Just in case you’d forgotten the reason for all the bank share volatility - it’s the shorties, stoopid!
Yup, banks are still different.
Mustn’t let the market spoil their fantasy world.
Who needs to short them arent they doing a damn fine job of f***ing things up on their own already.
I can understand why naked short-selling may have an effect on share price (i.e. artificial increase in availability of shares available for sale) but ordinary short-selling is no different from actual selling in terms of effect it has on demand / supply!!! This is a publicity stunt!
A 14 month long publicity stunt!
Dom, I’d like to take you up on this.
The line seems to be short selling is fine, but is it?
On another thread (thepropertypin.com/viewtopic.php?f=19&t=23760&start=0), I asked why would the owner of shares lend them out to another party if the result would be a lower share price.
Xman explained the shares would normally not be borrowed from the actual owner but from an institution holding them on the owner’s behalf, and the owner wouldn’t know they’d been lent out.
This bothers me because when someone puts their hardearned into a pension fund, the (reasonable) assumption is surely that the pension fund makes every effort to increase the value of the fund.
But how is this squared with the fund lending out shares, which helps drive down the price of those shares? It seems like a total abuse of trust.
I can see there’s nothing wrong with short selling if you really can find an owner who doesn’t give a monkey’s that you want to drive the share price down, but I imagine such eejits are hard to find.
This seems to mean that short selling can only occur because a majority of institutional investors are actively conspiring against the best interests of their clients.
This is how it seems to me but show me I’m wrong.
You’re not wrong. The financial industry has created lots of tricks that are unique to it, short-selling is only one. Securitisation is another one. As for fractional reserve banking and investment banking fees, Christ!
It’s a racket designed to bilk gullible consumers and earn vast fees for the insiders. And the US and Britain have built their modern economies on this.
A delightfully cynical book about it was written in 1940: “Where are the customers’ yachts?”. Still in print and very much worth reading. All that’s changed is that the racket has gotten rackettier.
Incidentally, I can short AIB or BOI shares at the click of a mouse. Short-selling ban, my arse.
So, you want to get rid of puts too then…?
I shorted the life out of Anglo because they were overpriced, they didn’t become underpriced thanks to the shorts.
It reminds me of people giving out about being able to lay a horse on betfair, thick.
Naked Short Selling = Bullshit.
Pump and Dump = Bullshit.
Shorting = Ying
Unless you’re the ISE.
In the view of the portfolio manager, there are always going to be shares out there which someone is willing to lend and whether their own shares get lent out or not is irrelevant to them. Generally, they sign up to a brokerage deal which gives them the ability to leverage themselves 3 or 4 times and in return they allow the prime broker lend their shares out (or re-hypotecathe) to other clients in return. as you say they have no idea who they are being lent to. they just think of it as the free market and know that if they want to short some shares then they too will have to borrow the shares from the same broker and the wheel keeps turning…
Are we the only country still with a short ban?
The way I see it, if a fund was to pay for your pension and you wanted to see those shares mature in 40 years time, ya don’t care too much about the short term volitility. Once the fund has the shares back in 40 years so they can flog them to pay for your annuity. So if someone is willing to pay a premium for the use of your shares in the meantime then you are happy as its another income stream to add to your pension fund on top of dividends and capital appreciation.
The problem is this is normally done with good quality companies which will be expected to have a higher share price in 40 years due to their sound business model, capital base, good management…see where I’m going with this.
This is my view on it, it may be simplistic but I think it sums up most of the problem.
Big Differences in the two and Media always throw the two together to confuse or just offer a stupid explanation to explain the drop…
Naked short selling - is shorting shares that dont exist, you cant borrow them, usually happens with penny Equities (stocks) not Big Institutions… hence naked…
Short Selling is borrowing someone else shares to short the Equity (stock) and is easy to do
Media always intentionally throw the 2 together, whether it is to confuse the situation or just to try and explain a drop in the price
Financial Sense done a sketch on this a while back, to do with Naked Short Selling on Canadian stocks, penny stocks gold shares etc…
Other thing, shorts actually provide support in the mkt by providing a bid under the mkt, at some time these shorts need to be covered(i.e stock needs to be bought back) …Hence which sometimes causes short covering rallies, i.e a rise in stock prices…
The reason why Bank shares were dumped, its a dumping of Risky assets and a banking of profits thats all…
Many European countries still have bans or restrictions in place.
The UK and the US lifted their banks but in the UK you have to report short positions in financial shares and companies undergoing rights issues (above a certain % our their share capital).
What is genuinely worrying is the regulatory shift against short-sellers in general. If the FSA gets its way then the short selling disclosure regime is going to become fairly restrictive. Whilst this may appear to be a good thing to many people, I think that the capital markets need contrarian voices.
Lending out shares earns you a return. Simple really. This is especially helpful for index fund managers and long-term buy and hold investors. The amounts that can be earned can be material, especially if short sellers are having difficulty locating stock to short in a particular name.
Pension funds can elect to remove their share from borrow pools but most do not because of handsome fees they earn for lending stock.
Not all shorts are bets on the share price falling.
Some people borrow stock to cover settlement problems.
Some people short shares to neutralise the risk of a long position in another asset class of the smae issuer.
Sometimes companies are simply overvalued and/or badly run and shorts bet that these companies will suffer falls in their share prices.
One final point - short sellers do not all aim to drive prices down. What they want is for others sellers to drive the price down once their short is on. Bear in mind that short interest above 5%/7% of the shares outstanding would be considered high so long-only fund (or regular shareholders if you will) will almost always dwarf the short sellers.