|Main Forum - Off Topic News Posts - Search - Next|
|Taibbi writes some grossly incorrect things on naked shorting. |
pentheus 10/03/09, 14:24
Megan has a pretty good response, linking to this paper
But lets review the clusterstock guide to short selling.
but the basic fact is this:
Taibbi writes that the biggest problem with naked short selling is MORAL:
The real significance of the naked short-selling issue isn’t so much the actual volume of the behavior, i.e. the concrete effect it has on the market and on individual companies — and that has been significant, don’t get me wrong — but the fact that the practice is absurdly widespread and takes place right under the noses of the regulators, and really nothing is ever done about it.
i.e. boy this is just wrong and the regulators know it but don't actually do anything, even though it doesn't have that big of an effect.
the solution, "pre-borrowing", he says, would be simple, of course, not actually knowing anything about anything, he misses what the effects of preborrowing would be. from CS:
The downward pressure on stocks from short-selling—which is actually much less than is usually imagined—is not increased by a lack of intent to borrow or by a failure to deliver three days after settlement.
In the real world (if not in theory), nakedness just doesn’t matter.
It’s true that we could decrease this downward pressure by requiring all short sales to have located and borrowed stocks prior to sales. This would end naked shorting and would also make short selling far more difficult. But the alleviation of downward pressure on stocks would not come from the fact that short sellers couldn’t short without intending to borrow. It would come from the fact that short selling would be a much slower and costlier process.
So, as usual, Taibbi isn't going to let his utter lack of knowledge get in the way of him writing about vampire squids and proposing solutions that are more harmful than the unimportant problem he hopes to solve.
|Next||Reply - Reply With Quote|
oh my (Totes Rennen) 10/03/09, 14:38 "Megan" (FeeFiFoFoTheFifeFifeBrown) 10/03/09, 14:42 awwww (yrmom) 10/03/09, 14:44 Oh no! (Xiphias) 10/05/09, 11:51 so... (pentheus) 10/06/09, 18:47 hahaha (Gommorrah) 10/07/09, 11:52 you sure? (Grape Soda Diabetes) 10/06/09, 05:38