VIDEO - What Happened to Bear Stearns

[patchie]

Quote from Pekelo:

But it works the opposite way too! Planted positive news, irrelevant CNBC/Cramer pushing, analysts pumping, etc can push a completely shitty company to new highs and you, who correctly valued the company and shorted it legally gets burnt...

So what is the difference???

Even without naked short selling OR short selling altogether stockprices can fall drasticly no matter what, if the stockbuyers correctly value a shitty company. We got pretty decent drops AFTER shortselling was suspended...

Pekelo, I do not disagree that it works in both directions. The difference is that short selling is a minority position in most markets.

When a short creates a panic it instills fear into a majority stakeholder base. If a pump transpired that created an upward panic it would only be those short the stock that would be in panic mode, the minority stakeholder. The majority would be appreciating the run. Because it was moving upward, it likewise creates the profits that generate long sales for profit taking thus stemming the range of the euphoria. I believe that this is why you see less short squeezes in the markets over what you see in panic selling.

 

[patchie]

Quote from Landis82:



While many of you battle back and forth about "naked short-selling", I believe that you miss the bigger picture of where all of the de-regulated LEVERAGE came into being in the first place.

Didn't the de-regulated leverage take place when the SEC changed the net capital rules and allowed the 5 largest investment banks to manage to a different standard of net capital. In doing so the SEC essentially threw caution to the wind and let leverage skyrocket.

Who lobbied hard for this change? The investment banks.

 

[flytiger]

Quote from Pekelo:


My bet is that it is hard/impossible to find such a company.

not so, dozens and dozens of them. Most were put to death though.

CALM, FRPT, JOSB, etc. etc. I'll give you the one survivor of the Ladenburg death march........SDNA, SEDONA CORP. You can read the realeases and see. And people will say, 'but it's a penny stock'. Guess what? They don't start that way. The game is, to get you on the BB or pinks, and then finish you off. But if Sedona always had this product, and made it by the skin of their teeth, how many were destroyed before they could prosper. See, that's not Capitalism. That's thuggery.

Quote from Pekelo:

. After all, those huge short positions need to be covered at some point...

Wrong. up to now, they don't. Maybe that would change. OSTK never got covered. SDNA never got covered. Very few do. What do you think the fight is about? Why did the sec summarily execute so many bb's and pinks? Because the covers would have destroyed the SEC's true clients..........the Brokers. Well, now that's off the table, isn't it?????

Oh. Did I mention? IT"S ILLEGAL!!!!!!!!

 

[Landis82]

Quote from patchie:

Didn't the de-regulated leverage take place when the SEC changed the net capital rules and allowed the 5 largest investment banks to manage to a different standard of net capital. In doing so the SEC essentially threw caution to the wind and let leverage skyrocket.

No, because investment bank holding companies were NEVER subject to the net capital rule. Even the broker-dealer subsidiaries of these holding companies were NOT subject to a debt to equity leverage limitation. Instead, they were restricted to holding customer receivables not greater than 50 times the amount of their net capital.

Thus, the net capital rule never limited leverage at the (bank holding companies ) like Goldman, Lehman, Merrill, Bear, and Morgan Stanley.

http://en.wikipedia.org/wiki/Net_capital_rule#cite_note-0

 

[IShopAtPublix]

The video is misleading on so many levels.
It conveniently avoids mentioning what was the total volume during the times of the "assault". Even if you have 20 million "failed to deliver" when your total volume is 500 million, you can't in good faith claim that the failed to deliver buried that stock.
It also adds cumulatively failed to deliver shares which is also misleading.

Look at LEH total volume during the "final assault" that started September 9th according to the video. Post 15th Volume is irrelevant since the company was already dead.

September 9th: 383.5 million
September 10th: 256.5 million
September 11th: 472.6 million
September 12th 307 million
September 15th 467.8 million

I rounded the numbers. I did not include bear Stearns because the stock does not trade anymore (for obvious reasons).

It was not the naked short sellers that buried Bear and Lehman, they simply "kicked a dead cat".

Short sellers(naked or not) are a convenient scape goat.

 

[LeeD]

Quote from patchie:

You miss the point. When a company's market is under attack it is hard to distinguish between the attack itself and the potential that maybe it was you who were wrong. This is why such attacks work.

Examples of this happen all the time. Planted negative news, old news, irrelevant news is followed by a major selloff initiated by the short selling community. Investors, wary of how far it will fall will take their losses to protect further losses and work on figuring out what happened after the fact. The net result in the effort is that the market's equilibrium changed without cause but changed anyway with many investors who believed in the company now out of teh market and out for good. Once burned it is difficult to draw those same investors back into the market.

I think it's you who misses the point! Share price fall even by a factor of 10 is sufficient to devastate shareholders. Executives may loose their performance bonuses. However, drop in share price on its onw cannot drive a revenue-generating company with transparent business model and sound business practices insolvent.

 

[intradaybill]

Quote from IShopAtPublix:

Short sellers(naked or not) are a convenient scape goat.

I'm not sure either that it was short selling that cause the global crisis as the video maker claims. With that being said, short sellers can cause a lot of damage and even drive a company bankrupt if there are loans with collateral the stock of the company. It also damages reputation and investor confidence. Nobody should deny these facts.

 

[IShopAtPublix]

Quote from intradaybill:

I'm not sure either that it was short selling that cause the global crisis as the video maker claims. With that being said, short sellers can cause a lot of damage and even drive a company bankrupt if there are loans with collateral the stock of the company. It also damages reputation and investor confidence. Nobody should deny these facts.

Short selling of all kinds was banned for financials last year. Citi, Wachovia, etc. did not do so well afterwards.

Fact of the matter is, as subprime mortgage crisis was starting to go into higher gear, Bear, Lehman, etc. were rumored to be up the wazoo in CDS and CDOs. Rumors were correct and rumors+fear started driving the thing down.

The author of the video just hates short sellers.

It is Lehamn's and Bears fault they were over leveraged.

 

[intradaybill]

Quote from IShopAtPublix:

Short selling of all kinds was banned for financials last year. Citi, Wachovia, etc. did not do so well afterwards.

Fact of the matter is, as subprime mortgage crisis was starting to go into higher gear, Bear, Lehman, etc. were rumored to be up the wazoo in CDS and CDOs. Rumors were correct and rumors+fear started driving the thing down.

The author of the video just hates short sellers.

It is Lehamn's and Bears fault it was over leveraged.

I do agree with your points. Do you agree with mine or do you think that under no circumstances short sellers can do damage to a company?

 

[Allen3]

Thought the video was interesting. A lot of unproved suppositions, but generally thought there were good points about some things in our system that should be enforced and some people who abuse their position.
Then he whips out Micheal Moore as a confidant and someone to give our allegiance to. In a theoretical documentary about people who lie and manipulate to get ahead, he sites the Jabba the Hutt of factual and social manipulation. There is probably some truth to what he's presenting, but every good lie contains a seed of truth. Congrats on creating another senseless waste of time.