Let’s define terms.
Naked shorting is not shorting.
What is shorting? Shorting is where one borrows shares from another to sell but they must be bought back again and returned to the original owner of the shares.
How does one make money by shorting? One makes money by selling borrowed shares and buying them back cheaper.
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Paul lends shares —> Peter sells Paul’s shares —> Market
Market tanks.
Market sells back shares —> Peter returns shares —> Paul
Peter has ‘shorted’ the market.
All short transactions are ‘cleared’ through clearing houses.
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What is ‘Naked’ Shorting?
In the above scenario there is no Paul and there are no shares. Peter just makes up shares out of thin air much like the Federal Reserve creates money out of thin air.
But regulations allow the Federal Reserve and only the Federal Reserve to create money from nothing. Not so with stock market shares, regulations require shares to be real.
So Naked Shorting is a form of counterfeiting and if the big brokers like Goldman Sachs can counterfeit shares to inject into the exhanges, then they can drive a market up and down at will.
Overstock has been after Wall St. and the Naked Shorting issue for a long time because more shares have been shorted against the company’s stock than exist in the first place. In other words certain bankster gangsters on Wall St. have launched short attacks on Overstock.com.
Naked Shorters on Wall St. can launch short attacks on companies and drive them to bankruptcy. Then predatory hedge funds like Romney’s Bain Capital can move in and offer ‘help’ to the victims of the short attack. But ‘help’ means buying assets for pennies on the dollar, lies about assuming debt burdens and taking over cash assets.
It’s a racket for sure and it does involve the mafia who have infiltrated banks and hedge funds. The SEC is bought off. The criminals control the markets and answer only to politicians who tell them to manage the talent pool of High Frequency Traders and to keep the markets spiked for retirement accounts so as not to cause unrest.
That is still possible even without naked short selling. Let's say that you own some stock. I borrow it from you and sell it to person B. That is normal short selling. I am so sure that it will go down that I borrow that same share from person B and sell it again. Now there are two short shares sold for only one real share existing. Each time I borrowed a real share of stock instead of a counterfeit one created by the brokerage firms like in naked short selling.
I guess it could be possible to set up regulations so that a share can only be shorted once, but that would set up a situation where a share shorted once would be a slightly less valuable stock than one that still could be shorted, which should be accounted for somehow (maybe a mandatory dividend paid by the shorter to the new owner of the stock.
Well said. And yes, there are laws on te books to prevet this...and yet, the SEC does nothing.
Naked short selling is a big contributor to investors fleeing the market...it is uncontrolled, except by the insiders..the rest, the regulators, financial media, lawmakers and judges..are captured.
Well said. And yes, there are laws on te books to prevet this...and yet, the SEC does nothing.
Naked short selling is a big contributor to investors fleeing the market...it is uncontrolled, except by the insiders..the rest, the regulators, financial media, lawmakers and judges..are captured.
True. The FedResBank has no 'risk' in the money they 'loan'. The amount of 'money' that they loan is not even important to them (they never get it back). It is just numbers on a computer screen and it's only purpose is to produce the 'income' to the FRB of 'interest payments'.
To that end, the FedResBank allows each 'bank' they distribute this printed currency to, to then 'loan' out around 2 and 1/2 TIMES the actual amount of 'money' the bank received.
Why?
Because the 'banks' can pay back more 'interest' to the FRB, this 'profit income' is the only thing that is important and has value to them. That is why they allow their customers (our country's bankers) to lie about the actual 'assets' they have.
This method of fudging the numbers to ensure profit is the actual source of INFLATION.
The bankers of Wall Street are just following company policy.
An important difference is that Peter doesn't get to keep the proceeds of the sale until he buys the shares back.
Unlike the Federal Reserve that can print and print and never has to buy anything back.
Overstock has been after Wall St. and the Naked Shorting issue for a long time
Mostly because the Overstock CEO is a nutbag. It's easier for him to attack naked short selling than to actually get his company to make a profit.
In other words certain bankster gangsters on Wall St. have launched short attacks on Overstock.com.
That's funny! They need to do a better job of forcing firms to cover these naked short positions, but the only gangsters attacking Overstock are the ones in Patrick Byrne's imagination.
The origin of the saying is unknown, but by 1898 it was attributed to financier Daniel Drew (1797-1879).
Sadly, with naked short selling, such criminal fraud is rampant on Wall Street.