tagged w/ Short Selling
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“Unrestrained financial exploitations have been one of the great causes of our present tragic condition.” -- President Franklin D. Roosevelt, 1933
Why did gold and silver stocks just get hammered, at a time when commodities are considered a safe haven against widespread global uncertainty? The answer, according to Bill Murphy’s newsletter LeMetropoleCafe.com, is that the sector has been the target of massive short selling. For some popular precious metal stocks, close to half the trades have been “phantom” sales by short sellers who did not actually own the stock.
A bear raid is the practice of targeting a stock or other asset for take-down, either for quick profits or for corporate takeover. Today the target is commodities, but tomorrow it could be something else. When Lehman Brothers went bankrupt in September 2008, some analysts thought the investment firm’s condition was no worse than its competitors’. What brought it down was not undercapitalization but a massive bear raid on 9-11 of that year, when its stock price dropped by 41% in a single day.
The stock market has been plagued by these speculative attacks ever since the four-year industry-wide bear raid called the Great Depression, when the Dow Jones Industrial Average was reduced to 10 percent of its former value. Whenever the market decline slowed, speculators would step in to sell millions of dollars worth of stock they did not own but had ostensibly borrowed just for purposes of sale, using the device known as the short sale. When done on a large enough scale, short selling can force prices down, allowing assets to be picked up very cheaply.
Another Great Depression is the short seller’s dream, as a trader recently admitted on a BBC interview. His candor was unusual, but his attitude is characteristic of a business that is all about making money, regardless of the damage done to real companies contributing real goods and services to the economy.
How the Game Is Played
Here is how the short selling scheme works: stock prices are set by traders called “market markers,” whose job is to match buyers with sellers. Short sellers willing to sell at the market price are matched with the highest buy orders first, but if sales volume is large, they wind up matched with the bargain-basement bidders, bringing the overall price down. Price is set by supply and demand, and when the supply of stocks available for sale is artificially high, the price drops. When the bear raiders are successful, they are able to buy back the stock to cover their short sales at a price that is artificially low.
Today they only have to trigger the “stop loss” orders of investors to initiate a cascade of selling. Many investors protect themselves from sudden drops in price by placing a standing “stop loss” order, which is activated if the market price falls below a certain price. These orders act like a pre-programmed panic button, which can trigger further selling and more downward pressure on the stock price.
Another destabilizing factor is “margin selling”: many speculative investors borrow against their holdings to leverage their investment, and when the value of their holdings goes down, the brokerage may force them to come up with additional cash on short notice or else sell into the bear market. Again the result is something that looks like a panic, causing the stock price to overreact and drop precipitously.
Where do the short sellers get the shares to sell into the market? As Jim Puplava explained on FinancialSense.com on September 24, 2011, they “borrow” shares from the unwitting true shareholders. When a brokerage firm opens an account for a new customer, it is usually a “margin” account—one that allows the investor to buy stock on margin, or by borrowing against the investor’s stock. This is done although most investors never use the margin feature and are unaware that they have that sort of account. The brokers do it because they can “rent” the stock in a margin account for a substantial fee—sometimes as much as 30% interest for a stock in short supply. Needless to say, the real shareholders get none of this tidy profit. Worse, they can be seriously harmed by the practice. They bought the stock because they believed in the company and wanted to see its business thrive, not dive. Their shares are being used to bet against their own interests.
There is another problem with short selling: the short seller is allowed to vote the shares at shareholder meetings. To avoid having to reveal what is going on, stock brokers send proxies to the “real” owners as well; but that means there are duplicate proxies floating around. Brokers know that many shareholders won’t go to the trouble of voting their shares; and when too many proxies do come in for a particular vote, the totals are just reduced proportionately to “fit.” But that means the real votes of real stock owners may be thrown out. Hedge funds may engage in short selling just to vote on particular issues in which they are interested, such as hostile corporate takeovers. Since many shareholders don’t send in their proxies, interested short sellers can swing the vote in a direction that hurts the interests of those with a real stake in the corporation.
Lax Regulation
Some of the damage caused by short selling was blunted by the Securities Act of 1933, which imposed an “uptick” rule and forbade “naked” short selling. But both of these regulations have been circumvented today.
The uptick rule required a stock’s price to be higher than its previous sale price before a short sale could be made, preventing a cascade of short sales when stocks were going down. But in July 2007, the uptick rule was repealed.......
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http://www.webofdebt.com/articles/shear_short.php“Unrestrained financial exploitations have been one of the great causes of our... more
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HERE IS HOW KATX.. "A SMALL MINING COMPANY".. WILL BREAK AWAY FROM KNOWN MM MANIPULATION "naked shorting of penny stocks " AND THE GROUPS WHO ARE ASSOCIATED WITH THEM. $$ COORDINATED MARKET MANIPULATION $$ .....ONCE IN A BLUE MOON A GREAT LITTLE COMPNY WILL GROW AT A ASTRONIMICAL RATE AND WILL DO EXACTLY THE **OPPOSITE** OF WHAT THE WALL ST. MARKET MAKERS THOUGHT !...".I own shares in a small mining company in Newfoundland Canada who has had a PHENOMENAL RISE IN IT'S PRICE SHARE ...KATX RAN FROM .001 IN NOVEMBER LAST YEAR TO 24 CENTS...(( 23900 % ))..A RECENT PULL BACK IS DIRECTLY RELATED TO " and yes I have proof ! " WHAT IS ABOUT TO HAPPEN IS THAT KATX IS MOVING TO A DIFFRENT "higher" EXCHANGE ...AKA ((( OFF THE PINK SHEETS ))) .........GO DOWN TO PART -3- WICH IS THE MOST IMPORTANT PART........>>Step 3. KATG submits a “friendly takeover” offer to shareholders to purchase KATC outright, which the KATC board of directors will recommend that shareholders accept. This offer will either be cash, shares of KATCHERE IS HOW KATX.. "A SMALL MINING COMPANY".. WILL BREAK AWAY FROM KNOWN MM... more
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E-mails released Saturday morning show top executives at Goldman Sachs Group Inc. boasting about the money the firm was making as the national housing market collapsed in 2007.
The e-mails suggest Goldman benefited from its bets that securities backed by subprime mortgages would lose value. The messages seem to contradict previous statements by the investment bank that it lost money on the securities.
"Of course we didn't dodge the mortgage mess," CEO Lloyd Blankfein wrote in an e-mail dated Nov. 18, 2007, according to e-mails released by the Senate's Permanent Subcommittee on Investigations. "We lost money, then made more than we lost because of shorts."
more at link http://www.npr.org/templates/story/story.php?storyId=126243597E-mails released Saturday morning show top executives at Goldman Sachs Group Inc.... more
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Or a misrepresentation by the pundits and spin-doctors?
What really happened on wall street?
Do we really need these jerks who got us into this mess to get us out?Or a misrepresentation by the pundits and spin-doctors?
What really happened on... more
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asherp
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added this
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3 years ago
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Jon Stewart's interview of Jim Cramer on "The Daily Show" Thursday went way beyond its allotted time, so Comedy Central promised to upload the full, unedited video of the interview to its website.
>> Follow link for the other two videos, or just visit: www.thedailyshow.com
>>The first video already has over 700,000 hits!
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Jon Stewart is my new hero!
Too good to be true, Jon Stewart shows that he has the balls it takes to call out major networks who have clearly allowed and even aided in the manipulation of financial markets that has lead to the current situation.
You won't want to miss this, trust me!Jon Stewart's interview of Jim Cramer on "The Daily Show" Thursday went... more
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Here is another name they do not teach you in American history, Albert H. Wiggin. Head of Chase National Bank in the 1920s, he set up dummy companies in the name of family members so that he could short sell his own company’s stock, i.e. bet that his own bank’s stock would go down in value. This made him millions of dollars during the banking crises that rocked the nation between 1929-1232. Try to imagine how easy it would be for the guy in charge of a bank to bet that his own company’s stock would take a dive (in someone else’s name, of course) and then leak some “bad news” so that the stock would take that dive just as he predicted. And it was all legal at the time. That was before FDR was elected and Ferdinand Pecora held his public hearings which exposed the immoral, greedy practices of America’s bankers---or banksters as TIME magazine dubbed them.
More on Wiggin at
http://en.wikipedia.org/wiki/Albert_Wiggin
Note that he never paid for his crimes. Instead, the FDR administration attempted to put a stop to the practice of insiders manipulating the price of their own company’s stock, wrecking havoc with the finances of mom and pop investors and costing employees their jobs, all for the sake of a few more million dollars that they did not really need.
For those like me who do not have economic degrees, here is a link to the wiki entry for short selling .
http://en.wikipedia.org/wiki/Short_ (finance)
Here is another name they do not teach you in American history, Albert H. Wiggin. Head... more
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Issue separate statements that prohibitions would be too restrictive
The leaders of two of the world’s largest options trading and clearing entities criticized the Securities and Exchange Commission’s emergency ban on short selling scores of financial stocks.
Meanwhile, a University of Chicago Nobel laureate in economics said Sunday he supports what might be the beginning of a growing and global emergency ban on short selling financial stocks.
William Brodsky, the chief executive officer of the Chicago Board Options Exchange, said in a written statement that the ban is “a draconian measure that will result in the sudden and severe removal of liquidity from the marketplace
Issue separate statements that prohibitions would be too restrictive
The leaders of... more
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