I read a good article this morning by Jon Nadler, Senior Analyst with Kitco Bullion Dealers about the recent short selling activities on global stock markets. Jon states that whilst last Friday's ban on short selling was a profoundly sad day for the free market system, he discovered over the weekend that there might be more to that decision than initially thought. There has been chatter on the Beltway that the markets may have been the victim of economic terrorism by way of coordinated short raids that originated in London and Dubai. While the legitimacy of this remains to be seen, Jon Nadler confirms that his source is well-respected. Additionally it makes sense as the goals of terrorism are economic destruction and social upheaval. Jon stated that breaking the capital market construct would effectively achieve both goals. Does anyone have anything to add this this?
Fingerprints of economic terrorism
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Trembling Hand
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wayneL
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Yep, a load of BS.
Any raid on a company with a sound balance sheet will be met with a stampede of buyers picking up value. Can you imagine someone trying to take out BHP? Money would come from everywhere.
The only fingerprints to be found are those of the creative accountants. If ailing companies are raided, it is because they deserve it, not because of terrorism.
Any raid on a company with a sound balance sheet will be met with a stampede of buyers picking up value. Can you imagine someone trying to take out BHP? Money would come from everywhere.
The only fingerprints to be found are those of the creative accountants. If ailing companies are raided, it is because they deserve it, not because of terrorism.
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What, what, what, next thing you will be saying is, ailing people deserve to be raided. In fact, that is what you are saying, as people own shares in these, so called, ailing companies. They end up poorer because of the raiders and end up sadder Australians, which does not help the country.
Shame on the raiders!
wayneL
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Nonsense, a disgusting straw man argument.
Markets are about price discovery, they are about finding the value of the asset in question.
If a company is making a loss, and therefore destroying the real equity of the owners, the value will be discounted accordingly. The decision for shareholders is whether to hold on an see their equity destroyed further, with the hope of it being one day restored, or cutting their losses and moving on.
Harsh, but fair.
This is the same as the value of any asset. Lets say you have a vehicle worth 20k. If you drive it without oil, blow up the motor, and then crash it into a tree, you've just destroyed that value and to expect the value to remain at 20k is living in la la land. Someone might give you $500 for scrap value. This is the reality now for many companies... eg Lehmans etc.
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A car would be insured and the driver would get the $20k back again. So that is the reality. ( I do remember someone driving into a tree and killing his front seat passenger.)
So that analogy really shows what damage can be caused by raiders.
Sometimes a company, like a person, might be unwell in financial terms. Far easier to turn things round without having to spend time fighting off the raiders.
In 2003 I was in contact with a person who had set-up a company for the purpose of writing to shareholders and getting himself on the Board of Directors. Then getting shareholders to agree certain proposals. Not long after he would resign and sell the shares.
Believe me, these people do no good.
Another entry for the wooden spoon award??????
There is a half truth in the economic terrorism in my view. To suggest that no company with sound fundamentals has been targeted is way off the mark.
You will no doubt ask me to name them. I will stir by thinking about answering for some time. It is up to each interested person to look at the shares they own and decide if they were targeted unfairly. I'll start by going back over the history of OZL, SBM and CFE.
It may be hard to see the difference between economic incompetence, economic vandalism, economic terrorism and economic greed. Sometimes they are just bedfellows.
Whiskers
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Interesting article Carol. Stranger things have happened. Afterall there are plenty of undemocratic, corrupt organisations and governments around the world. One only has to look at some of the secret activities of the US themselves in the past.
As noirua points out the counter arguement begs for a bit of logical extrapolation.
I think some of these guys must rely pretty heavily on short selling, hence their whole-hearted damnation of any crititism of any irregular market activity involving shorting, while the rest of us have a more balanced kit of tools.
Struth, they might even be stoolies for the fundies and terrorists to try to debunk any conspiracy theories.
Meanwhile, I'll show you below, an example of illogical extropalation, then I'm outa here cos I'll cop it left, right and centre now... but don't take their scaulding to heart... they bark a lot worse than they bite.
Yeah?... so if a crooked executive or two fleeces and or drives a company into the ground all the rest of the employees, shareholders and public that deals with it deserves to suffer too!!! I don't think so.
And, what bounds criminals and terrorists! Don't they Parasitise 'healthy' companies! It's a bit dumb heading for an underperforming company to try milking some cash out off.
Trembling Hand
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LOL. And where would the insurer hedge his risk!! With speculators.
wayneL
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I knew you would mention insurance.
Point one - Car insurance is a put option, which is available to stock investors as well. So if you're holding shyte, I suggest buying insurance.
Point two - The insurance won't pay for the motor you blew up, just the accident damage.
Point three - Once again, raiders cannot damage the value of a sound company FULL STOP. Raiders can only take advantage of value destruction perpetrated by the company themselves.
Point four - Once again, the stock market does not exist for anyone's benefit as you seem to believe. It exists solely for the exchange of equities at an agreed price, that's it. If it's less than you paid, tough cheddar. If you think that's unfair, tough. That's just the way it is, the same as any market whether property, bananas, baseball cards, or rail cars of wheat.
It is not good or bad, it is just capitalism, no matter what socialism is attempted to be inflicted upon it.
Nokia,
Yes, I will ask which companies, otherwise I think we can safely ignore you.
Trembling Hand
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Interesting now that they aren't manipulated with evil shorts that the volume is still the same. What has changed.
Are they still being shorted or is it that sentiment has changed. The stopping of shorts has not resulted in ANY reduction in volume.
Its really poor that punters have just taken the crud that the media have spewed out. I mean where is the evidence. Even the ASX has said that they have seen no reduction in volume. Just because something goes down is it because of shorts?
wayneL
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Interesting article Carol. Stranger things have happened. Afterall there are plenty of undemocratic, corrupt organisations and governments around the world. One only has to look at some of the secret activities of the US themselves in the past.
As noirua points out the counter arguement begs for a bit of logical extrapolation.
I think some of these guys must rely pretty heavily on short selling, hence their whole-hearted damnation of any crititism of any irregular market activity involving shorting, while the rest of us have a more balanced kit of tools.
Struth, they might even be stoolies for the fundies and terrorists to try to debunk any conspiracy theories.
Meanwhile, I'll show you below, an example of illogical extropalation, then I'm outa here cos I'll cop it left, right and centre now... but don't take their scaulding to heart... they bark a lot worse than they bite.
Yeah?... so if a crooked executive or two fleeces and or drives a company into the ground all the rest of the employees, shareholders and public that deals with it deserves to suffer too!!! I don't think so.
And, what bounds criminals and terrorists! Don't they Parasitise 'healthy' companies! It's a bit dumb heading for an underperforming company to try milking some cash out off.
JULIA,
Do you see the insult implied, nay, explicitly stated by these clowns?
Whiskers
If value is being destroyed by crooked execs and parasites, SELL. It will show up in the fundamentals and in the price. Easy.
I wouldn't hesitate to short it.
SBM and OZL are back in green ink in my portfolio and I'm expecting CFE to do the same. Now THAT"S A CHANGE.
And the volume is still there???. According to the short exports the volume was supposed to drop off wasn't it? Maybe the investors now have more faith.
Trembling Hand
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That's my point
If they were being manipulated by a huge amount of shorts then when the shorting was banned the volume should of dropped!!As you can see by looking at the volume of the market taking away what was meant to be a HUGE amount of evil shorts has in fact not effected the volume.
A rational person, you would think, would conclude that they never accounted for a large percentage of volume in the first place
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With all the media attention on shorters, this would steer away potential investors. Maybe the stopping of shorts has given these ppl confidence to buy back in. Or those who have been shorting and now buying and selling because they cant short? Any of these factors could explain why there is no change in volume.
why does someone have to be irrational if they dont share the same view as you TH?
why does someone have to be irrational if they dont share the same view as you TH?
Can't agree with you there. So we will have to differ on that one. Never agreed that should happen anyway. Shorting is more about price than volume. Volume is more about confidence. No confidence leads to high volume in the same way confidence can lead to volume. Confidence is the price setter. You can have volume either way.That's my point
As you can see by looking at the volume of the market taking away what was meant to be a HUGE amount of evil shorts has in fact not effected the volume.
A rational person, you would think, would conclude that they never accounted for a large percentage of volume in the first place
Did I say there was a huge amount of shorts. It doesnt take a huge amount of targeted (evil) shorts to damage a company especially if it is associated with rumours.
Can you deny that there were NO (evil) targeted shorts specifically designed to bring a company to it's knees. A company which may have been struggling but which was capable of trading out of trouble given a reasonable "Fair go".
Nor do I suggest all shorting was meant to be evil. However the system was there for it to allow dodgy practices. In the same way not everyone who carried a gun was an evil person but guns are banned because of the evil few.
Therefore I believe a ban on shorting was justified. All the discussion etc on this subject has not changed my mind at all.
Can you guarantee me that there can't possibly be any economic terrorism involved.?
Volume is not an overiding factor. Holders of ASX shares and brokers like as much volume as possible, regardless of price. I just like to see sufficient volume to maintain liquidity and the fundamentals maintain the price. Traders like to think they are a necessary part of the equation, I don't.
chops_a_must
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Lol. Just lol.
Worthy of a motivational poster:
Worthy of a motivational poster:
Trembling Hand
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Yes I think you are right. People are now buying. Where previously they were selling
Don't follow you on that one. What have they to gain in flipping. Thats my job
Are we not all traders?
In any case boys come 30 odd days when its all sorted shorts will be disclosed and we will be able to but exact numbers to the manipulation.
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In 30 days time the only game in town will be 'short financials' if the Fed cannot pull a rabbit out of a hat.
I feel that pent up demand in my bones.
Trembling Hand
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Actually you still can short the Fins with single stock Futs and Put options. And of course you can still short the SPI.