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| User Info | Short Sales: The Real Issue in forum [Ticker] | ||||
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Genesis Posts: 71432 Incept: 2007-06-26 
KD^2 
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http://market-ticker.org/archives/1531-S....
---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-10-21 15:33:02
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Rmonical Posts: 2155 Incept: 2007-07-04 
Omaha
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Bingo. I am very concerned about any "insurance" where the interests of the provider of the insurance and the insuree are not aligned.
---------- The truth is out there
2009-10-21 15:52:47
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Karlmarxghost Posts: 2641 Incept: 2009-01-26 
Stealing Your Property
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Quote:How likely would it be that someone would be sneaking around with a gas can at 3:00 AM were this to be allowed? Priceless. Explained so anyone can understand. ---------- My views are my view and mine alone. Karl or ticker forum does not endorse or necessarily agree with my views. DO not trade on my views or take them personally.
2009-10-21 15:53:11
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Eaglewwit Posts: 1890 Incept: 2007-11-30 SoCal
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Gen, I was thinking the same thing when reading. However put yourself in Taibbi's shoes. He is a financial novice, he was just awaken to this tremendous fraud in our economy only a few months ago. He is doing his best job to research, understand, and write about it in a way ordinary people can understand and hopefully become outraged. I feel in that perspective he is doing a excellent job. Perhaps he will evolve and address the issues you did in the future. ---------- "Not even I imagined we would see trillions of dollars being created and given to the culprits as a means of allegedly "saving" the system. This is not mere Keynesianism; it is Keynesianism on steroids and crystal meth."
2009-10-21 16:10:28
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Wawawa Posts: 104 Incept: 2009-03-18 San Diego, CA
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FRONTLINE (video, 55 Min): Alan Greenspan, Brooksley Born, and THE WARNING. http://www.pbs.org/wgbh/pages/frontline/.... ---------- RAT RACE IS OVER, RATS WON :) Last modified:
2009-10-21 16:15:05 by wawawa
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Reza30 Posts: 233 Incept: 2009-02-15
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I agree with you on enforcing existing laws. The Fed has broken every possible law it can to help its cronies on Wall Street. This will end very badly for the average American. This article puts forward a very convincing argument as to how the Fed's law breaking behavior could create the next crisis. How the weak dollar might bring down the house Karl has mentioned several times that the bond market and the stock market are pricing two very opposite scenarios: deflation versus inflation. This guy makes a very convincing argument that either way Bernanke has painted himself into a corner—this is one of the best analysis I have read so far. Quote:With a near $2 trillion deficit this year, one might think that interest rates on US Treasuries would be significantly higher than today’s rates. However, interest rates are low because the bond market appears convinced that there will be deflation because of high unemployment and low capacity utilization throughout the economy. This is in stark contrast to the equity market where, because of the weakening Dollar, participants have started to buy US stocks to access foreign earnings and to hedge against inflation. If the stock market is accurately predicting that the Federal Reserve will be successful in creating inflation, holders of government bonds will inevitably sell their Treasury holdings. As a result, rising long-term interest rates will undermine the Federal Reserve’s efforts, harm the economic outlook, and lead to a decline in stock prices. On the other hand, perhaps the bond market is correct that deflation takes hold. If so, then the stocks that are rising as an inflation hedge are mispriced and likely to fall as deflation persists. Either way, divergences in inflationary and deflationary outlooks present a hurdle for the equity markets. IMO, Bernanke will be under intense pressure to keep the rally going with a flood of liquidity, leading to Scenario 1 (loss of confidence in US dollar and a bond market sell off as inflation skyrockets—look at oil and gold, and where they are going). Only time will tell, however all the giddy suckers who are saying you missed out on the rally if you listened to Karl will have a very rude awakening (in not too distant future I might add). Last modified:
2009-10-21 16:22:34 by reza30
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Jstanley01 Posts: 2573 Incept: 2008-07-30
San Antonio, Texas Online
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Great Ticker. I hope Taibbi reads it. Comprehending that short squeezes are the inverse of bear raids ought to be within his grasp. The guy is a great journalist, as evidenced by his lead. He bit into that OTM PUT trade against Bear Stearns nine days out as evidence of illegal insider trading, and once he chomped down on it, he didn't let it go. It should not be let go until someone is in...  ---------- ...so in short, my fellow Texans, we must secede. "For the children..." --Me Last modified:
2009-10-21 16:27:03 by jstanley01
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Nitpicker Posts: 88 Incept: 2009-10-15
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CDS protection buyers can also get ripped off if protection is oversold. Say there's a bond that's widely expected to go to zero, and a CDS issuer is still selling protection against it - you pay 90% of face value in premium and collect 100% when it actually does expire. Now, say there's only $100 million in that issue outstanding, and the protection-writer sells policies covering $500 million worth of that issuer from various speculators expecting an easy 10% gain. The protection writer can PAY OFF THE BOND, causing it to not default, and pocket the rest of the premiums. it's been done -- see http://www.bloomberg.com/apps/news?pid=2.... and http://online.wsj.com/article/SB12446814....
2009-10-21 16:26:40
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Viking Posts: 323 Incept: 2008-03-12
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Seems like additional points that complete Taibbi's description of naked shorts what did Taibbi get wrong exactly?
2009-10-21 16:30:59
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Statusquojoe Posts: 2397 Incept: 2008-11-20
Land of the fees Home of the slaves.
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Although Taibbi seems to be hitting on most cylinders lately, I was dismayed that he suggests a single payer health insurance reform. Although that is probably better than completely subsidizing the health insurance industry with no real reform as is currently proposed. I am amazed at the depth of your knowledge Karl from banking to trading, you just keep educating us all. ---------- "In short, you are the definition of moral hazard." Senator Bunning to Bernanke
2009-10-21 16:54:27
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Franco Posts: 23 Incept: 2009-10-06
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While we are trying to enforce the existing law against naked short selling, why don't we go ahead and just ban all "betting" type of derivatives? No more CDS. In options trading, if you want to write a call, you have to own the underlying. If you want to buy a put, you have to own the underlying. And no more margins, especially in futures trading. You want to enter into a futures contract for a bazillion barrels of petroleum, you better have eleventy billion dollars in the bank. The advocates of all this bull**** will tell me that it's necessary for the sake of liquidity. So what? Do we really need 3 billion shares changing hands every day? And also, about shorting, if I have stock with a brokerage, I'd like to be able to decide whether I allow others to borrow the stock from me for shorting, and if they do, I want to be paid interest.
2009-10-21 16:58:59
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Genesis Posts: 71432 Incept: 2007-06-26
KD^2
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I don't have a problem with derivatives so long as the underlying is not counterfeited in the process. Options can be traded without this, as can CDS. Futures are in fact a forward on a contract, and so long as the margin is maintained I don't see the issue. In fact the futures markets are one of the best and cleanest out there, for this reason - margin is studiously watched, and you get INSTANTLY ****ed if you go into negative equity. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-10-21 17:02:44
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Jakesky Posts: 5 Incept: 2009-09-04
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Ticker Guy I've only been reading your post for a few months, but thank you for posting on this issue. Taibbi is an excellent journalist. Jake Sky
2009-10-21 17:24:07
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Franco Posts: 23 Incept: 2009-10-06
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What bothers me about the futures market is that it evidently allows leveraging to such a degree that speculators are able to "pile on" and really move the market. When oil went to 140, I don't know that the evidence is definitive, but it seems that it was mostly speculation, no supply/demand imbalance. That shouldn't be allowed to happen. Maybe it would be as simple as significantly reducing the allowed leverage.
2009-10-21 17:38:01
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Genesis Posts: 71432 Incept: 2007-06-26
KD^2
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Leverage is significant but leverage works both ways. So long as margin has to be posted, I don't care. And in the futures market, it does - in spades. Oil going to $140 was all about the DOLLAR. Oil more than doubling is STILL about THE DOLLAR. $81/bbl in the worst recession since the 1930s, with a forward outlook that arguably might be WORSE than the 1930s? That's not organic, its the FX. ---------- "The monetary base in ALL modern monetary systems is the sum of unencumbered assets against which one is both WILLING AND ABLE to borrow." - Me
2009-10-21 17:40:10
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Steelhead23 Posts: 389 Incept: 2008-09-09 Portland OR
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Excellent. I simply love your fire insurance metaphor. Please be sure to share this with Matt.
---------- short em all - let God sort em out!
2009-10-21 17:47:27
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Crosseyed Posts: 153 Incept: 2007-07-29
Atlanta, GA
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Excellent ticker. Thank you for that clear and concise explanation.
2009-10-21 19:22:34
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Hankrearden Posts: 48 Incept: 2009-08-21 Atlanta
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Agree with wawa, Frontline's "The Warning" was very good. Unfortunately, we are the Brooksley Borns in American society today. She was ignored, ridiculed for doubting the "wisdom" of bankers and had her regulatory duties revoked on this isssue. She quit after that. We won't. Not sure if you caught the Daily Paul article last week that talked about "disorganized" rebellion, but it made a lot of sense to me. Writing your congressman, protests at town hall meetings, tea parties or even marches on Washington have not and obviously will not work. Those of us who get it have to have a structure similar to that of terror cells, where there is no "leader" per se. Simply a "silent revolution" at the individual level to rebel against the elitists in control. Obvious actions include withdrawing all money & credit accounts from all banks and moving to credit unions as Karl raged on. But I think there is more we can do on an individually organized level, with proper "guidance" if you will. We, as Americans, must find a way to fight back. There are over 300 million of "us" and only a few thousand of "them"(yes that is a Pink Floyd reference). The adult elephants in the room have forgotten they can easily break the chain that has been attached to them since childhood. How do we awaken the sleeping giants that are the 300 million Americans getting ****d by an elite that control our government? A bloodless coup is what I am advocating, as long as we still have that option.
2009-10-21 19:35:28
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Schwantz Posts: 5077 Incept: 2007-11-12
Monkey Do
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Taibbi has absolutely no financial background whatsoever and he's already got more of the story correct than almost anyone out there. You're right Karl, that he just barely missed the big story on this one, but I still give him Kudos for pushing the boundaries, especially for an audience like Rolling Stone.
---------- Dives sum, si non reddo eis quibus debeo Smash the Keynesian idiocracy! Last modified:
2009-10-21 21:29:08 by schwantz
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Bozonian Posts: 14033 Incept: 2007-09-01
PFT - Pure F'n Tin
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I think the most effective means of protest right now is to refuse to participate in the system, except to vote out any incumbents. Violence and protesting are too unreal for most people right now, they aren't hurting enough. If things turn around, then no harm, no foul, but if things get worse, more and more people will want to take action. I say take care of yourself first. All serious upheavals begin with those who are most desperate, crazy, brave or stupid. They will be coming out of the woodwork soon. I don't happen to be one of them. It'll be those who have nothing left to lose. ---------- I'm so depressed about outsourcing I called the suicide hotline and got a call center in Pakistan. They got all excited and asked me if I could drive a truck. Everything I write is my opinion and not to be considered proven fact. Nothing I write should be considered financial advice. Last modified:
2009-10-21 22:15:52 by bozonian
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Arturo Posts: 76 Incept: 2007-07-17
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I would think that it would be easy to stop naked shorting if DTC and the prokerage industry really wanted to. Just impose a penalty on fails, let's say .05 per share the first day, .10 the second and so forth. (Penalties could be higher or lower - just see what it takes until fails get down to a small level.) As for options market makers, while it would be preferable to require them to follow the same rules as other market participants and borrow before they short, I could see giving them a modest window (maybe 1-5 days) to make a borrrow after shorting. This would give them an opportunity to make markets in most stocks without delaying execution to find shares to borrow. ---------- Illigitimi non carborundum.
2009-10-21 22:35:31
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Rutben Posts: 900 Incept: 2007-07-27
Phoenix, AZ
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Knowing it could be highly profitable (the earlier the default the better) to "invest" in naked CDS, I can't wait to see who "discovers" there was intent to "create" debt whose default was likely and "insurable". My imagination could of course be racing ahead of the ability of the pigmen to find enough "qualified" (unemployed with no assets yet having a strong desire to achieve the American dream) borrowers. Much like the Fed "renting" primary dealers for five days, I can't imagine they overlooked a strategy of "renting" the borrower for as short a time frame as possible. You could even say you were buying CDS just to be "prudent". Did they know taxpayers would be forced to be "insurers" or were they just "lucky"? Wouldn't it be great if records were available showing to whom loans were made and when, and who bought CDS on the loans and when. I assume securitizations took care of this problem by keeping it all sufficiently opaque.
2009-10-22 01:15:53
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Donethat Posts: 70 Incept: 2009-04-22 Online
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Market makers are exempt from the prohibition on naked short sales. They should not be. Well said Gen in 15 short simple words.
2009-10-22 01:48:51
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Mike57 Posts: 352 Incept: 2009-03-10 Bethlehem, PA.
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What about commodities futures and options. When oil skyrocketed I read many articles which claimed that there wasn't enough physical oil to cover all the contracts written. If this were true then the dealer be selling something that didn't exist.
2009-10-22 01:52:04
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Donethat Posts: 70 Incept: 2009-04-22 Online
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http://www.sigtarp.gov/reports.shtml Oct 21, 2009, report to Congress Special Inspector General TARP, Barofsky says he has been helping NY state attorney general, SEC etc. page 7 of 256. and is investigating AIG counterparty claims from Sept 2008. I'm not sure whether this will be a whitewash, or whether indictments will follow. Still working with the SEC, but then maybe other prosecutors will step up.
2009-10-22 01:54:40
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