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(Yahoo)   Today, SEC bans short-selling. Tomorrow, SEC bans any decline ever in stock prices   (biz.yahoo.com) divider line 34
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567 clicks; posted to Business » on 19 Sep 2008 at 2:48 PM (6 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



34 Comments   (+0 »)
   

Archived thread
 
2008-09-19 12:10:17 PM  
Short-selling is unethical anyway. It should never have been allowed. Allow me to shed a tear for the day-traders who will get pantsed by this:

....can't seem to muster one.
 
2008-09-19 12:16:49 PM  
Follow the British on this. Didn't they ban ALL short selling about 250 years ago?
 
2008-09-19 12:36:15 PM  
RobertBruce: Didn't they ban ALL short selling about 250 years ago?

No, but they banned shorting bank stocks for the next three months yesterday.

/My question from the previous thread remains--what happens to investors and institutions that already have short positions on bank stocks?
 
2008-09-19 12:54:12 PM  
Why don't they do something useful, like banning clothes on Salma Hayek

www.uncorrelated.com
 
2008-09-19 02:00:32 PM  
I say let 'em crash. They knew what they were getting into.
 
2008-09-19 02:52:28 PM  
CrankMyBlueSax: Why don't they do something useful, like banning clothes on Salma Hayek

Run for something, please, so that I may vote for you
 
2008-09-19 02:53:32 PM  
This way no one can make money in the foreseeable future. If Bush's buddies aren't able to make millions (except for golden parachutes from their failures), no one can.
 
GOB
2008-09-19 02:54:12 PM  
BunkoSquad: CrankMyBlueSax: Why don't they do something useful, like banning clothes on Salma Hayek

Run for something, please, so that I may vote for you


seconded
 
2008-09-19 02:55:43 PM  
RobertBruce: Follow the British on this. Didn't they ban ALL short selling about 250 years ago?

Market Makers everywhere can short - this aids liquidity and protects them whilst they're holding equity between sales. In the UK anybody can short a share (stock) but it was briefly banned after the Dutch tulip market disaster in the seventeenth century.

It does protect the large finance companies and pension funds from losing enormous amounts in a bear market, and also fleeces thousands of private investors who think they're clever/talented enough to beat the market (hah!).
 
2008-09-19 02:58:41 PM  
As long as Ohio State doesn't get another BCS game I'm happy.

...

/why are you all looking at me like I'm a moran?
 
Juc
2008-09-19 03:11:40 PM  
CrankMyBlueSax: Why don't they do something useful, like banning clothes on Salma Hayek

Despite the clothes she's wearing, she looks pretty naked to me in that picture
 
2008-09-19 03:15:57 PM  
Juc: CrankMyBlueSax: Why don't they do something useful, like banning clothes on Salma Hayek

Despite the clothes she's wearing, she looks pretty naked to me in that picture


Isn't it more because of the clothes?

/Semantic Nazi
 
2008-09-19 03:16:43 PM  
CrankMyBlueSax: Why don't they do something useful, like banning clothes on Salma Hayek

Those boobs could end the recession and the War on Terror.
 
2008-09-19 03:23:33 PM  
rosebud_the_sled: This way no one can make money in the foreseeable future. If Bush's buddies aren't able to make millions (except for golden parachutes from their failures), no one can.

You fail. The execs at Freddie and Fannie have been denied a golden parachute and have told to give back their 07 bonus.
 
2008-09-19 03:35:03 PM  
Yea, shorting always seemed wrong to me. You invest because you believe the company will be worth more than you put into it. I also don't like the idea that rooting for a company to fail and have the stock tank can make you money.

Shorting a stock is like a vote of no-confidence, which should be restricted to just don't invest it the damn company in the first place.

I get that it's all speculation, but in my mind committing a resource (time, money, effort, whatever) should be done with the intent you'll get more out of it. The idea of being rewarded for failure seems completely wrong.
 
2008-09-19 03:38:56 PM  
I just wish they had not banned offense.


/ 3-2 set college football back 50 years
 
2008-09-19 03:40:01 PM  
Okay, people here's what you sould want to hear....

"Given the importance of confidence in financial markets, the SEC's action halts short selling in 799 financial institutions. The SEC's emergency order, pursuant to its authority in Section 12(k)(2) of the Securities Exchange Act of 1934, will be immediately effective and will terminate at 11:59 p.m. ET on Oct. 2, 2008. The Commission may extend the order beyond 10 business days if it deems an extension necessary in the public interest and for the protection of investors, but will not extend the order for more than 30 calendar days in total duration."

October third.
That's the day that we start making money to the downside. If you had bought BAC at open yesterday, right now, you'd have a 25 percent gain. (50% if you maxed out your margins.) These short sale bans are the dumbest thing they can do.
They are the greatest thing for us little guys. Imagine making ten percent in a single day! Then on October third, I'll start short selling again. Then in December when they decide they need to protect these Great National Treasures® from us scurrilous short sellers, I'll buy them again. My gosh, is this what it feels like to be a pirate? Gobs of money on the way up. Gobs of money on the way down. Somebody get me some hookers and blow, stat!
I say we take it one step further. Lets protect the banks on even weeks and allow shorts on the odd weeks. That could result in doubling my money every month!
I suddenly freaking love these protections.
October second. That's the day to get out. Remember it boys. That's when we start spreading our filthy rumors again. Except we aren't. We know these banks are garbage at their current price. Why risk prosecution by pushing them over. They will fall on their own.
 
2008-09-19 03:41:56 PM  
CrankMyBlueSax: Why don't they do something useful, like banning clothes on Salma Hayek

I prefer her clothed in public, so I know I'm seeing something special when she comes round to my place.

the_real_muppet: Short-selling is unethical anyway. It should never have been allowed.

ckessel: I also don't like the idea that rooting for a company to fail and have the stock tank can make you money.

Shorting isn't unethical. Shorting and spreading false rumours that the company is up shiat creek, then taking the profit IS unethical. And illegal. And usually, it just helps the market tick along efficiently.

It's different at the moment, when the traders in London and NY are significantly more clueless and insane than usual, though... what's usually fine is a problem at the moment. So a temporary ban on shorting is probably about right.

/ No really... not everything is done to screw us proles. At least not everything done by the government. The banks, now they're something else...
 
2008-09-19 03:46:00 PM  
I made this same comment in an earlier thread since I didn't think we needed two threads on the same topic today.

That's what I get for thinking
 
2008-09-19 03:50:27 PM  
pandabear: RobertBruce: Didn't they ban ALL short selling about 250 years ago?

No, but they banned shorting bank stocks for the next three months yesterday.

/My question from the previous thread remains--what happens to investors and institutions that already have short positions on bank stocks?


Well, now they have to either actually locate the stocks they are shorting or close their short sells. Unless they are market makers. MMs can keep their shorts. Shorting means "flooding" the market with extra shares. Covering shorts can cause share liquidity to reduce therefore creating the phenomenal jump we are seeing today. There are less shares floatng around the market, therefore they are worth more.
However, I am a computer guy, not an economist. If I am wrong, I welcome correction.
 
2008-09-19 03:56:21 PM  
Gunny Walker, only extra shares when they 'naked short'. It sounds a bit pervy but it's basically selling a stock without borrowing it first. Closing a naked short is buying it and filling the contract, ie giving it to the guy you'd sold it to earlier.

Normal shorting is borrowing a stock (say from a pension fund), selling it on, paying rent on it until you buy it back (off of anyone who holds it) and give it back to the fund (closing or covering your short) you borrowed it off. Normal shorting doesn't create extra stock.

/I think I've gone cross-eyed
 
2008-09-19 04:12:52 PM  
Gobobo: Gunny Walker, only extra shares when they 'naked short'. It sounds a bit pervy but it's basically selling a stock without borrowing it first. Closing a naked short is buying it and filling the contract, ie giving it to the guy you'd sold it to earlier.

Normal shorting is borrowing a stock (say from a pension fund), selling it on, paying rent on it until you buy it back (off of anyone who holds it) and give it back to the fund (closing or covering your short) you borrowed it off. Normal shorting doesn't create extra stock.

/I think I've gone cross-eyed


Right, I guess I didn't clarify that. I tried to simplify as much as possible. A much shorter way of saying it would have been "lots of big guys have to buy stocks. Ride the wave."
Thanks though
 
2008-09-19 04:25:02 PM  
Today, SEC bans short-selling. Tomorrow, SEC bans any decline ever in stock prices

Close, the Fed announced they will be guaranteeing money market funds.
 
2008-09-19 04:27:26 PM  
moof: Today, SEC bans short-selling. Tomorrow, SEC bans any decline ever in stock prices

Close, the Fed announced they will be guaranteeing money market funds.


that better be a very very bad joke on your part.
 
2008-09-19 04:31:25 PM  
Weaver95: that better be a very very bad joke on your part.

I'm pretty sure I heard that this morning as well. Some banks worried about major withdrawls from FDIC insured accounts because the MM account guarantee would have no limit.
 
2008-09-19 04:43:36 PM  
*slaps forehead*

Yes, simplifying. I forgot about that one. Too much time reading other sites with people who do this day to day.

/I need more social life
 
2008-09-19 04:49:57 PM  
Gobobo: *slaps forehead*

Nah dude, you're cool. Thanks for the reassurance.
 
2008-09-19 04:52:19 PM  
Banning shorts will add to volatility. If a stock becomes very popular, people hang on to their shares, which makes them hard to obtain and drives up the price. If shorting is allowed, there will be people who think the stock will fall and will therefore be willing to sell borrowed shares,. That will dampen the upward climb. Without them, the price will climb much more and when the balloon pops, the resulting plunge will be from a much higher peak. Likewise, when the stock price begins to fall and the shorts start buying to close out their positions, that serves to lessen the drop. Short selling acts as a moderating force that helps to mitigate drastic swings.
 
2008-09-19 05:09:20 PM  
BunkoSquad: CrankMyBlueSax: Why don't they do something useful, like banning clothes on Salma Hayek

Run for something, please, so that I may vote for you


It would be a wasted vote. I am unelectable. I inhaled, I reject sky-fairies, I have been naked in public, and I subscribe to TotalFARK.
 
2008-09-19 05:22:35 PM  
img.villagephotos.com
 
2008-09-19 06:03:39 PM  
Gunny Walker: Nah dude, you're cool. Thanks for the reassurance.

I love "y'all", of course it's Friday and I'm drinking vodka + fruit juice/red bull but I've met many a US citizen on my travels and they're, generally, all good regardless of political persuasion.

I'm really enjoying this site. Will take a subscription (because I damn well should, 5 dollars for this much entertainment!?!one) as soon as I'm comfortable in my new job in a certain location (the Middle East is an uncertain area to work in, just getting a visa is a trial) as we all have to spread the western diplomacy and 'freedom' to the heathens and non-infidels.

I'm going to regret typing that in the morning.

[OFFICIAL] That was your English, dry sense of humour for the day (we love 'u'!!), carry on. I'm off to watch Jonathon Ross on the BBC.
 
2008-09-19 07:11:17 PM  
pandabear: /My question from the previous thread remains--what happens to investors and institutions that already have short positions on bank stocks?

They are grandfathered. You can hold a short position (assuming you got a locate for it in the first place, of course), but you can't add to it.

ckessel: I also don't like the idea that rooting for a company to fail and have the stock tank can make you money.

In many cases, shorting is done as a hedge. You go long the undervalued company and short the overvalued one. Then you don't have to guess the direction of the stock market (which is very hard), you only have to be right about the spread (which is not quite as hard). Without the hedge from the short, your profit is subject to significant market risk.
 
2008-09-20 05:34:36 AM  
Weaver95: moof: Today, SEC bans short-selling. Tomorrow, SEC bans any decline ever in stock prices

Close, the Fed announced they will be guaranteeing money market funds.

that better be a very very bad joke on your part.


Got me. It's actually the Treasury.

"For the next year, the U.S. Treasury will insure the holdings of any publicly offered eligible money market mutual fund - both retail and institutional - that pays a fee to participate in the program," the Treasury said in a statement.
 
2008-09-21 11:52:28 AM  
Doesn't matter. Unless they are going to ban trading of stock options you can usually create a synthetic short by purchasing/selling at varying strike prices. This action might slow down a few of the huge volume computer driven trades and disrupt processes in some trading organizations (plus sound good to the public), but leave it in place a little while and everyone will be set up to get around it.

The biggest benefit might be that the company CEOs won't be able to blame 'those evil short sellers' when everyone panics and bails because they've been lying to the shareholders for a year and the truth comes out.
 
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