I am hearing alot of talk about how the shorts are responsible for the failure of banks, stocks going down.. Do you believe this? I have always believed that the market is always right, and that these banks, brokers, lenders were going down due to taking major losses on their sheets. AIG missed its revenues by 12 billion dollars (18 billion-30billion-e). It wrote down billions and billions of dollars. Were the shortsellers responsible for that? And if you believe they were partialy, how much?
Yes and no. The issues they had/have made and make them good targets to short and take down. They basically feed on the weak which makes it easy to create and spread panic. If they went after solid companies, they'd have a tougher time convincing the market and driving them down. Once they are headed down, the financials had to make panic moves and struggled to get any footing. In some cases, like AIG, they could have pared down some assets, like the airline leasing business, and been able to keep themselves above water, but they couldn't do it fast enough. Just my guess......
The stock price is only a reflection of the perceived value of the company. So, why driving the stock price down by "speculators" should drag the company down as well, is beyond my understanding. Why is the stock price important to the balance sheet of a company. Someone explain this to me.
Like most people you are only choosing to hear bits and pieces. It's not shorts that caused the problems: it was NAKED SHORTS. Please, for the final time everyone, pay attention: Naked Shorting == FRAUD The govt, as usual, overcompensated with the 799 list. IMO, just bring back the uptick rule to slow things down and enforce the rules on naked shorting and there would be no mess.
Share price is part of a company's equity. Less equity means higher rates on LCs, loans, etc. Just like when you have little to no assets credit card companies charge you a higher interest rate. One problem is that companies stretch themselves to thin with borrowing that any change in their credit rates can push them over the edge on operating income.
Excellent point. I assume when people are talking about shorts in this climate/this week, they mean naked shorts. That's not always the case.
I have a question. Why would anyone long a stock that could not be shorted? I will only trade equities in which I have a choice on which side of the trade I take.
It doesn't matter because the best companies don't require heavy debt, don't need a high stock price to mortgage themselves from, and actually would love to see the market value their shares lower...like they're on sale...a perfect time to buy more so long as it's a great company. The ones in trouble got themselves into trouble. If you were in the market for a 911 turbo and the dealer was selling them brand new for $25,000 would that turn you off? No, because that's a great bargain. You'd probably buy two or more. Shorts and speculators are scapegoats for the mess the thieving criminals and traitors in control of this country have gotten us into. Don't be surprised if the whole thing was planned and/or expected. Don't fall for it and don't believe that Cramer ape.
Agree...plus I've noticed for some time that stocks that don't have available shorts often seem to be the kind that violently rise in price way beyond what you'd expect.