Should shorting be suspended/banned?

[mazzatelli1000]

Well what an interesting few days. But I must admit I have learnt a few things.

* The media has more power than I'd given it credit for. There are alot of people who obviously believe everything the media says and some of them are the decision makers who can change things as they see fit

I think the decision makers are just making the right moves to calm down the misinformed or "fools" as some here have described them.

 

[chops_a_must]

As do my replies. Let future history answer the question. Today's trading was on my side but I'm not gloating as there is a long way to go yet.

Ok... do that.

But answer TH's question before you go.

 

[nomore4s]

Go Hawks.

Yep looking forward to Saturday.

OMG 4s - you didn't get short idiots did you???????

lol, I was but was forced to close the trade out because my brokers lent stock was recalled, apparently there is alot of demand for them now.

 

[cuttlefish]

The below is not what you want to hear if you have current short CFD positions that you want to keep.

Talk about minefields lately

Dear Client,
Due to ASIC's prohibition on short selling ASX listed shares, MF Global is experiencing higher stock recalls from our stock lenders than usual. Correspondingly, therefore, please note that MF Global may have to recall certain existing short CFD positions held by our clients.MF Global will use best endeavours to contact affected clients with existing short CFD positions, but you should be aware that this may not always be possible.
Kind regards,

RICHARD AVERY-WRIGHT
HEAD OF CFDs
MF GLOBAL AUSTRALIA LIMITED
p. 1800 626 099
e. cfds@mfglobal.com.au
www.mfglobal.com.au

So superannuation companies are conservatively lending the stock that they hold on behalf of current and future retirees to retail punters to play the short selling game. Why doesn't that surprise me.

Why does anyone, ever, trust their money to an investment company is what I find more surprising.

It will be interesting to see if there are any ramifications to the unwinding of this. I can't imagine why anyone would use CFD's in the first place except possibly for short trading so I'd imagine the CFD's providers aren't exactly raking the money in at the moment. I hope the super companies that lent stock to them are comfortable they are good for it if the CFD punters aren't.

 

[jono_oz]

And here I thought that the true value of a company was determined buy economics, supply, demand and balance sheets - when its obvious that only short sellers really know the true value of a company!

All hail the short sellers.... whats left of them. :

 

[mayk]

Please do not get overly excited and tease the shorters as (in Arnold words) THEY WILL BE BACK.

I am afraid this is the first time a bear market rally has been timed for 30 days.... This will one big sucker rally.

 

[Calliope]

Come on answer the question?? which one is it????

I was just puting forward a point of view. It was not my intention to join the debate. If contrary points of view upset smartarses and know-it-alls, that's their problem, not mine.

 

[fordxbt]

30 days of making some long $$$..then its back to the shorts for $$$ !

 

[johenmo]

I remember reading somewhere that nobody has ever shown that shorters were responsible for driving the price of a stock down

From Business Spectator, today:
"Along those lines, one stock that is likely to fall today is that of the ASX itself; the difference between last week’s trading volumes and this week’s will give us an idea of the extent of activity based on short selling. It won’t be insignificant."

Be worth a look.

 

[Trembling Hand]

From Business Spectator, today:
"Along those lines, one stock that is likely to fall today is that of the ASX itself; the difference between last week’s trading volumes and this week’s will give us an idea of the extent of activity based on short selling. It won’t be insignificant."

Be worth a look.

Being the know it all and smart **** I am that's going to look a little silly. Last week was Futs rollover. We will not get another high volume week like that for another 3 months.

Either he doesn't know that and is the fool that I have always accused him of or he does know that and is deliberately lying.

 

[lusk]

30 days of making some long $$$..then its back to the shorts for $$$ !

Do you think the "short covering" rally or what ever the excuse is for it going up will last for 30 days?

They have not banned selling for 30 days.................yet

 

[skyQuake]

Do you think the "short covering" rally or what ever the excuse is for it going up is going to last for 30 days?

They have not banned selling for 30 days.................yet

Asic announced they will review it in 30 days. So maybe even longer?...

Anyways after 5 days or so we're gonna find a new equilibrium in an artificial market without short sellers. Derivatives traders know this and will just go with the flow. After the allocated period of grace is over, watch out below...

 

[mit]

Besides the hysteria from the media there isn't any actual Facts about short sellers. The covered short list gives no clues to an increase in shorts.

Will be interesting the next 30 days. No shorts at all. The balance has been given completely to the longs. You would think at the end of that period "fair value" will be well and truly restored. Will be funny if its at the same level as it is today. 3% higher than when shorts were manipulating the market.

I think that the market will get more volatile. As we are not seeing any new trillionaires floating around short sellers are probably losing slightly less as they are winning so you are suddenly reducing liquidity in the market.

If there is the run on a particular share, you wont have short sellers covering their shorts and then possibly no buyers.

Having sad that, I think that Rudd had no option, you don't want to be the only country allowing shorting

 

[dutchie]

In the news Kevin Rudd said that banning short selling will stop the manipulation of stocks.

Thank god for that, it will be heaven to deal in a market that is not being manipulated!!

 

[Trembling Hand]

Having sad that, I think that Rudd had no option, you don't want to be the only country allowing shorting

Yep that is true. Once one did it they had to follow.

 

[James Austin]

it's very easy to get emotional about money. to counter this tendency i like to do the figures, see what the numbers say. which brings me to TH's quote.

it would be interesting to know what % of an XJO fall, in any given period, is actually atributable to shorting VS selling.

any one actually know, or is this a bit of a witch hunt

Besides the hysteria from the media there isn't any actual Facts about short sellers. The covered short list gives no clues to an increase in shorts.

Will be interesting the next 30 days. No shorts at all. The balance has been given completely to the longs. You would think at the end of that period "fair value" will be well and truly restored. Will be funny if its at the same level as it is today. 3% higher than when shorts were manipulating the market.

 

[wayneL]

Don't look now, but it looks like those wicked manipulating short sellers have migrated over to NYMEX and are buying up oil.

Evil bast*rds....evil!

 

[misterS]

Robert Gottleibsen says shorting is alright - just got a bit out of hand by the time a trillion dollars was devoted to it.

His article Business Spectator 22 Sept 2008

Shocking the short-sellers.

"A decade or two ago when the hedge fund industry first developed its shorting practices, they served a useful function in the market by smoothing out rises and falls. It enabled investors to protect long investment positions and engage in reasonable trading activity.

But the avalanche of capital into the hedge fund industry became so large – probably around $1 trillion dollars if gearing is included – that they were required to take bigger and bigger risks. And in a bear market the risks had to be on the short selling side, because picking stock winners had become a very tough game.

And so a vicious corporate destruction system was developed to make money and the best targets emerged as global banks, although as we will see below, Australia was not immune.

In the end, when the hedge funds took on the banking system it forced the authorities to act and bring the whole game to an end.

Over time, sensible people will find a way of returning to the original purpose of short selling, but first the vicious games have to end. Meanwhile shorting hedge funds are going to lose a lot of money which will be accelerated by the inevitable runs on their money as those who can get their money out do so.

The vicious practice that the hedge funds devised was to locate a highly leveraged company – it could be any trading company, investment house or even a bank. The funds would undertake incredible research looking for a weakness. Sometimes they would discover that there was a weakness in the way a major shareholder had borrowed to buy stock, so that if the shares were driven low enough, the major shareholder's financiers would sell him out and send the stock down further, enabling the shorters to buy back at huge profits.

Another common scenario was where hedge funds would see that some of the company’s loans had a market capitalisation trigger figure that enabled banks to appoint an administrator if the capitalisation fell below a stated level. The hedge funds would drive the stock down to that level. Sometimes the information the hedge funds used was clearly an inside tip.

Once they discovered a weakness, the hedge funds would borrow scrip from index funds, superannuation funds or others and try to bring on a crisis by ruthless shorting. An essential part of the process was to flood the market with rumours – some Australian companies have reported up to 70 a day. Sometimes a journalist would write a really tough article on a company often inspired by the shorters' research. The stock would slump. Sometimes the inside information was right and other times it was wrong. It did not matter much.

The early targets in Australia were companies like Centro, ABC Learning, Challenger and Allco. Each of these companies had flaws in their operation and the defenders of shorting would say that short selling merely hastened the crisis. On the other hand, it also prevented rescue attempts (Investors must fight back, February 27).

But globally it became apparent that the best shorting game was to go for banks, because if you could get a deposit run going on the bank the shorters' profits would be huge. Strangely, the first attempt at shorting a bank in Australia was a complete disaster. The shorters went for Bendigo Bank and shorted about 14 per cent of the capital. In that case the rumours were wrong. The bank was in good shape and a French bank bought in. The shorters had to cover and were routed (Bendigo shafts the shorters, March 12).

But overseas bank raids became a shorter’s picnic because of the huge sub-prime and other losses they faced.

In Australia the shorters played the bank game with Macquarie Bank trying to engineer a run on the bank and bring about its destruction. Like Bendigo Bank, Macquarie had no real difficulties and the shorters were routed, helped by a rally in the market, but it showed graphically what could be done.

The hedge funds have only themselves to blame for the Australian and global action against them because they took what was a reasonable activity and tried to manipulate the market to destroy the banking system. Not one group undertook such an action, but it was the collective outcome.

The people who were big victims of the shorting action were the clients of those who loaned the stock. They remained long in stocks and saw their unscrupulous managers lend stock to shorters who destroyed the value. The ruthless superannuation funds mangers who undertook those actions should have been fired. Now they can't do it and their clients are the winners.

The hedge funds are going to suffer big losses depending on how much time they are given by their supporters to cover. Many of the world banks loaned large sums to these funds and they will incur well deserved losses."

 

[Timmy]

In the news Kevin Rudd said that banning short selling will stop the manipulation of stocks.

Thank god for that, it will be heaven to deal in a market that is not being manipulated!!

LOL.

I wish I was a fly on the wall in the briefing Mr. Rudd got...

"OK Mr. Rudd.
Now, this is your arrrrse.
And this is your elbow.
Etc."

 

[fordxbt]

LOL.

I wish I was a fly on the wall in the briefing Mr. Rudd got...

"OK Mr. Rudd.
Now, this is your arrrrse.
And this is your elbow.
Etc."

"so let me understand now..you can actually make money $$$ on a losing position? why the hell didnt we ban this already!?!"

my 5 cents, its not the shorters who entirely draw the market down its the vast majority running away with their tails between their legs & dumping their portfolios. this little brief fix will give those their will back to buy back into the market therefore creating this euforia that it was the short-sellers who created this downturn when infact it was the bears