Good to see Bernake talking about reinstating the uptick rule for short sellers. Those bastard*have been wrecking the market for a long time. Don’t recall he said anything regarding naked shorting-he should stop that too.
Sea Hunt 2002
Yamaha 150
Please expand on how “the bastards have been wrecking the market for a long time”. I’m genuinely interested in your perspective.
Well, I’ll do my best; it’s been a while and my knowledge of short selling is a bit rusty. I do not sell short myself.
Shorting is a bet that a stock will go down.
Prior to Joe Kennedy’s appointment as head of the SEC back in the 20’s there were no controls over short selling. This led to “Bear Raiding”
of company stocks whereby a group of shorts would get together and force a companies stock price down at which point they could gain control at a cheap price. Kennedy himself was a bear raider-he knew the game.
He was responsible for implementing the uptick rule and the rule requiring shorts to own the stocks they were shorting.
If they did not own the stocks, they could arrange a stock loan from a bank or other entity which was willing to lend the short the stock-this cost money as there was interest charged on the loan.
The uptick rule said that a stock must show an increase in price before the short could sell.
These rules prevented the short from driving the price of a stock to 0 and stopped the practice of short selling stocks not owned by the shorter.
These rules were removed several years ago thanks to Enron and Chris Cox, then the head of the SEC.
Effectively, those actions put short selling back to the bear raiding days of the 20’s.
Don’t know if that helps you or not.
I tried to give you the essence of the problem; many of today’s active short sellers are hedge funds which have access to huge amounts of capital and which are not transparent at all.
http://www.investopedia.com/university/shortselling/
Sea Hunt 2002
Yamaha 150
quote:
Originally posted by sternlineWell, I’ll do my best; it’s been a while and my knowledge of short selling is a bit rusty. I do not sell short myself.
Shorting is a bet that a stock will go down.
Prior to Joe Kennedy’s appointment as head of the SEC back in the 20’s there were no controls over short selling. This led to “Bear Raiding”
of company stocks whereby a group of shorts would get together and force a companies stock price down at which point they could gain control at a cheap price. Kennedy himself was a bear raider-he knew the game.
He was responsible for implementing the uptick rule and the rule requiring shorts to own the stocks they were shorting.
If they did not own the stocks, they could arrange a stock loan from a bank or other entity which was willing to lend the short the stock-this cost money as there was interest charged on the loan.
The uptick rule said that a stock must show an increase in price before the short could sell.
These rules prevented the short from driving the price of a stock to 0 and stopped the practice of short selling stocks not owned by the shorter.
These rules were removed several years ago thanks to Enron and Chris Cox, then the head of the SEC.
Effectively, those actions put short selling back to the bear raiding days of the 20’s.
Don’t know if that helps you or not.
I tried to give you the essence of the problem; many of today’s active short sellers are hedge funds which have access to huge amounts of capital and which are not transparent at all.http://www.investopedia.com/university/shortselling/
Sea Hunt 2002
Yamaha 150
I suppose I should have been more clear in my previous question. I understand how the uptick rule works. What pangs my curiosity is more the part about “the bastards wrecking the market”. Is the current state of
Some attribute the fall of Enron to naked short selling.
No, we should not ban short selling. It serves as a useful tool to offset strong bull markets. However, shorts need to be controlled.
The shorts are contributing to the bear market by exerting constant downward pressure on stock prices.
They are rumored to be in large part responsible for wrecking the bank stocks.
Maybe all this will be easier all of us to see if, as, and when (if ever) hedge funds are forced to reveal their investing activities.
Sea Hunt 2002
Yamaha 150
Here’s an interesting article I found on naked shorting-note the date!
http://www.fool.com/investing/high-growth/2005/03/30/whos-behind-naked-shorting.aspx
Sea Hunt 2002
Yamaha 150
I’m with you Sternline. I think all calls should be covered calls. Eliminate them for people who don’t actually “own” the stock (naked). But, if you do own the stock, covered calls can be a good way to make money and hedge your investments.
GW 205
F200 Yam