Financial Jiggerypokery Returns

[thelace]

The ban on short-selling of financial shares in the UK is to be lifted, according to Britain's City watchdog, the Financial Services Authority (FSA).

The FSA said the ban would expire as planned on 16 January, despite calls from MPs to keep it in place.

Short-selling is when investors borrow shares which they sell, hoping to buy them back later at a lower price.

You'd have thought seeing the banks have bought the world to it's knees by their financial schemes like derivatives, trading debt, etc. that these sort of practices would be stopped for good!

In the real world, if I was to "borrow" your car and sell it hoping I could buy it back for less money before you noticed it was gone, I'd be locked away surely

[d000hg]

You're not 'hoping', you're promising to pay what's agreed. I'm sure there are some more real-life examples than share-trading, if anyone can suggest any?

[BrilloPad]

I dont see what is wrong with short selling. it just makes for a fair market.

If there were no spectulators there would be a reduction in liquidity.

[Solidec]

I dont see what is wrong with short selling. it just makes for a fair market.

If there were no spectulators there would be a reduction in liquidity.

Well the problem is short sellers effectively force the market price of a shorted share down, as there is a bandwagon effect, as soon as one hedge fund starts to short, they all follow suit.

Next thing you know a share is trading at 20%+ below where it should naturally lie. Shroedingers Cat and all that, the act of shorting makes shorting profitable!

Remember on the other end of these trades are regular investors who do NOT have the ability to short, ones mans win is another mans loss.

In this manner hedge funds have an unfair advantage in shorting versus joe bloggs who cannot do this!

[d000hg]

But surely the same is true of normal buying - if people start buying a share they force the price up?

What's the version of trading though where you have some kind of multiplier built in? e.g. if shares rise 10% you double your money, if they drop 10% you lose everything.

[Ravello]

Remember on the other end of these trades are regular investors who do NOT have the ability to short, ones mans win is another mans loss.

In this manner hedge funds have an unfair advantage in shorting versus joe bloggs who cannot do this!

Joe Bloggs can short just as easily as a hedge fund these days, most of the large dealers offer accounts which allow you to buy CFDs which is effectively shorting a stock

[Ravello]

But surely the same is true of normal buying - if people start buying a share they force the price up?

What's the version of trading though where you have some kind of multiplier built in? e.g. if shares rise 10% you double your money, if they drop 10% you lose everything.

There's a few different ways you can do what you suggest; Spreadbetting, Factoring and CFDs are the easiest ways (to lose your shirt etc. )

[thelace]

It must just be me then, I find it all a bit "emperors new clothes"

[BlasterBates]

Well the problem is short sellers effectively force the market price of a shorted share down, as there is a bandwagon effect, as soon as one hedge fund starts to short, they all follow suit.

Next thing you know a share is trading at 20%+ below where it should naturally lie. Shroedingers Cat and all that, the act of shorting makes shorting profitable!

Remember on the other end of these trades are regular investors who do NOT have the ability to short, ones mans win is another mans loss.

In this manner hedge funds have an unfair advantage in shorting versus joe bloggs who cannot do this!

So giving a private punter an excellent opportunity to buy shares cheaply.




The hedge funds have basically given private Joe Bloggs millions over the last few weeks. Anyone buying shares will make a good money, and all because the hedge funds dumped them on the market at rock bottom prices.

[Pickle2]

In the real world, if I was to "borrow" your car and sell it hoping I could buy it back for less money before you noticed it was gone, I'd be locked away surely

You dont read the daily mail by any chance do you?

Get a grip of yourself man. Being able to go long or short, to take a view, is what markets are all about. Prices will go where the fundementals demand. Do you really think if a company was REALLY worth X but was trading at X-10 because of "shorting" that those 10 points wouldnt be snapped up in no time, thus returning the price to X?

Does a short ban all of sudden make RBS a well run, sound bank? No, of course not. Its a crock of poop bank and the price would of gone south either way. shorts or no shorts.

Shorting is what it is. Its a way for long only holders to juice returns by lending out stock and charging interest. Its good for your pension, init.

I regular get short lots of stuff (usually incorrectly but thats for another thread ). Last time I checked I wasnt a hedge fund or other such capitalist rape and pilager. Just a bloke with an opinion.