine, while he slips you the sweet succor of liquidity through the back door, er window, er discount window.

Posted by guest, Sep 19, 2008 2:36PM

#93
simply put... they cant. This is a classic example of regulators “shooting first and aiming second”

Posted by guest, Sep 19, 2008 2:47PM

@93, I guess you're right. The collateral damage from this huge. We could probably come up with a list of 100 markets and products that are directly affected by this. Price discovery might as well involve astrology at this point.

Cramer was talking about financial terrorism. Well, this is the equivalent of shooting down an airplane full of passengers because a suspected terrorist is on board.

Posted by guest, Sep 19, 2008 2:48PM

@95 - you are a moron. Please go retake your economics class before preaching your shit here. Supply and Demand points changes with quantity. If company X has 100 million shares out there, only 100 million shares can only be up for sale at any one point, not 105 or any number you fancy. That's why you have to have actually 'borrowed' a share (cover short) to short it. What we see instead is that somebody dumps/shorts 5 million shares that they have made no effort to cover. Because they know given the fear in the market, when prices start to go down, the Longs will Sell. Win-win. Except for this country's financial system.

Posted by guest, Sep 19, 2008 2:50PM

Like it or not, restrictions on the shorts are here. Good thing.

The search for the guilty is on. Good thing.

Punishment of said guilty is anticipated. Another good thing.

New regulations on hedge funds are in the offing, and some hedge fund chiefs are whining like sissies. Two good things.

A number of you clowns are so confused, you don't know what to do next. Also a good thing.

All in all, today is shaping up to be a very good thing.

The Guy from Delaware

Posted by guest, Sep 19, 2008 2:53PM

89-

Your welcome. I don't think the uptick rule would change anything. Empircal evidence says that markets to not trade consequentially any different whether the uptick rule is there or not. Again, when a business is insolvent, it honestly doesn't matter.

(btw- I am not the jerk off in the answers post yelling at you..although he does sort of sound like me and seems to enjoy paraphrasing my posts)

92-

I trade energy futures for a living. I am guessing you do not make your living actively trading. I have never been involved with the physical delivery of oil, so, in essence, I am able "to sell something [I] don't have." If someone sells short, they have to buy back eventually. Also, in order to have on a short position (or any position) you need to have money in an account somewhere. In order to short sell a company into bankruptcy, you would need an enormous amount of money in that account. Like I said before, I don't think $30 billion is enough. Therefore, I leave you all today with this thought...

If a hedge fund really shorted these companies out of business, which hedge fund was it? Like I said, it would require a ton of capital; only a few hedge funds could even come close. Obvioiusly, hedge funds don't release up to the minute stats, but they usually annouce quarterly to their investors (which get leaked) or they post their returns on a hedge fund data base (after all, they're always trying to raise more assets.) SO, if a big fund had a huge year/quarter perhaps you could ask some questions. But, I'd wager that we won't see any huge returns attributable to this whole mess. Einhorn (for whom I have tremendous respect) is allegedly down a little for the year. (I'm not judging, this is just an example. Losing part of the gig. It's not hard to lose (in the short run) on bets for which you have positive expectancy...trust me on that.) So all that said, if you remember this discussion six months from now, and you haven't heard anything, it's very likely that this "blame the shorts" campaign is complete nonsense.

Posted by guest, Sep 19, 2008 2:54PM

if you want to talk econ, this is a classic case of akerloff's adverse selection (lemons) theory. Nobody is trading with some of these financial firms because of information asymmetry.

If things become more transparent, trading will resume. Maybe this toxic waste dump idea aims to do that. I don't know.

Restricting short sales does not fix the problem. It only amplifies the asymmetry by choking off another means of price discovery

Posted by guest, Sep 19, 2008 2:54PM

@ 77 - Futures have limit up/down, so there are rules, even there.

But the futures highlight that what is important in a market is that whatever the rules are, they should be clear, consistent, and (if possible) fair. Changing rules in mid-play is what 7 year old girls do in the playground when they try to freeze out the fat chicks.

On to more pressing issues:

A year after his 79th birthday, a pirate goes into a bar, orders drink after drink after drink. Finally, after a dozen or so, the bartender says to him; "You seem to be having a good time"

And the pirate replies:

I'mmmm eighty.

Posted by guest, Sep 19, 2008 2:54PM

One possibly overlooked positive that may come about from the short-sale restriction is that 799 companies can come clean about the filth in their portfolios next monday with no add'l pressure on the stock from the shorts. Time to get the skeletons out of the closets...

Posted by guest, Sep 19, 2008 3:04PM

93-

S$P futures options market makers are in the clear. They can still short the s&p futures. Futures to cash index arbitraguers, however, are in trouble if they cannot short the cash stocks. The people that dominate that business, however, are probably smart enough to figure out a way around it.

OK, guys, its been fun. Going home. Good luck to all those interacting in the world's most noble profession.

Posted by guest, Sep 19, 2008 3:10PM

Anybody notice that there's only 797 names on the list?
What's missing?

Posted by guest, Sep 19, 2008 3:11PM

@103. Perhaps you should start trading your resume.

Posted by guest, Sep 19, 2008 3:11PM

102 How can you compare trading - either short or long - of commodities to shorting listed securities. In listed securities there's only a finite number of outstanding shares. Naked shorting disturbs that equation. I don't have a problem with shorting. Only naked shorting, which is manipulative, plain and simple.

Posted by guest, Sep 19, 2008 3:15PM

112 He's prohibiting "any shorting" because he's proved to be unable to prevent naked shorting. Simple as that. You abused the system, now pay.

Posted by guest, Sep 19, 2008 3:30PM

The real secret to Goldman's Success, has just been demonstrated. If you don't like the rule, ignore it until inconvenient then change it intermittently so nobody every quite knows what the fuck is going. The quietly big a hole out back, and dump all your shitty assets in it.

Posted by guest, Sep 19, 2008 3:42PM

Dealbreaker's Pakistan chart is dead on.

Short sellers are typically the only ones that stop a crash. They stop crashes and provde a floor, because they buy the stock back to close out their positions.

Without short sellers, we will have no buyers the next time a wave of ex-MS/GS employees decide to sell their stock, and they free-fall will continue unabated

Posted by guest, Sep 19, 2008 4:04PM

(The Department of Justice is monitoring IPs in real-time, so berate the SEC at your own peril).

Fuck you SEC, Cox and the rest of you dirt bag politicians.

Come get me Fuckers......Bring an Army cause you'll need it

Posted by guest, Sep 19, 2008 4:19PM

Bravado@#117...

Hahaha! Just post your name, address, vital info, etc, and I'll be happy to forward same to Uncle Sam.

He's looking for some new, fresh, clown idiot to throw in the dumpster.

The Guy from Delaware

p.s. Your post actually is funny.

Posted by guest, Sep 19, 2008 5:07PM

NotNasser, nice post.

110, et al-

For all of you hung up on "naked shorting," let's examine the life-cycle of a short sale.

I, John Galt, think Lehman's balance sheet contains more liabilities than assets. I decide to initiate a short position.

I borrow one share from bank A. I sell it to bank B.

Bank B now owns the share. They make it available to borrow. I borrow it from them. I sell it to bank C. Bank C makes it available to borrow. I borrow it. I sell it to fund X. They make it available to borrow...

What I'm getting at here is that I could theoretically put on a huge short position by borrowing the same share over and over again.

THUS, it is not the availability of borrowing shares that ultimately restricts short sales. What does restrict short sales is the capital required to take such a large economic interest (the short position).

THEREFORE, whether you are "naked shorting" or not, it shouldn't really matter. One should be able to borrow shares indefinitely if they'd like.

As evidence, I don't think any of these shares have been terribly hard to borrow on their way down.

"The Menace of Naked Shorting" is a myth created to scapegoat the sins of poor broker-dealer management upon others.

Posted by guest, Sep 19, 2008 10:23PM

#121

Good post. Your final paragraph sums it all up quite succinctly.

People, also do not forget that a short seller only shorts a stock if he believes the share is overvalued. There has to be a reason for his/her belief that the price of the stock should go down.

In our case, it is because most banks and nearly all brokerages have skeletons in their closets that have not been made public.

Look at A-I-muthafuckin'G as an example. Willumstad said time and time again AIG only needed $20billion. But days later, the Treasury had to bail them out with a $85billion loan! WTF!! Why's the big discrepancy I ask?

The truth is, everyone is fucked. They could not obtain any short term funding because their peers do not trust them.

Don't forget, Central Banks all over the world have pumped more than $1.50trillion before the month of September. If things are really not that bad, $1.50trillion should have been ample. But we all knew what followed......................

Go Hank, just keep giving methadone to those Wall Street crack addicts and junkies.

Posted by guest, Sep 20, 2008 1:27AM

@3: I was trying to figure out why you're bitch-slapped on multiple threads, but after reading your comment, I'm surprised you're sentient enough to even recognize the abuse heaped on you.

Your comment was ignorant, and your clients who "buy stocks and hold on" are idiots, advised, apparently, by another idiot.