Friday, September 19, 2008

But the government’s just outlawed it … ?

Short selling helped promote truth about HBOS and Lehman Brothers

"the short sellers took the view that HBOS was going to have a funding problem next year, a view that was very probably right. By betting on the price going down, short sellers were signalling publicly what they thought about HBOS's prospects. They understood HBOS's prospects and helped the rest of the market understand them. They helped us know about a problem earlier than we would otherwise have done. Is that such a bad thing?"

Posted by paul @ 08:56 AM (1046 views)
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13 thoughts on “But the government’s just outlawed it … ?

  • I fail to see how this works; someone is buying these derivatives right? Are they idiots that they choose to lose their money to these people. I think its more likely they have been singled out at someone to blame simply because they are making money at the moment.

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  • Of course its bad. The Stock Market has made a 15% gain over the past 10 years. 1.5 % per annum. Because the City still makes money when shares fall.

    Pension funds are locked into fixed strategy trading and don’t benefit from Shorting the Markets. Money should only be made on a rising Market.

    Why not make huge on flat markets? Pure madness, unless you are a Banker. Buy and hold investments are neccessary over the long term.

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  • Yes he is absolutely right! its a diversion tactic DONT fall for it! As for Alex H – i know some sensible Scots (you know the ones who disassociate themselves with crass comments from people like Dennis “worst day in my life was when England won the world cup” Law and Andy Murray – not enough space to detail his contempt for the english) they think Alex is a bit of an idiot to say the least. I have no evidence to counter that opinion.

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  • *sigh*

    Whatever your views on short selling, it is IMPOSSIBLE to ban it, as there are so many variations:
    1. Selling a future on a share
    2. Writing a call option and buying a put option.
    3. Spreadbetting (a purely private arrangement).
    4. Contracts for differences.

    How on earth can our benighted gummint possibly prevent e.g. an American agreeing with a Japanese that for every 1p that a share price in Bank X plc falls, the American gives the Jap $10,000, and for every 1p it rises, the Jap gives the American $10,000.

    The Jap has, in this example, sold the shares short.

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  • Short sell Nu Liebor, a sure bet.

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  • mark – yes fully agreed xref this to the other post that paul has made re the banning by the FSA.

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  • R2, nice idea, but ‘the market’ (i.e. opinion polls) is currently quoting them at 24% of the vote or something. You’d only make money if their share of the vote is less than that.

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  • Will you dont get it my good man. Either that or your eloquence has abandoned you – ’cause your post dont make sense mate.

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  • Presumably, those with short positions (is that the right term?) are getting a bit of a stuffing as I write this – currently the FTSE 100 is up nearly 8% this moring.

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  • yes nubbers. The fact is that the shorts have had to cover. If you look at it the other way – (just makes the explanation simpler), if they were to ban holding longs (i.e. now you have bought a share by law you have to sell it) if i came to you and you knew i had to sell the share, what would you offer me? Not very much right, cause i have no choice. Just reverse that – and you can see why the shorts are getting killed.

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  • Short sellers don’t affect the shares – they only influence the sentiment in the market. short positions are aither hedged elsewhere, or not even affecting the price at all (bets essentially, not investments).

    The FTSE is up because the US Gov have said they are intending to buy assets from every failing financial institution – hence none of them go bust. So everyone buys, and yep shorts take a hammering. USGov insanity on an incredible scale. I really feel for the american taxpayer, he’s gonna get shafted good and proper!

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  • Fair point beartil2010. Where the US taxpayer gets hammered we do next. Is it three strikes and you’re out? one : we take all the toxicity out of your balance sheet 2. you build up more toxicity -strike 2 we take it off you again……etc.

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  • hot off press: ETCs are coming back onto markets today – phased reintroduction today and tomorrow

    Techieman – who knows, eh? Get a decent accountant and try not to pay as much tax. Otherwise I’d have to take a shotgun to either myself or some cabinet ministers then myself, out of depression rather than anger. So, so wasteful.

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