Naked shorting has driven alot of companies into the ground causing many investors to be ruined.
Read the article and you may realize this scandal dwarfs that of Enron.
Also read how the SEC appears impotent in dealing with enforcement.
And note as well the involvement of George Soros' Quantum Hedge Fund.
If Republicans had a spine they would hold hearings on 'Naked Shorting' and likely snag some high profile individuals with an investigation.
While it is considered illegal in the US, as an example, the german stock market easily allows it, and you can massively naked short american stocks from it.
The germans, and other euro countries day in and day out do a lot of damage against the US economy by exerting a ton of fake shorting pressure on our securities to keep them down. And you bet your ass guys like Soros are involved in this as well.
Considering we are entering the 4th year of the current bull market in 2006, many of our stocks haved stayed undervalued due to all this artificial shorting pressure.
I think impotent is the wrong word. Complicit is more like it.
Same with the NASD. They could improve things if they wanted to. But they dont want to because their members are profiting handsomely from the thievery.
Some clarification here.
Shorting in the stock market is the act of selling a share of a company with the intent of follow up "buy" (usualy in a short period of time) at a lower price. The net effect within a brokerage house, that the broker will "borrow" a share from one customer, sell it, give the cash to the person who did the shorting and when the follow on buy order gets filled, the broker then replaces the "borrowed" share. The share owner receives the same value (1 share for 1 share) and perhaps some minor interest payment, the seller receives the proceeds of the sell but then has to buy back the stock at a HOPEFULLY lower price point. In essence, the person doing the short, pockets the price difference on a down swing (minus any brokerage commissions of course). This is perfectly legal.
A NAKED short is doing all of this WITHOUT A COVERING STOCK! This is esentually electronic counterfeiting stock certificates which SHOULD be illegal and get you jail time but the SEC has not enforced or to my knowledge, even had a single public trial of anyone for naked shorting.
One form of a naked short with a brokerage house is essentually conducting the sell but recording the "borrow" of the stock as a dollar transaction on their books. This creates a downward preasure on the stock that is not controled by supply and demand. Without the covering stock, the brokerage firm could in theory, sell as many shares as they wanted and keep piling up thier accounting books with ledger entries that they "owe" stocks (need to buy the shares back). But if their is no policing to drive the brokers to re-purchase those shares within a short time period, then there is a artificial devaluation of the stock. Something that hurts all the other investors and the company itself.
Could it have been shortened to:
Dear (401k, IRA and General Individual Investor),
You're screwed, we win; but then, we always do.
Thanks
George S. and the Boys
Uh, McCain's hearings on steroids in baseball was far more important than this.
The well connected people doing the short selling have bought off all the politians. There will be no hearings, no grand juries, no indictments and no prosecutions.
I wonder if this is why the Fed has announced going stealth with M3 statistics next year. Maybe they have to clean up this mess.