naked short selling

[dickfromalberta]

i would like to know what this means. what effect it has on a stock
does it end and how does the stock react after. the stock in question is
mrkl.ob  would love some advice on it as considering to average down
 

[CarolRemond]

Naked Short Selling = Failure-to-deliver = counterfieting stock = CRIME

It has been illegal to strategically naked short a stock since 1934, however, the prime brokers are making BILLIONS off of the illegal activity and do not intend to allow anyone to "rock the boat".

JP Morgan-Chase, Goldman Sachs, Morgan Stanley, Daiwa, Royal Bank of Canada, Toronto Dominion Bank (aka TD Ameritrade;TD Securities) and any other major bank you can think of, are literally the biggest crooks this world has ever seen. Sounds pretty over-the-top, but it is provable, except in court, only because the SEC continues to pardon felony crimes committed by these banks and collect fines (bribes) to look the other way, despite the fact that the SEC does NOT have that kind of pardon power.

The SEC is allowed to runamuck because politicians like Richard Shelby, one of the biggest crooks in Wash. DC, is the (soon to be "former) Chairman of the Senate Banking committee which is charged with overseeing the SEC. Shelby has clearly done things that are best described as "crime cover-up" to protect his puppetmasters, the prime brokers.

The best websites I know of to educate yourself on this worldwide scandal are:

http://www.ncans.net/

http://www.thesanitycheck.com/BobsSanityCheck/tabid/56/Default.aspx

http://www.faulkingtruth.com/

http://www.investigatethesec.com/

Good luck

[CarolRemond]

Just wanted to add, that if you buy and sell stock and do not have a good grasp on the scandal of naked short selling/conterfieting stock, you could be setting yourself up for one serious downfall.

Something very basic to remember:

The White House knows of this scandal.

Congress knows of this scandal.

The SEC knows of this scandal.

The Justice Dept. knows of this scandal.

Probably every Atorney General in every State knows of this scandal.

Some Governors know of this scandal. (Utah passed a law recently to help fight the situation, but extreme lobbying from Wall Street "convinced" Utah to postpone the law.

NO ONE AT THE FEDERAL LEVEL IS DOING ANYTHING TO STOP THESE CRIMES.
More the case is that many are involved. How else could you explain the Threshold list containing stocks for YEARS?

[Samantha Stephens]

i would like to know what this means. what effect it has on a stock
does it end and how does the stock react after. the stock in question is
mrkl.ob  would love some advice on it as considering to average down

Hi DickFromAlberta,
I'm too optimistic to short ... and I always seem to get burned on pennies....    BUT - - there are a ton of people on the is board that make a living from doing both.

I'm not exactly sure what you're asking... so I'll take a shot at both.

I checked your stock and it's a fraction of a penny ... so if you're asking if you should short, I... would tell you NO NO HELL NO!!!!, because your upside risk is HUGE. But that's just me...

If that's not your question and you're wondering if you should buy more as it falls ... because you think it's a being overly shorted, then I'd suggest you search for threads that discuss things like "short squeeze", "3 magic lines", and EliteG has a theory called Gspot... I think etc. I think the bounce is supposed to be part of a set up ... not just a matter of a stock getting infinitely cheaper.
I hope that helps.

Check out this short squeeze thread - http://www.3stocksonfire.org/trading/index.php?topic=6517.msg76963#msg76963
Do not worry about the symbol, just look at the graphic explanations for the set up and such.
-Samantha

[CarolRemond]

Samantha,

I would suggest that you do a little research into Naked Short Selling. The links I provided will be very useful.

[Samantha Stephens]

Hi Carol -

Are you the DJ Journalist by the same name?? If so, very cool.

I thought we were trying to help Dick. I wouldn't have posted had I noticed that his question is actually a year old. Reading your posts, I didn't see how they would help him decide if he should average down and such. So I was just trying to be "helpfull".

If you'd like me to delete my post so you can use this thread to continue your campaign against Naked Short Selling ... let me know.

I appreciate your passion ... even though ... after reading all your links... I'm still agnostic on the topic.
-Samantha

[Quasi]

Hi all,

Agree naked short selling is a crime and should be eliminated.

For any who are interested, the following link is to a slide show presentation that explains in detail how it all works.  Take about 45 mins to go thru it, but very well done and well worth the time as an aftermarket or Sunday afternoon viewing.

http://www.businessjive.com/nss/darkside.html

Happy trading / investing
Quasi

[hotdog]

I'm too optimistic to short ... and I always seem to get burned on pennies....    BUT - - there are a ton of people on the is board that make a living from doing both.

Hi Samantha - The timing of this thread is funny, because I was wondering if there may be folks here touting stocks that they were shorting. I took a small position in a couple of pennies I found here, and both so far are dogs - I don't stand to lose much if they don't do well, but find it a bit disconcerting none the less. Thanks and good luck.

Ed

[Quasi]

Hi all,

Here's a new Bloomberg report on the subject of naked short selling.  Takes about 25 mins, but very interesting.


http://www.youtube.com/watch?v=7fcre8P2UUY

Quasi

[Samantha Stephens]

Quasi -  Every time I see you ... I just can't help myself! I think you might be a shiny bright object that brings out the crow in me. You're always just so smart about stuff.  Applaud to you...

And ...  finally ... I'll have someone yelling at me ... trying to set me strait ...  that might actually be able to reason with me....

Hotdog ... I'm sorry I missed your post. If you're still around, I think you will like the fact that this site tries very hard not to be a pump and dump site. OR ... if someone is trying to pump and dump ... they need to come up with a really good explanation ... not just hype ...  in order to not get slammed by the community... and I have never see a pump and dump from someone with a decent posting to applaud ratio. They may come up with some damn goofy ideas ... consider it or not – up to you ... but it's always worth a read. At first, I thought this whole site must be pumping/dumping. Now ... my take is that there are a bunch of smart people here ... who are just quick to spot moves and even faster on the analysis. All of them are quicker and smarter ... than me.

All the resources provided on this thread have been great. Even the one's from Carol (who... I have to say ... was mean to me ... and I'm still in therapy....) I especially appreciate the Phantom stock YouTube - - that was really cool/informative. I especially appreciate the fact that the Overtock.com president doesn't look like a complete nut job ... don't get me started on my media "agenda setting" conspiracy theory.  - - very good find Quasi!

BUT ... IT STILL DOESN'T HELP ANSWER MY BURNING QUESTION .... IS SHORT SELLING MY ISSUE?

OH LORD ... now I know I'll type to regret it .... This is that one thread I wish I had never posted to ... or at least had the will power just to never post to again .... But I can't resist! I can't tell you how many times I've thought about removing my initial post... but then all the "sam ... pull your head out ... Sam this ... Sam that... " wouldn't make any sense if I had no post  ... so... though it is one of my largest life regrets ... I leave it. For now....

If you want a really good laugh ... you really should read the whole thread from the beginning ... and be sure you note the dates of the posts.  You have to appreciate that I was TRYING to be helpful ... even if I it was a year after the fact. (Still blond) HahahahHAHAHAHA

Now for fear of being chastised by Carol.... again - - KEEP IN MIND I STILL DON'T HAVE THE GUTS/BALLS TO SHORT STOCK ... so I guess you could call me a devils advocate on this.... OR MAYBE... YOU SHOULD JUST CALL ME .... SERENA ... AHAHAHAHAHAHHAHAHA

With that said... and without yelling at me ... or telling me I'm a completely uninformed idiot that can't read ... please... can someone tell me how naked short selling ... is MY issue? In plain English .. without pointing me to some legaleeeeze site. Can someone explain to me how this short selling is MY problem? This is how I see it....

NAKED SHORT SELLING IS LEGAL...
By Samantha Stephens...aka ... Serena

Let's say I'm PMSing and wake up one morning and decide to short a teeny tiny company called HUSBAND.com... and kill it.

I'll have to borrow the shares from my broker to do it ... right ... ( I guess that makes him the hit man in this .... Right? )

(Now ... I could be wrong or a little fuzzy on this part .... Or at least that's my defense ....) If my broker is doing what he's supposed to be doing ... then he HAS TO buy the shares ... so that he essentially can take the other half of my trade ... right? My broker has to think that husband.com is going up ... otherwise, why would he offer to buy the shares ... and take on that risk? His plan is to buy low sell high. (So is mine ... we just have  a different order...) What we've essentially done is made a side bet on a stock ... and the stock market will decide which of us will need to pay. We've really taken the bet out of the market ... and now it's just between my broker and me... ( well ...and my broker and the market ... but that's not my issue ... )Right?

The bigger issue with Naked Short selling ... is that when I make this bet with my broker ... if he thinks husband.com is going down also ... maybe he agrees with me... for once... He decides to not buy the shares to cover. Right. And... so in choosing to go short naked with me ... he has the potential to let "us"  (really ... him) oversell the number of shares that are even physically possible to buy and sell.

But here again ... I have to ask is that's my issue? My broker chose to go naked. How can that part be MY fault??? My part was legal ... right?

OK ... so if you're a teeny tiny investor... like me ... and you aren't a broker, a hedge fund, a stock prognosticator, company insider ... and you haven't managed to establish a short trading cartel. ... and you play by the rules of your broker. I WILL ALWAYS CONTEND ... EVEN THOUGH I DON'T DO IT ... THAT SHORT SELLING ... AT OUR LEVEL... IS LEGAL ... PERIOD. 

And ... I think the rules for "up/long" should be the same as the rules for "down/short". Nobody made me sell the stock before I bought it. Why should I have to buy it before I sell it? If all of this was a requirement, then nobody would be able to get into the market.... Ponder that over a glass of wine! BUT I DO AGREE ... THAT THE NUMBER OF SHARES BOUGHT AND SOLD SHOULD LOGICALLY <= FLOAT ... AND THEY CERTAINLY SHOULD NOT LEGALLY EXCEED THE TOTAL NUMBER OF OUTSTANDING SHARES. PERIOD. 

If shorting the market was not legal ... then the only direction would be up ... and that's just not realistic... but it is quite blond. (I used to only refresh my portfolio when it was up ... so I never had dips ... just a constant ... up up up .... Didn't do a lot of refreshing for a couple years ...and my graphs missed the whole tech bubble.... ). Even the Overtock.com guy agrees with me that short selling IS legal.

It's like telling me insider trading IS ILLEGAL ... ya... ya ... ya ... but when will I ever get a "chance" to be that kind of an insider?

OH WAIT!!!! ... I did have a neighbor give me an insider tip once... ... He asked me what I thought about ... let's call it ... WIFE.com .... ... He told me it was going under. I said ... "GREAT!!!!! ... does it have options?" ... "No ... stock only sells for a couple bucks... (Don't get me started on the cents on a dollar debate....) so I said ... " well ... as your "stock broker (not)"  ... at a couple bucks ... I wouldn't short it... what if it gets a buy out offer..."... Then I said ..."how do you know it's going down?" .... And he said "because I signed the paperwork" ... to which I said ... "As your LAWYER ...  I would suggest that you not even consider doing anything with that information." I hope he didn't do anything ... I know I didn't. Hell ... I didn't even tell Husband.com ... loose lips ... sink ships! BUT ... I DIGRESS ... AS USUAL...

So ... anyway ....I think this whole debate is like preaching to the choir? If you've been injured by short sellers, join the club. BUT it's not really about us.  OR WAIT .... is it the issue that my short selling demand has caused an increase in illegal short selling by my broker (et all)? I still don't think that's my issue.

So that's my SERENA/devils advocate take on the issue. My take on this is that if you are (somehow) able to illegally short. Then shame on you. You have hurt a lot of  people.  And my guess is that Magick, Karma and/or the law will eventually find you for a little pay back.

BUT most importantly ... if you're in a stock that is falling and now on the "Reg Sho" list ... you have to know that even if you've bought stock in a great company ... it may never come back. And ... even better ... if they ever close the loopholes on illegal shorting ... then I think we all need to be ready to catch the short squeeze wave!

OH ... and if you want my advice. Why short a stock ... when you can just buy a PUT?
Call me crazy ...  OR

-SERENA

[Quasi]

......BUT ... IT STILL DOESN'T HELP ANSWER MY BURNING QUESTION .... IS SHORT SELLING MY ISSUE?.......

And ... I think the rules for "up/long" should be the same as the rules for "down/short". Nobody made me sell the stock before I bought it. Why should I have to buy it before I sell it? If all of this was a requirement, then nobody would be able to get into the market.... Ponder that over a glass of wine! BUT I DO AGREE ... THAT THE NUMBER OF SHARES BOUGHT AND SOLD SHOULD LOGICALLY <= FLOAT ... AND THEY CERTAINLY SHOULD NOT LEGALLY EXCEED THE TOTAL NUMBER OF OUTSTANDING SHARES. PERIOD.  ......

Hi Sam, good to see you again too, thanks

I'm no expert on this subject but I do find it rather interesting and does it affect you ? well it very well could. 

Is short selling legal, well yes in accordance with the rules of how you do it with the proper paper trail of IOU's, stock borrowing and delivery of stock.  Is Naked short selling legal, well NO as the stock was never properly borrowed and then sold for money without delivering the stock.

Illegal stuff happens and sometimes you get caught up in it.  Years ago my father inlaw died and part of the estate was a share certificate in his safety deposit box. When we tried to deposit it in our trading account and sell the stock we were told the certificate was not valid and thus no stock would be delivered.  Now somebody did collect money when the stock was purchased and the certificate was issued, but all we got out of it was a tax loss equivalent to the price of a mid sized car.  This was probably not naked short selling, probably just out and out fraud,  but you would think the system would protect us retail guys, well not always.

So you buy some stock of XYZ and it sits in your account for some time, you don't know you bought it from a naked short seller, you just bought it in the market thru your broker.  Now maybe your broker tells you they haven't received the stock after 3 days, maybe they don't and just keep trying to get it.  So later you try to sell it, but you don't actually have the stock and your broker is honest so he doesn't let you sell something that hasn't yet arrived in your account yet.  Say several months have gone by and the guy who sold you the stock has closed up shop and is living in the Caymans, now you would hope your broker will pay you back out of his pocket, but I'm not sure how all this will play out and in the mean time you still can't sell the stock as it tanks, (ie you haven't yet received it, in order to legally sell it).

More than the float trading?  well yes it can happen legally.   Say I own ALL the 1M shares of XYZ on account at my broker and without my knowing he loans the shares to B for a short sale to C.  So now the share certificates are transferred to C, B has cash in his account with an obligation to cover and I have an IOU in my account for 1M shares of XYZ.  Now there are 2M shares legally in the market place and XYZ doesn't even know it, say they pay a dividend, well C gets the dividend as he owns the certificates and B will be obligated to pay me the dividend as he is short the shares, all is still well as long as everyone follows the rules.  Stock goes up, I sell out, my broker calls in the IOU from B who has to buy at whatever price from me or C to cover the short and return the shares for me to deliver on my sale.  Bit complicated but in the end B's short is covered and we are now back to 1M shares floating around in the market.

So if you don't want to have your broker loan out your shares for shorting then just pay the money to get the physical certificates and put them in your safety deposit box, then they can't be loaned out.

Now I don't usually short stocks, like you I usually buy puts for the short term.  But puts have those theta's and deltas etc and they expire so they can eat away at you profits but risk is limited.  Shorts have no expiry just 100% intrinsic value (profit or loss), you get interest on the money in your account, but you could be required to cover at any time.  So there are advantages both ways and associated risks.

Just some other ideas to consider.

Quasi

[Samantha Stephens]

Well ... that's not cool!

So what you're saying is that I may think I have stocks in my account that I can't sell until my broker gets them back in my account ... because he lent them out to some guy who wanted to short them???

That's only "slightly" terrifying.

I guess I never thought about where my broker would actually get the shares from ... if I wanted to short. I guess I thought they were in his stash ... not in a fellow trader's account!

I'm liking this less and less the more I hear about it. BUT ... I still have to think I'm not the one breaking the law. Isn't it really on the brokers? They're the ones that are making it illegal. Right? If I want to short XYZ .... and my broker borrows them from your account ... shouldn't he be responsible for making me give the shares back to you?

SO ... let's talk Overstock.com. That's an overly shorted stock. The shorts have driven it down relentlessly. Let's say I own shares and I don't like what's happened to the stock price ... I'm panicked ... so I decide to sell. The shares have been lent out ... so now my broker will need to get them back so I can sell them. By selling at such a deflated price ... I'm essentially giving in to the shorts ... and helping them close their positions by making them buy at such a low price - - that's exactly what the shorts wanted.

WHAT IF ... instead of panicking when the price fell ... WHAT IF ... every single Overstock.com shareholder demanded their certificates? All of the short sellers would have to cover ... right? That buying would cause the stock price to skyrocket ... because now the people who really own the shares are not really selling ... they're just asking that their IOU be redeemed. Wouldn't that force a short squeeze? If the shorts were all forced to cover ... and none of the stockholders were willing to sell ... wouldn't that "fix" the problem?
-Sam

[Samantha Stephens]

OK ... not to open a can of worms...

But I just got a note the other day that short selling will no longer require an uptick.

Gotta go before Carol bites my behind.
-Serena