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| Journalist rigged Wikipedia's naked shorts | |
| 2008-10-02 | |
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| Posted by:Steve White |
| #14 Make the shorts out of clear plastic. |
| Posted by: Deacon Blues 2008-10-02 20:37 |
| #13 If they'd had their spokesgal in some naked shorts, they probably wouldn't be in the position right now. Hey - that's a good name for certain types of short shorts. Maybe you oughta trademark the expression and introduce a line of products. |
| Posted by: Zhang Fei 2008-10-02 15:55 |
| #12 If they'd had their spokesgal in some naked shorts, they probably wouldn't be in the position right now. |
| Posted by: remoteman 2008-10-02 15:48 |
| #11 And they might have made money if the stock had declined. That's not much of a penalty for undermining a market. That's only if you agree that they are undermining a market. Given that *all* short-sellers take tremendous financial risk, I believe they are actually facilitating the market. I have bought heavily-shorted stocks and seen short-sellers get wiped out as these stocks went to the moon. But because the short-sellers were out there, I got to buy stocks at bargain prices (not on a risk-adjusted basis, of course - the whole reason the stocks were cheap was because the underlying companies were in dire financial straits). Note that a forced purchase (or sale) is always disadvantageous. If they had wanted to close out their positions, they would already have bought them back. If the employer fires you from your job or your landlord evicts you from your home tomorrow, it might actually be advantageous to you, long term. But the fact is that you were bounced from comfortable situations before you were prepared to vacate them. |
| Posted by: Zhang Fei 2008-10-02 15:17 |
| #10 Actually, the penalties aren't minimal, since when discovered, naked short sellers are required to close out their positions, at whatever the market price currently is, which might be at a 52-week high. And they might have made money if the stock had declined. That's not much of a penalty for undermining a market. |
| Posted by: Nimble Spemble 2008-10-02 15:01 |
| #9 Naked shorting is an attempt at market manipulation without risk as the penalties appear to be de minimus. Actually, the penalties aren't minimal, since when discovered, naked short sellers are required to close out their positions, at whatever the market price currently is, which might be at a 52-week high. They stand to lose huge sums of money. Imagine if you were penalized by selling your stock at the market price today, even if your stock was at a 52-week low. The fact is that with short-selling, the financial risk is far greater than investing in stock, since you can lose several times your initial investment. Someone who did a naked short on Google at $80 and closed it out yesterday would have lost three dollars on top of every dollar invested, the same as someone who borrowed shares before shorting. In contrast, anyone who bought Fannie Mae at $80 in '04 only lost one dollar for every dollar invested. |
| Posted by: Zhang Fei 2008-10-02 14:55 |
| #8 Naked short selling is and has been a violation of trading rules. In a short sale, the seller borrows the stock from an owner and promises to return it later. The borrowed stock is then sold. The seller is betting that the stock will go down and they will be able to then buy it for less than they sold it and return the share to the lender, having made a profit. In a naked short sell, illegal, they sell the stock, driving the price down. When the trade settles, they have no stock and the trade fails, that's why it's technically illegal. I believe shorting serves a valid market function, but only if the stock is borrowed with the owners consent and only if the sale is completed. Naked shorting is an attempt at market manipulation without risk as the penalties appear to be de minimus. |
| Posted by: Nimble Spemble 2008-10-02 14:43 |
| #7 I'm a major fan of short sellers, even though I have personally never sold stock short. Here's why - if a company is cooking the books, large short positions are an early warning signal that the company's results aren't necessarily what executives have stated. If I have looked at the company's results and found the short-sellers' objections to be unconvincing, the existence of short-selling activity gives me a good price on the stock. If I'm holding a stock and the company reports a series of results that demolishes the bears' case, short-sellers fleeing their busted bets provide a nice pop to my holdings - holdings that I bought at a discount because short-sellers were active in the stock. This is why I like having short-sellers around - they keep stock prices from getting out of hand on the upside. Anyone who thinks naked short-selling is a guaranteed path to riches needs to look at the performance of bear funds over the past several decades - they have at best kept up with Treasuries and are certainly nowhere near the levels of the major stock indices. |
| Posted by: Zhang Fei 2008-10-02 14:02 |
| #6 The issue isn't shorts per se, but naked shorts. Short sellers who don't own the underlying stock are free to maliciously tank a company's share value and profit along the way, without the risk associated with their owned shares dropping too. In other words, naked short selling is bad because it inherently bypasses market discipline and rigs the information available to other buyers/sellers. Cuts at the heart of market integrity. Naked shorts need brokerages to conduct their shorts. The proceeds from short sales are held in escrow at the brokerages. Short-sellers themselves must put up cash margin to support their short positions, just as stock purchasers are required to put up margin to support their long positions. If the market moves against them, short-sellers get margin calls just like anyone else. The only advantage naked shorts get over non-naked shorts is that naked shorts can't be subject to short squeezes from a lack of stock to borrow, since they never borrow stock in the first place. But they can be forced to buy back stock at a higher price if the price moves up to a level that triggers a margin call. Note that short-sellers, naked or not, are taking much bigger risks than stock purchasers. Stock purchasers can only lose 100% of their investment. A short-seller can lose several multiples of his initial investment (or margin), since a stock he shorts at $10 could go to $50, $100 or indeed, any amount that investors or acquirers are prepared to pay. For instance, naked or not, anyone who shorted Google at $80 has either voluntarily exited the position at a loss, or involuntarily had his short position closed out - via a margin call - with an $80 (or higher) loss. |
| Posted by: Zhang Fei 2008-10-02 13:49 |
| #5 The issue isn't shorts per se, but naked shorts. Short sellers who don't own the underlying stock are free to maliciously tank a company's share value and profit along the way, without the risk associated with their owned shares dropping too. In other words, naked short selling is bad because it inherently bypasses market discipline and rigs the information available to other buyers/sellers. Cuts at the heart of market integrity. |
| Posted by: lotp 2008-10-02 12:39 |
| #4 Overstock.com, because it's all about the O. They should have gotten their spokeslady to run the company. |
| Posted by: Clererong and Tenille2502 2008-10-02 12:17 |
| #3 Patrick Byrne is the victim of Wall Street Journal, New York Times and CNBC reporters who made Overstock.com lose $170m in the past 3 years via a conspiracy with naked short-sellers. Does this sound right? No! He lost it partly due to operational problems and partly due to the intensely competitive (price- and service-wise) nature of retailing. A persecution complex convinced Byrne to buy back stock in the 30's and 40's in 2005 (ostensibly to defend it from shorts), and then issue new stock in the teens and 20's in 2006. The stock remains in the teens today. Again - I don't fully understand how the stock being shorted translates to operational problems. Does UPS charge him more money because his stock is being shorted? Do customers make false claims against him because of naked short sellers? Did short sellers make him borrow $80m? The problem with Byrne is that he is spending too much time focusing on an irrelevant topic and not enough time on running his company. At the present burn rate, his company will run out of money in little over a year. Instead of focusing on operations, like any normal CEO, he is rambling on and on about reporters and short-sellers operating at the behest of a "Sith Lord". |
| Posted by: Zhang Fei 2008-10-02 10:58 |
| #2 just another reason traditional journalism will die. Jounalists rely on wikipedia for their expertise hummm this case was probably much worse than any journalist just using wikipedia as their primary resource. Weiss supposedly doctored Wikipedia multiple times with malice to cover Wall Street Crimes AND also POISON Patrick Byrne's work while hiding his own dirty deeds from the public [anonymously]. |
| Posted by: Red Dog 2008-10-02 09:16 |
| #1 just another reason traditional journalism will die. Jounalists rely on wikipedia for their expertise. |
| Posted by: Betty 2008-10-02 00:26 |