stock market going north

Obama must still be asleep.

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jimz wrote:

Ooohhh we must all bow to the all mighty stock market... I would NOT want a president making decisions based on the whimps of short selling traders.
As one who follows the markets, the Dow will visit 4700 or so this summer then level off (pretty ballsy prediction eh?). Why? Because that is when all the short f*cking sellers get done with their work. They will not have brokers left with enough leverage willing to loan them the shares for the shorts (do your homework that is what is moving the markets). The major INVESTORS have pulled out already or sitting for the ride. What you see is the handy work of day and swing traders breathing their last gasps of air. I look forward to this summer to jump back in as an investor!
-- Bill
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--------- You appear to be largely correct.
While the earnings are very weak, especially when net earnings after taxes are examined as opposed to fantasies such as EDIDTA, short speculation does appear to be a major downward force.
If you want to do more than just vent on this NG, within the last few days I sent the following email to my Senators and Representative. Feel free to use any or all if you would like to write your Congressmen on this important subject.
http://www.house.gov / http://senate.gov / for webmail and snail mail, telephone, fax contacts.
----- sample email follows ----- It is now clear that the SEC is a regulatory agency that has been captured by the industry it was intended to regulate.
While complete reconstitution of this agency is long overdue, one specific item of immediate interest and urgency is the former SEC regulation 10a-1, commonly know as the "up tick" rule.
For many years, this rule helped limit downward speculation, the so-called "bear raids," on specific stocks. This regulation was rescinded July 6, 2007, under highly questionable circumstances/motivation, with the results we are all too familiar with on a daily basis.
You are the Congress of the United States.
Rather than continuing to go hat in hand to the SEC and plead for regulatory reinstatement, it is suggested that Congress legislatively re-impose the "up tick," rule in the stock, bond and commodities markets with increasingly heavy criminal penalties for repeated violations, including mandatory suspension from trading for increasingly lengthy periods, heavy fines and mandatory prison time after the first conviction.
It will also be necessary to provide specific criminal sanctions for employees of the SEC, CFTC and other regulatory agencies that aid, abet, or ignore any violations of the "up tick" rule.
George McDuffee
-------- http://www.bloomberg.com/apps/news?pid 601109&sid=aQWwTSdLSybk&refer=home ----- end sample email ----
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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Quoted from above article:
In a short sale, traders borrow stock and sell it, hoping to profit by replacing the shares at a lower price.
"Borrow stock". Borrow from whom?????? Sounds like every embezzler when caught: "I was going to pay it all back."
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On Fri, 6 Mar 2009 22:30:23 +0000 (UTC), Alphonso

------------ In theory the short seller actually has to "borrow" or "rent" the stock or other security, paying a fee, in order to sell it "short." http://en.wikipedia.org/wiki/Short_selling
In practice the frequency of "naked short selling" where the stock/security was not borrowed, but sold anyhow seems to be increasing. http://mcauleysworld.wordpress.com/2009/03/06/stock-market-naked-short-sales-what-are-they-a-repost / This is illegal since July 04 http://wapedia.mobi/en/Locate_ (finance)
As you might expect, "short selling" and especially "naked short selling" can greatly accelerate a drop in stock price. This was the reason that the "up tick" (SEC rule 10a-1) was adopted in the first place. This requires that before a short sale can occur, the market had to have an "up tick" or advance in price.
The "up tick" rule, Glass-Steagall, and a host of other depression era restrictions were eliminated in the "deregulation" frenzy dating back to the Reagan administration, even as the SEC, FDIC/FSLIC, OTS, OCC, etc. were being progressively emasculated or coopted/preempted.
It may well be that re imposition of the up-tick rule will have no effect on the current market kamikaze dive, but then again it might. Any cost is minimal, and the only people it would effect are the speculators/day-traders. Sounds like a "no brainer" to me. IMNSHO - if the "high rollers" and "generous sports" want "action," let them go to Vegas or Jersey City, gamble with their own money, and leave the stock/bond/commodity markets alone.
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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On Fri, 6 Mar 2009 22:30:23 +0000 (UTC), Alphonso

--------- Another important distinction between covered and naked short sales.
With covered short sales, while the speculator is making a bet that the price of a stock will go down, their ability to influence that price is limited because the total amount of the stock is fixed and much of it is held by inactive traders/long-term investers/pension funds, etc.
On the other hand with naked short sales, any amount of stocks or other securities can be [and frequently are] created out of thin air, and the speculators not only bet the price will fall, but actively drive the price down by flooding the market with these "counterfeit" stocks. In the past [before there was an SEC], it often occurred that more stock was traded than had been issued.
While this can be very profitable, albeit illegal, it can also be very dangerous when the stock price goes up rather than down, when even bigger players decide to intervene, such as the government or Soros. One of the most recent cases was Volkswagen, which ruined many of the European high rollers & hedge funds.
http://www.streetinsider.com/Insiders+Blog/Massive+Short+Squeeze+In+Volkswagen +(VLKAY)+Triggers+Government+Regulator+Inquiry/4101351.html "There was speculation in the market that large investment banks, Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS) both suffered substantial losses from the unwinding of the Volkswagen short trade. Later, sources at both Goldman and Morgan Stanley both denied having significant losses related to Volkswagen."
http://www.iht.com/articles/2008/10/28/business/28vw.php
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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Who does he borrow or rent the stock from???? And does that person know that his stock has been borrowed or rented?????
I must not be very smart. From your responses it sounds like you are saying: Someone offers to sell a stock which he does not own or may not even exist. Isn't that plain, ordinary theft?
I had a guy try to sell me a car once. When I went to pay him and pick up the car, the true owner showed up, and when made aware of what was happening, called the cops. The "seller" went to jail. I kept my money, the owner kept his car. How is this different than selling stock??????
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On Sat, 7 Mar 2009 15:32:07 +0000 (UTC), Alphonso

Indeed they do. In fact a separate industry has sprung up to locate stocks to be borrowed for shorting. Some of the larger stock holders such as pension funds and other long term investors make a good amount of money on the side by "renting" out their stocks for shorting. This "locating" is required under current SEC regulation, and for some economic sectors such as banks was banned entirely, although now again permitted. http://www.sec.gov/news/press/2008/2008-204.htm and http://www.sec.gov/rules/other/2008/34-58572.pdf also see http://www.financial.rrd.com/wwwFinancial/Resources/forms/form_sh_compliance.asp

You just can't believe how a casino like the NYSE operates. You have spent too much time the shop where a part either meets specs or it does not, including the material.... If the spec said 4140, you used 4140 and not hot rolled, even if you could get by with it.

Again at least 90%correct. This is called a naked short, and is indeed currently illegal in the US, but as stocks don't have serial numbers, titles, etc. in many cases a speculator can tell their broker to sell 100,000 shares of GM and the sale is made on the exchange floor whether the stock exists or not.
The seller has a limited amount of time to present the actual stock however. This is similar to writing a hot check with no/not enough money in the account and using the float. As long as you get enough money deposited in the checking account before the check is presented for payment you can get by with it. The 10% is that I don't know how plain and ordinary kiting a check or naked shorting a stock is.
Note that the up-tick rule worked against both kinds of shorts. The Up-tick rule was also effective against a "short" like technique called a "put," that sidesteps short seller regulations including any outright bans. http://en.wikipedia.org/wiki/Option_ (finance)
for more info on short selling see http://www.technitrader.com/selling_short/index.html?gclid=COjxsuagkZkCFQKHxwodqzTLaw http://www.wallstreetwindow.com/ShortSellReport.htm?gclid=CPbK5_ygkZkCFQNbxwodbzN1ag
for short sale justification see http://www.sec.gov/rules/concept/s72499/levine1.txt
FWIW -- the secret to making a small fortune in short selling is to start with a large one unless you are one of the pros, and even they get "squeezed" from time to time, e.g. Volkswagen....
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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On Sat, 7 Mar 2009 19:23:59 +0000 (UTC), Alphonso

------------- It looks like the next best thing is about to occur. Rule 10a-1 [the up tick rule] may be reinstated.
-------------------------- House Frank Urges Reinstatement of SECs Uptick Rule (Update1) By Christopher Stern
March 10 (Bloomberg) -- U.S. House Financial Services Committee Chairman Barney Frank called for reinstatement of the so-called uptick rule as lawmakers aim to bolster markets roiled by the worst financial crisis since the Great Depression.
Frank said discussion of the uptick rule, which aimed to curb speculators who seek to drive down stock prices, with U.S. Securities and Exchange Commission Chairman Mary Schapiro left him confident the agency can restore it quickly.
I am hopeful that the uptick rule will be restored within a month, the Massachusetts Democrat told reporters in Washington today. Frank spoke after meeting with Democratic leaders including House Speaker Nancy Pelosi and House Ways and Means Chairman Charles Rangel on ways to restore confidence in the economy.
==>Regulators are considering restrictions on speculators after the Standard & Poors 500 Index fell 53 percent in 20 months after the uptick rule was eliminated. Schapiro said in January during her confirmation hearings that examining the rule is one of the things that I would be committed to doing very quickly. Federal Reserve Chairman Ben S. Bernanke told Congress last month that the measure, removed after 69 years on the books, should be revisited.<=--------------------- http://www.bloomberg.com/apps/news?pid 601087&sid=aYM0DQECYsew&refer=home
I for one would like to see a low key but thorough congressional investigation into just how and why 10a-1 was eliminated in the first place. I smell large amounts of money changing hands here.
What is so hard to grasp about 53% decline?
Unka' George [George McDuffee] ------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?
Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).
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