Macke of Fast Money said something hilarious last night something to the effect: If you get a call from your broker telling you that if you love GM at $20/sh then you'll love GM at $9/sh, smack him on the side of the head... whatever side you want if you're right-handed or left-handed. Classic!
If LEH is well-capitalised, liquid, and hence undervalued, wouldn't the board order a stock buyback? With the stock at $12 and change yesterday, down 75% in 2 months, surely it would create massive shareholder value, and crush the shorts, if they were to just buy back at $15 per share or higher. Yet they don't take this obvious confidence-boosting, liquidity-proving step. I wonder why that is?
they dont need to stop shorting, they need only to stop NAKED shorting if they think the 20% falls in stocks are due to shorters, then the 100% rises in 2006 and 2007 are due to... illegal buyers of stocks???
These stocks are going down because their business models are no longer viable and equity should take the hit. These markets are seeking the truth. If you can't handle then get out.
I agree with you Failedpoet. While shorting is useful in the markets, a mechanism to make sure it is legitimate needs to be enforced. Naked shorting is another matter altogether, and that has led to serious problems for smaller companies in particular. I haven't seen anyone come out against shorting. It's naked shorting where you can end up with more shares sold short than exist. That's the problem.
X Clearing can be five or more times the float. If there were no naked shorting, a raided stock would be a multiple higher, and they could raise money. Instead, I'll point out BKUNA, their equity price is destroyed, and they never got to raise the 400mm they wanted. So, everybody loses. If people wanted to put the 400 in, what's it to you? But as soon as the deal was announced , the stock was naked shorted to death, taking away any chance of the stock to possibly make it. Good bank? Bad bank? subjective. Market manipulation? Fact. I've said on these boards time and time again that this rampant criminality would bring the world down around Wall St's head. That day is here; we will all suffer. If you watched those hearings yesterday, and you could look at the panel and hire any of those assholes to weed your garden, you're ahead o' me. And now, before the end of the year, they'll regulate our markets. Now. How are you going to make a buck????
Yes.....yes! More regulation! What manure pile are you speaking of? Naked shorting, which was your original topic and not a manure pile. Or this "recession," which has much more to do with other things then shorting stocks. Regulate everything and have the government insulate us from all bad things (communism). These banks did nothing wrong and deserved to be saved for handing out "no doc" and "stated income" loans (sarcasm). And stocks should only go straight up. New highs are only buying opportunities. When companies are burning through cash and misleading the public, who are you to try and profit from bad things! As Paulson said yesterday, "If you've got a bazooka and people know you've got it, you may not have to take it out. You're not likely to take it out." Blank checks and big brother. Sounds great to me.
Cutten, I typiclaly find your comments insightful and I tend to agree with you but on this issue I disagree strongly. It's too simplistic to say if the stock is "cheap' then Lehman should order a stock buyback. Note that the issue here is liquidity, it makes no sense for any financial service company in this environment, to use critical cash reserves to buy back stock. especially when the competing side (the short sellers) can short the stock infinitely via naked shorting. I strongly believe in shorting an dteh key role it plays in market stability (when done legally/properly), the issue here is NAKED SHORT SELLING. It's one of the most evil pratices in the markets and incredibly destabilizing for companies and other shareholders. Finally, any company that trades primarily on confidence and liquidity can be damaged by rumors and shortselling. This is a critical issue here. The SEC should finally ban NAKED short selling and ensure there are no loopholes where traders can naked short stock via foreign broker dealers, etc. With such rules in place, companies will then trade legitimately and not be subject to these heinous rumors and manipulation.
It's funny that in markets which have minimal regulations on shorting, these problems do not exist. Naked shorters short stocks as if they are futures. Sounds like they are advancing stock trading forward. It's funny how the "evil" naked shorters only attack garbage companies that are losing money, have bad balance sheets & are failing.