Reuters: Germany to ban shortselling, tonight

[morganist]

Quote from Pippi436:

Doesn't make my statement untrue. Go get your Hull edition from the shelf.



Surely swaps got nada to with it? Explain the qualitative difference of economic danger in hedging rate risk with i.e. bunds versus a similar swap. I'm very sorry that you are pissed off, but there is still no point to see. Hopefully it will emerge in your next post.

i was answering in relation to your point about how a future is a forward. all i said was future and forward should be the only derivatives, perhaps futures are types of forwards. in any event even if they come in the same umbrella they are different. i would not read hull, i read macdonald. hull was the book the lecturer gave to the people who weren't smart enough to read macdonald. it is the equivalent of economics by david begg. the introduction level book.

i have made my point already. there is a history that third world countries got stung. maybe they get just as badly stung by the other products but still the post was about shorting being prohibited. i was just saying what i would prohibit. if you read my posts you will see i am willing to hear other peoples arguments and i did. i still think there is a danger there. the point i am getting pissed about is i have made my point and you haven't read it.

i made no claim to be right just made my opinion and then explained it. you are entitled to answer and have your opinion. but it stops there. you may think they have value. i did actually admit they might have some use but need assessment. after other commentators point. read the previous posts.

in any event i am going to bed.

p.s. there is another difference between the return of a bond and a swap.

the bond is an investment and the investor will receive a return. there is no link to another cash flow.

the situation i explained previously was this. the first world country had a cash flow that was stable. the third world country did not. the third world country had a supply shock this created inflation in turn interest rates rose. because the third world country made payments that were in real terms more expensive as a result of this reduction in output. higher cashflow payments were made and the stable first world country did not have a real payment increase due to its stability.

as a result the payments made from the first world country did not compare to the relative payments from the third world country.

a bond would take the other cash flow out of the situation. therefore the other cash flow is irrelevant.

sweet dreams.

 

[Ghost of Cutten]

Quote from jprad:

The missing piece in any argument for naked shorting is the fact that you can end up with more shares owned then the available float since there is a limitless supply of fictional shares that can be naked shorted.

When enough well-capitalized entities who are able to naked short pile on simultaneously the stock will get pummeled into oblivion.

BSC? LEH?

Are you going to seriously try to say that naked shorting didn't contribute in the slightest to the downfall of those two?

Where's your evidence that naked shorting caused their downfall?

Bear in mind that many banks and financials went to $0 after ALL shorting (not just naked shorting) was banned in Sep 2008.

 

[Ghost of Cutten]

Quote from morganist:

there is a history that third world countries got stung. maybe they get just as badly stung by the other products but still the post was about shorting being prohibited. i was just saying what i would prohibit.

So in your opinion, it is legitimate to criminalize any activity that anyone has ever lost money on? That means you are in favour of criminalizing saving, investment, start-up companies, venture capital, research and development, marketing, government bonds, foreign exchange, stocks, commodities, putting money under the bed, selling, buying - in fact, every single type of economic or risk-taking activity that is possible.

 

[morganist]

Quote from Ghost of Cutten:

No guns? That means the police and army will be unarmed. The downsides would massively outweigh the upsides, and it would prevent legitimate people using guns for the necessary job they are designed for - just as banning derivatives would have far more downsides than upsides, and would prevent legitimate hedging and accurate investment, speculation and trading decisions from taking place.

No one has ever said that trading was risk free. So don't act like a scumbag politician by pretending that we said otherwise. You can lose money in anything - real estate, bank loans, start-ups, blue chip business, government bonds etc. Derivatives are simply a tool for transferring risk. Like any tool, if clueless morons use them idiotically to take insane risks on way too much leverage, then they will sometimes get hurt. But it is the idiocy that is to blame, not the tool - don't shoot the messenger. And the biggest losses in the last 2 years came not from derivatives but from plain old residential housing and plain vanilla bank loans. Shall we ban home ownership and bank loans too?

weren't the losses of the banks and home oweners as a result of credit and default derivatives?

 

[morganist]

Quote from Ghost of Cutten:

So in your opinion, it is legitimate to criminalize any activity that anyone has ever lost money on? That means you are in favour of criminalizing saving, investment, start-up companies, venture capital, research and development, marketing, government bonds, foreign exchange, stocks, commodities, putting money under the bed, selling, buying - in fact, every single type of economic or risk-taking activity that is possible.

if you actually read that comment. you will see that i said the situation should be reassessed. that means i did not fully stand by my first statement. i just said there are some downsides, which was an answer to someone else's post that there are no losers in interest rate swaps go back and read page one or two or where ever it is. you will see that.

i do not want to argue this anymore.

i am off to the land of nod. see you in the morning.

 

[morganist]

Quote from Ghost of Cutten:

Where's your evidence that naked shorting caused their downfall?

Bear in mind that many banks and financials went to $0 after ALL shorting (not just naked shorting) was banned in Sep 2008.

there is another danger with shorting. that is people make money when businesses fail. this is something that people can control like throwing a fight. there is incentive to fail.

 

[rew]

Quote from endsongs:

Just delaying the inevitable. This won't impact options, right?

It will. If you can't short an asset put-call parity no longer applies, and market makers can no longer hedge short puts with short stock. This causes puts to become more expensive relative to calls. So even if buying puts isn't forbidden it becomes more expensive. Stock holders who want to buy protective collars (long puts, short covered calls) will find this more costly to do. Thanks a lot, financial regulators!

 

[rew]

Quote from morganist:

weren't the losses of the banks and home oweners as a result of credit and default derivatives?

No. The losses of the home owners had nothing to do with credit default derivatives, as home owners took neither side of those bets. They defaulted because they bought houses they couldn't afford. Some banks lost money on credit and default derivatives, but most lost money the old fashioned way, by winding up with a lot of bum mortgages that weren't being paid.

 

[jprad]

Quote from Ghost of Cutten:

Where's your evidence that naked shorting caused their downfall?

Never said, or implied, "caused."

Bear in mind that many banks and financials went to $0 after ALL shorting (not just naked shorting) was banned in Sep 2008.

How many of them fell at the same rate and with trade volume several magnitudes above normal as LEH did during its last week of existence?

I'm not advocating elimination of all shorting. But, naked shorting, like T+3 settlement and delayed short interest reports, they're all anachronisms in the digital age.

It's inexcusable to not require all shares be located prior to executing a trade.

 

[rew]

Quote from morganist:

there is another danger with shorting. that is people make money when businesses fail. this is something that people can control like throwing a fight. there is incentive to fail.

That's an argument against allowing principals and employees of a company to short their own stock. (I believe that most companies already have such policies in place.) But the idea that me shorting a stock on a company I have no relation to is going to cause the company to fail is silly. You could just as well argue against allowing people to go long on a stock since then they have an incentive to hype it, pump in on internet forums, trash its competitors, and so forth.