In the case of Bear Stearns, the rumor on CNBC about Goldman Sachs cutting off credit had nothing to do with anything, and neither did any short selling whether ‘naked’ or otherwise. What caused Bear Stearns to fail is that everybody cut off credit at the same time. It wasn’t because of Goldman Sachs, which could have easily denied cutting off credit. It was because of the extreme leverage that Bear Stearns had, its poor capital position and the crappy structure they had set up that was completely vulnerable to panicky creditors. Blame the creditors for shooting and not asking questions first, and blame Bear Stearns management for putting the company is such precarious position. It’s ridiculous to blame the rumor mill or short sellers. Companies like this need to fail or very quickly change their ways. Moves like the SEC Emergency Order do nothing but delay the necessary corporate action.

One last point is that most of the crusaders seem to have missed the irony that supposedly ‘they’ (the Wall Street MOB) are both keeping stocks afloat via the Plunge Protection Team and trying to bury stocks by allowing ‘naked’ short selling. It seems to me the two conspiracy theories cannot possibly co-exist. So which is it? Plunge Protection Team or Cabal of Naked Short Sellers? Who knows, maybe they cancel each other out . . .

You should have to pay cash for your house and your car when you buy those. Loans should not be extended to businesses or students either because all of those things are leverage. Certainly, nobody should be able to use credit cards to buy anything. Getting a loan to buy anything is leverage and, while it increases liquidity in the housing, car, higher education, business, clothing, etc.- in fact, all markets – it puts the financial system at risk of a meltdown like the one we’re having now when people can’t pay those loans.

No margin purchases (to increase leverage, in practice) and no borrowing, both now allowed to “increase liquidity.”

Just to correct some factual errors in your post: “margin” and “leverage” are synonyms. To buy on margin is to buy with borrowed money and to lever a purchase is to buy with borrowed money. So, if a=b and b=c, then a=c. Thus, buying on margin is borrowing money to buy something, otherwise known as “levering”. All three words mean the same thing.

Also, the oil speculators don’t actually buy and sell oil. They buy and sell oil futures contracts, so it’s not possible for them to decrease the oil supply.

Let me know on this board when you want to start the campaign against leverage. I’d rather do away with it than go through another housing correction like this one! Just wait until the credit card defaults start coming! Sheesh!

Obviously, I don’t buy the “liquidity” argument. This “liquidity” tends to become increased leverage for speculation.

Get the radio talkers on to this. How do I know? Easy, I am a Joe Sixpack.

Jerry Doyal has Bud Burrel on now.

This IMO is one of the ways to get the masses onto this Fail to Deliever/NSS criminal scam and hopefully mad enough to move the powers in charge.

http://www.cato.org/pubs/regulation/regv31n1/v31n1-6.pdf

You’re conflating two issues: market manipulation and shorting. One can be used to achieve the other but so can buying stock.

When you short a stock, what are you gambling on??

That the stock is overvalued. Or you’re simply taking a short position in that stock to hedge a long position in the other. Assuming you’ve taken that long/short position because the two stocks are correlated, if you’re wrong on your long position, the loss in the long position will be compensated for by the gain in the short position. Sometimes, you may even choose to buy a stock you think is undervalued and sell one you think is slightly overvalued. When they return to fair value (which may be just a few cents for each stock), you unwind the trade. If you’re managing money, that’s a way to reduce volatility of your returns even in a very volatile market.

Why is shorting legal? Who the Heck knows!!!!

One reason is the one I state above. Another is that it makes markets more liquid. So, if you want to buy a stock, but the next offer is 20% above the current price, you either can’t buy or you have to pay up. Say, somebody would like to sell you shares at a much lower price but has no shares in his account. If he can’t short them to you, you’re out of luck. So shorting increases the number sellers and increases overall liquidity, reducing transactions costs for everybody. In markets where shorting is not allowed (mostly small emerging markets) the price swings are outrageous because there’s only one door in and one door out and panic begets panic in both directions because there’s no way to hedge your risk.

3.) What is the benefit to that stock? None

There’s a lot of benefit to the stock. Short sellers prevent the stock from being run up to way above its fair value on heavy buying (again, reducing price volatility). This protects sellers because it prevents them from overpaying for the stock. Specifically, it helps retail buyers because they are the least expert in determining fair value for the stock and most likely to overpay (or sell too cheaply, for that matter). “Fair Value” is an opinion, BTW. So a buyer and a seller (whether short seller or seller of a long position) always disagree about fair value. Whether short selling or selling a long, the seller is always betting the shares will go lower. If the the long position seller didn’t think the shares would go down, why would he sell?

It also benefits the stock because people would rather own more liquid stocks. If you invest in something, part of your risk analysis is how quickly you can exit your investment. The more liquid the market, the more easily you can exit and enter and the more certainty you have that you’ve done both sides of your trade at a reasonable price. That benefits the stock.

you will find an organized well oiled machine of Day traders , Marker Makers and Broker dealers who work together to manipulate the market for personal gain at the expense of mom and pop shareholders!!!

That would take infinitely more collusion than is humanly possible. Keeping in mind, that a lot of these very same people are also long. However, it is possible for a few people to collude in order to manipulate markets. That is FRAUD. Plain and simple. And it should be prosecuted to the fullest extent of the law. But this is rare.

You seem to be working under the assumption that all short selling is targeted at separating you from your money. I also doubt that the financial companies want to be on that emergency action list (although, I’m not an insider to any of those firms, so I don’t have any special information). It’s like basically advertising that you are in such bad shape that you need protection from the SEC. Doesn’t exactly build investor confidence.

Average people/shareholders are the only one’s that loss in today’s market because of shorting!!!

Well, I feel for you and for me – considering a lot of the stocks I own also experienced heavy losses. For a while last summer, I thought I would lose every penny I had and would have absolutely zero for retirement. I didn’t sleep for two weeks and lost so much weight I almost fit into a size zero. It was so bad, I developed deep ridges in my nails from the stress.

Unfortunately, the reason people are losing money is not because of short selling. Naked short interest hasn’t really increased (even in the now protected stocks), which means the overwhelming majority of shares borrowed to short are borrowed from someone who is long. No. These problems stem from the stupidity of these dumbass financial institutions lending to people who didn’t even have a job. What prudent person/institution would lend to someone without determining their income and with zero down so that the borrower had no skin in the game? But they did and their investors are now paying the price of this stupidity.

15:23 SEC exempts market makers from ‘naked-short’ sale rule – Bloomberg

As for my identity, you couldn’t be more wrong. I’m just a nobody bean-counter at a tiny private company that nobody’s ever heard of or cared about.

No, bruiser, you are an idiot who is scared of things that he doesn’t understand and presumes to know who I am and I do. In the absence of the minimal IQ required to actually design and present a counter argument, you rely solely on low blows and copious amounts of stupidity to defend your idiocy.

I don’t know who any of those people you were listing are, btw. I’m just someone who has actual degrees in Finance and economics and knows how markets work. You’re free to disagree and stick your money under a mattress and not let any money grubbing bastards “take you for a ride.”

I hate to admit it, but you are right. If there is a way around regulation, you guys will find it. I just hope you didn’t have too much money in your LBT account.

As for my identity, you couldn’t be more wrong. I’m just a nobody bean-counter at a tiny private company that nobody’s ever heard of or cared about. I just happen to be a voracious reader who hates that soul-less greedy people like you who steal from the little guys, put the financial stability of the world at risk, and don’t really give a crap until their money is put at risk.

Just how deep in the shite is the DTCC?

“……..The Depository Trust and Clearing Corporation has been criticized for its approach to naked short selling. DTCC has been sued with regard to its alleged participation in naked short selling, and the issue of DTCC’s possible involvement has been taken up by Senator Robert Bennett and discussed by the NASAA and in articles — disagreed with by DTCC — in the Wall Street Journal and Euromoney Magazine. While there is no dispute that illegal naked shorting happens, there is a fight as to the extent to which DTCC is responsible. Some blame DTCC as the keeper of the system where it happens, and say DTCC turns a blind eye to the problem.

DTCC says naked shorting is not widespread enough to be a major concern. “We’re not saying there is no problem, but to suggest the sky is falling might be a bit overdone,” DTCC’s chief spokesman Stuart Goldstein said. DTCC General Counsel Larry Thompson calls the claims “pure invention.”

The SEC, however, views naked shorting as a serious enough matter to have made two separate efforts to restrict the practice. And in July 2007, Senator Bennett suggested on the U.S. Senate floor that the allegations involving DTCC and naked short selling are “serious enough” that there should be a hearing on them with DTCC officials by the Senate Banking Committee. The committee’s Chairman, Senator Christopher Dodd, indicated he was willing to hold such a hearing. The North American Securities Administrators Association, representing state stock regulators, filed a brief saying that if the claims were correct, its shareholders “have been the victims of fraud and manipulation at the hands of the very entities that should be serving their interest.”