If the stock was being hammered by short sellers and nothing was truly wrong with the company, the insiders of the company would step in at a level and start accumulating shares. Since Lehman was not worthy of proping up by insider buying at any price, there is essentially a vacuum under its current price which explains the collapse in prices.
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They just banned short selling in US
- Thread starter nitro
- Start date
Quote from Iceman14:
Not sure it's such a bad thing, to be honest. Maybe they can make it a temporary 60 to 90 day moratorium.
Don't flame me, but the only reason I say this is because of these CDO mothers. Do you guys know what these CDO traders were doing?? They were buying these CDO swaps and shorting the stocks that they were against, so that the CDOs could land in the money! The way the CDO swap gained in value is when the likelihood of the company that they were against were more likely to go bankrupt! It was previously a protective play, not a speculative one!! I don't know, call me crazy, but that part of the system is f'ed up.
It's not a natural hedge -- it is subverting simple risk management to essentially force the flat price to go your way. Not cool.
Don't worry. If SEC does ban short selling, all the big Wall Street firms will be exempt from the rule. That's how it was with the last ban on shorting financials.
Quote from newguy05:
i am definitly against short ban, but this is utter bullshit. Lehman had a bad balance sheet yes and fuld didnt act aggressively, but it is the shortsellers that killed it without any doubt. If its stock remained at $14 the company would be fine, the shortsellers took it down to $3 in a few days. Which caused the confidence to collapse and with little time to react, its ultimate demise.
I'm calling bullshit on your bullshit call. If LEH stock was undervalued at $3, then why didn't somebody offer to buy it over the weekend? The reason should be obvious: LEH was not even worth $0.
Quote from newguy05:
i am definitly against short ban, but this is utter bullshit. Lehman had a bad balance sheet yes and fuld didnt act aggressively, but it is the shortsellers that killed it without any doubt. If its stock remained at $14 the company would be fine, the shortsellers took it down to $3 in a few days. Which caused the confidence to collapse and with little time to react, its ultimate demise.
If the governments didnt do anything today, morgan stanley would be down 40%, and tomorrow another 40% and it would be done as well. They will then move onto goldman. There is NO FIRM that can withstand these kind of pressure to their stock and survive.
exactly.and it was these same guys from those firms you mentioned that put pressure on Cox.
Cox isnt to blame, he was between a rock and a hard place.Remember, he has to protect his job too.
hedge funds should have known better.I mean, to gang up and short the daylights out of a tech company or something, but banks?they overstepped their bounds there.
Quote from timscott:
So crazy.
Shorts didn't kill LEH, LEH killed LEH. They were so levered up in a bubble market WTF were they thinking. The company was insolvent.
Shorts didn't kill the market - greed did - all these financials were so overstuffed, and banks giving out money like nothing.
Come on - Housing went up like 300% in 6 years where I live. Normally if a house went up like 10% in 6 years the owner would be happy.
Pure unbridled greed caused this - not shorts.
They blaming the wrong people.
For the record - I trade 80% long and 20% short
I've honestly been surprised this market hasn't been sub 10k on the dow - the shorts are the only thing that propped this thing up. Once they are all squeezed out this could get real ugly.
Words of wisdom. If the stock market doubled nobody would be calling for regulation of long positions, saying it was a "crisis of overconfidence," etc. etc. Only when the market goes down, i.e. corrects for past excesses, do we hear this kind of nonsense.
Quote from startraitor:
Because they would or already were next....
Oh? I didn't know hedge funds could launch a bear raid on the Dubai Investment Authority. Like I said, nobody in the world wanted to buy LEH, at any price.
The fact is that these companies destroyed themselves. Every one of them. For months they've had access to government money and have been helped along at every turn by the ratings agencies (LEH debt was rated AA until the day it went chap 11), by the SEC, and by their ability to manipulate public information. If a company still fails despite all this it must be a real shitter. To all the short sellers who figured it out in time, I say good trade. They took on a lot of risk for a big reward, shorting a big Wall Street bank down to $3.