This page contains a single entry from the blog posted on July 18, 2008 4:03 AM. The previous post in this blog was Wild berry jam. The next post in this blog is Sick joke. Many more can be found on the main index page or by looking through the archives.

E-mail, Feeds, 'n' Stuff

Friday, July 18, 2008

Scary News of the Week

The SEC is taking emergency action to make it harder to short-sell bank stocks.

And then maybe other stocks.

How long before they make it harder to sell your stocks at all?

Comments (11)

Solutions looking for a problem.

The Bush Administration is running out of time, so they need to make the most out of the next six months. Next, they'll probably shut down all obstetric practices in order to stop abortions. After that, the Administration will probably stop reporting inflation figures so we won't worry about that nasty little problem. Then they'll probably drop a couple of a-bombs on the North Slope area of Alaska. With all the flora and fauna gone, drilling for oil there would have no longer adversely affect the environment. This last action would have the added benefit of keeping Dick Cheney employed and able to pay his shooting club membership dues after he leaves office.

It's all very logical, really.

Here's the difference between naked short selling and buying stocks ("short" vs. "long").

When you buy a stock "long" you can only buy as many shares as are publicly available: you can't buy shares that don't exist, and you can't exceed certain percentages without reporting your holdings to the S.E.C.

When you sell a stock "short" you are obligated to "borrow" shares from somebody who owns them, and you are required to pay any dividends to them.

Theoretically, you can't sell more shares "short" than are available to borrow.

The naked shorts are selling shares they don't own, and they don't go out to borrow them from somebody who does own them (a violation of SEC law), which means their could be twice as many shares "sold" as are actually available.

When the selling volume dramatically exceeds the "float" (number of shares routinely traded in the market), the price is pushed down very fast and many traditional holders of the stock are afraid to buy the shares for fear that somebody knows something they don't.

In summary, naked shorting allows the sellers to create artificial selling volume, while buyers are limited to buying shares that actually exist.

their = there.

It's unbelievable. I guess they don't really believe in the "free market'.

Jack, I highly recommend you read this rant on a blog by a Wall Street guy called,

"Idiots Fiddle while Rome Burns."

It's Classic!

You can see it by clicking on my name.

What Mr. Tee said: short selling is different game than just buying and selling stock.

But Jack's larger point stands. These are very interesting financial times indeed.

LOS ANGELES (CBS.MW) -- Patriotic American investors say they'll fight terrorism when the stock markets open by vowing not to sell stocks. (Sept 13, 2001)

In other news the Futures and Exchange Commission redefines a hedge from that of one who takes a position in the futures market while simultaneously taking an opposite position in the real cash market to . . . a speculator that takes two simultaneous speculative positions with no link whatsoever in the real market and then passes it off as a safer hedge than even a traditional hedge. (Sarcasm.)

Fits right in with SEC wanting to make it a felony to say bad things about financial institutions. Another 1st amendment going away like the forth and fifth.

This is part of a balancing act. Capitalism gives us things like inventiveness and a vibrant array of goods and services. But it also is prone to producing extreme economic cycles. Government on the other hand is designed to provide stability including protectionism from rapid changes. Currently, we do have the preconditions for an economic depression, and this I think does call for temporary government intervention in the free market economy. I think these preconditions could have been avoided if Alan Greenspan, former Federal Reserve Chair, had not kept short term interest rates very low (1%) for so long inorder to manufacture an economic recovery coming out of another bust, namely, the 2000/2001 tech blowup. It was kind of obvious the country was building too many houses, like trophy homes and second homes, and not investing enough in public infrastructure in the middle of this decade. We also needed to increase energy supplies but instead chose to do it through unconventional means, namely, ethanol and biofuels. These do not produce much net energy gain.

Jack's point "How long before they make it harder to sell your stocks at all?"

No dis' intended, but that's not the point of the SEC's rule. Reg SHO made it illegal long ago to sell shares naked, but the SEC doesn't enforce the rule, only now are they going to enforce the rule if you "naked sell" stiock of their friends.

They are really saying go ahead and violate Reg SHO and we'll look the other way, just don't do it with the our buddies.

They don't give a rip what happens to your stocks.

Bob Clark Said: "and this I think does call for temporary government intervention in the free market economy."

A somewhat ironic statement, as it was a lack or oversight, Indifference, or complicity by the PTB, that allowed the insane lending practices and other financial malfeasance to go on in the first place.

And since when has Big Gov ever fixed anything for the better? As far as intervention, it will be carried out to only benifit a few, the the money managers, cronies etc.

Clicky Web Analytics