Comments on: What is Naked Short Selling and What Does It Mean To the Market?

By: David

David — Wed, 25 Aug 2010 18:14:34 +0000

I totally agree with Get Real. Allowing someone to sell something they do not own is outrageous. I was taught in economics that supply and demand are what make the economy and markets work. When did supply + borrowed supply + naked supply become the rule? I can not buy naked shares, so I do not see why anyone should be allowed to sell naked shares. If an investor thinks a stock is overpriced, they can buy puts. Was that not the reason for creating the options market? The fact that the SEC allows this type of activity to go on is really sad. To say these types of practices had nothing to do with the financial meltdown of 08/09 is moronic. Again, if you want to bet on a company’s demise, buy puts on the options exchange. And to Vito’s point about the situation being flipped around on the long side, that is what sellers are for. If I own a stock and I think it is being overvalued, then I will sell. I do not need someone who has no interest in the company to step in front of me to sell first. By allowing naked sellers you are artificially inflating the supply of shares, hence artificially driving down the price of a stock.

By: Vito Rispo

Vito Rispo — Thu, 24 Jun 2010 21:08:39 +0000

Ireland-
you are saying that wealth is a zero sum game. This is not true at all. People do not gain wealth at the expense of others, in reality, when one person get rich, it benefits society as a whole.

By: Vito

Vito — Thu, 24 Jun 2010 21:05:27 +0000

Also, to Get Real…
the logic behind banning short selling is deeply flawed for another reason:
short selling is the function that keeps manipulative investors from manipulating long positions.

For example: the common wisdom says that a bad bad man could spread bad bad rumors about a company, sell short and make tons of money. The market fixes this buy allowing informed investors to buy up long positions in a company’s stock when its price is artificially depressed…
Now, flip that around
What if a bad bad man spreads false rumors about a company’s profitability, while trying to buy long and makes tons of money? Well, the only for the market to fix this is to allow investors to sell short, so they can profit on the company’s artificially increased price. Without that function, the market loses the ability to keep inflated prices down.

It’s just common sense.

By: Vito

Vito — Thu, 24 Jun 2010 20:59:43 +0000

to Get Real…
Name one single sound company, actually name one single company, sound or not, that has been ruined by short selling.

I understand that it is the folk wisdom to think short selling is a bad bad thing, but when you fully comprehend how it works, you can understand how it is an important part of the market’s price setting power.

By: ireland

ireland — Wed, 24 Feb 2010 13:50:08 +0000

the whole thing is nuts. they should get rid of the stock market. remember for someone to get richer some one else must get poorer. so someone gains and someone else looes. even if the loss is spread over thousands of people they may all loose a penny. we’re just all greedy trying to make it rich in the worlds at someone elses expence

By: Luis Granados

Luis Granados — Fri, 10 Apr 2009 16:25:40 +0000

It goes along with Soros’s reflectivity theory.
If he has made a fortune as a hedge manager and he is telling everyone who wants to hear
that the market is not fair since there are insiders manipulating and profiting, why I should doubt it?
Basically is like to have a thief self confession and the police does not want to hear or accept what he is telling everyone

By: Get Real

Get Real — Tue, 25 Nov 2008 18:49:15 +0000

As usual, justification can be made for any argument. My argument is that if you don’t own a stock, why should you be able to sell it? How would you like someone selling an interest in a company you own who had never put up any money? How about having someone sell a naked interest in your home when you think it will worth more 5 years from now? The fact is that the market often reacts to trends for a reason…because the process is so crooked that often insiders and their cohorts act before the rest of the world gets the official news. And the typical reaction is called covering your ass. The argument that prudent investors should know that the fundamentals of a company are sound and not worry is complete BS. Many a sound company has been ruined by manipulative short selling. The markets have evolved from a true investment vehicle to a huge casino. I say go to Las Vegas….check that…the casinos usually require that you buy chips before you start gambling…oh well.