03 Mar 09
Originally posted by PinkFloydI don't think that's completely accurate. For example, I can sell my house even though I have a mortgage on it.
I know that selling short means selling something I don't own---which if I (as a NON-stockbroker) did, would be illegal. Hence, selling short should be illegal.
03 Mar 09
Originally posted by Metal BrainGood Lord no.
Australia banned short selling. I think we should consider doing the same. I have not heard a convincing reason to not ban it. It seems like a way to profit from other investor's losses to me.
Should we follow Australia's example?
Let the bastards drown in their own greed.
03 Mar 09
Originally posted by FleabittenCan you lease a house and then sell it with the owner's permission? I think the question is should anyone other than the owner be allowed to speculate (sell and buy again) with the stock. I know that brokers sell and buy stocks but the owner normally does the speculating, right?
I don't think that's completely accurate. For example, I can sell my house even though I have a mortgage on it.
My point is that leasing a stock does not make much sense. If the owner is not going to do the speculating shouldn't they be required to sell the stock?
It is as if you can own stock even though it has already been sold. How can you sell something you lease? You cannot do that with land, can you? There is only one deed, right?
03 Mar 09
Originally posted by Metal BrainShorters borrow stocks, often from Pension Funds, in return for a fee. They sell these stocks and hope for a drop in price. If the price drops, the shorter buys the stock back and returns it to the owner. The shorter is happy, the owner of the stock less so, but at least they have a fee.
Can you lease a house and then sell it with the owner's permission? I think the question is should anyone other than the owner be allowed to speculate (sell and buy again) with the stock. I know that brokers sell and buy stocks but the owner normally does the speculating, right?
My point is that leasing a stock does not make much sense. If the owner ...[text shortened]... ell something you lease? You cannot do that with land, can you? There is only one deed, right?
But just because someone shorts a stock does not mean that the price will drop. If it rises, the shorter makes a loss as he still has to buy back the stock at a higher price. Now the lender of the stock has stock which is higher value and the fee.
Shorters do not sell stock without the permission of the owner of the stock. That would be naked short selling which is already illegal.
03 Mar 09
Originally posted by Metal BrainUsing insider information is illegal,regardless of the strategy adopted to do so.
What about inside information?
Doesn't this provide a tool for the few people that know the stock market is about to take a dump to profit from it and expropriate wealth from other stock holders?
For example, lets say David Rockefeller knew about the real estate bubble and sold out on them at their peak and invested in short positions knowing the ...[text shortened]... k holders leased their stock to short sellers? Would the stock be worth anything? I think not.
03 Mar 09
Originally posted by knightwestIf short selling is so harmless why did the SEC temporarily ban the short selling of financial stocks?
Shorters borrow stocks, often from Pension Funds, in return for a fee. They sell these stocks and hope for a drop in price. If the price drops, the shorter buys the stock back and returns it to the owner. The shorter is happy, the owner of the stock less so, but at least they have a fee.
But just because someone shorts a stock does not mean that the pr ...[text shortened]... ermission of the owner of the stock. That would be naked short selling which is already illegal.
Doesn't it result in more selling than would normally take place? After all, why doesn't the owner of the stock sell it himself? I think it results in selling that the owner would not do himself. More selling results in a lower drop and investor panic results.
Naked shorting is illegal but it still takes place. If the SEC did it's job it would not happen as often. Look at the Madoff scandal. The SEC looked the other way and Madoff is still living in his comfortable penthouse. Same thing with the Stanford scandal.
Just because insider trading is illegal does not mean it is not a big problem. Short selling allows people with inside information to abuse the system even more and all of us pay for that in the end.
03 Mar 09
Question:
If a stockholder owns most of the stock shares of a company and leases all of them to a short seller, does he still own those stocks and retain a majority of the stock shares? Or does he lose his controlling share of the company?
Did someone find a way to sell his stock (to avoid losses) and still own it at the same time to keep control of the company without owning any equity?
07 Mar 09
Why the temporary ban on financial stocks if short selling is so harmless as people claim? Can anybody justify temporarily banning financial stocks and no other stock when the stock market is crashing?
http://www.sec.gov/news/press/2008/2008-211.htm
Seems like a double standard to me.
07 Mar 09
1 edit
Originally posted by Metal BrainI don't think banning short selling is the answer because they help determine the actual value of stocks. Without them, stocks would tend to be valued much higher than what they are actually worth. Instead, what should be done perhaps is the reinstatement of what was called "the Uptick rule". Here is what Wiki says about it.
Australia banned short selling. I think we should consider doing the same. I have not heard a convincing reason to not ban it. It seems like a way to profit from other investor's losses to me.
Should we follow Australia's example?
The Uptick rule was a securities trading rule used to regulate short selling in financial market. The rule mandates, subject to certain excpetions, that, when sold, a listed security must either be sold short at a price above the price at which the immediately preceeding sale was effected or at the last sale price if it is higher than the last different price. In 1938, the SEC adopted the uptick rule, more formally known as rule 10a-1, after conducting an inquiry into the effects of concentrated short selling during the market break of 1937. The original rule was implemented by Joseph P. Kennedy, Sr., the first SEC commissioner. The NASD and Nasdaq adopted their own short sale price tests based on the last bid rather than on the last reported sale.
The SEC eliminated the uptick rule on July 6, 2007. The elimination of the rule was preceeded by a SEC order, placed on July 28, 2004, to create a one-year pilot temporarily suspending the uptick rule on select securities. The purpose of the suspension was so that the commission could study the effectiveness of the rule. The SEC's Office of Economics Analysis and academic researchers provided the SEC with analysis of the data obtained during a 6 month period starting May 2, 2005. The consensus was against the uptick rule, with the commission concluding that the uptick rule "modestly reduced liquidity and does not appear necessary to prevent manipulation". The rule was originally put in place to avoid the perpetration of a finanicial crime known as a bear raid. (Ironically Bear Sterns was taken down by such a raid as was Lehman Brothers). However, short sellers themselves viewed the rule as "largely symbolic" and having little actual effect on short selling.
On August 27, 2007, the New York Times published an article on Muriel Siebert, former state banking superintendent of New York, "Wall Street veteran and financial sage, and, in 1967, the first woman to become a member of the New Your Stock Exchange. In this article she expressed severe concerns about the market volitility; "We've never seen volitility like this. We're watching history being made," Seibert pointed to the uptick rule saying, "The SEC took away the short sale rule and when the markets were falling, institutional investors just pounded stocks because they did not need an uptick." Volatility increased dramatically in bonds, commodities and virtually all sset classes, and the uptick rule only applies to equaties, so it's removal was arguably not related to the fall in the markets. However, on the March 20, 2008 episode of Mad Money, Jim Cramer launched his campaign to have it reinstated with prophetic warnings about what may lie ahead.
07 Mar 09
Originally posted by whodeyReinstatement of the uptick rule cannot hurt.
I don't think banning short selling is the answer because they help determine the actual value of stocks. Without them, stocks would tend to be valued much higher than what they are actually worth. Instead, what should be done perhaps is the reinstatement of what was called "the Uptick rule". Here is what Wiki says about it.
The Uptick rule was a securi ...[text shortened]... campaign to have it reinstated with prophetic warnings about what may lie ahead.
If you believe that banning short selling is not the answer, does that mean you disagree with the SEC's decision to temporarily ban the short selling of financial stock?
08 Mar 09
Originally posted by Metal BrainNo. They had to do something or the whole market would have collapsed. I just think it telling that shortly after the uptick rule had been repealed, the market then collapsed. I also find it odd that they would temporarily restrict ALL short selling but not reinstate the uptick rule.
Reinstatement of the uptick rule cannot hurt.
If you believe that banning short selling is not the answer, does that mean you disagree with the SEC's decision to temporarily ban the short selling of financial stock?
08 Mar 09
Originally posted by whodeyWhat would happen if every stock holder leased their stock to short sellers?
No. They had to do something or the whole market would have collapsed. I just think it telling that shortly after the uptick rule had been repealed, the market then collapsed. I also find it odd that they would temporarily restrict ALL short selling but not reinstate the uptick rule.