Posted on 05/18/2010 12:04:43 PM PDT by 6SJ7
NEW YORK, May 18 (Reuters) - U.S. Treasuries prices rose on Tuesday, with the 30-year bond rising a full point, as Germany announced it would ban some short-selling activities and Wall Street stocks turned lower.
Treasury yields hit session lows after Germany's Finance Ministry announced a ban on naked short-selling at major banks. The ban would include a prohibition against naked shorting of euro government bonds. For more, click on [ID:nBAT005467]
Germany did not ban all short-selling of bonds, but by banning naked short-selling -- in which a position is taken on a bond without buying or borrowing the asset to support that position -- the government could make shorting more difficult because the supply of bonds to buy or borrow in such cases can become limited.
"If you can't sell a government bond short, then how is the market going to be deep and legitimate?" said Raymond Remy, head of U.S. fixed income at Daiwa Securities in New York. "I think that is bad for any market, but it just puts a little spook everywhere."
(Excerpt) Read more at reuters.com ...
30 year fixed mortgage rates down to 4.875%, moving in on 4.750%.
Naked Shorts = Fraud: Trying to sell something that doesn’t exist as you do not own it and have no liabilities if the stock does not sell. Naked shorting is a means to force prices lower by offering a stock at a low price and if it does not sell then the seller has no liabilities.
Normal shorting, and a good thing ofr markets, means the seller has ownership of the stock and a liability. To short sell, one borrows a stock and sells it at market price. the borrower owes the original owner of the stock a share of stock back plus a small fee. To make money, the short seller hopes the stock price goes down so they can buy the stock cheaper than they borrowed it, return the stock to the owner, and pocket the difference.
Naked short sellers do not have the stock to sell, so if the price does not go down they are out nothing. This is market manipulation and fraud. The reason for fraud is that should you buy a naked shorted stock, the seller must then go find stock to sell you. They may not find it.
Here they come to save the day!
I guess naked shorts is somewhat similar to “buying on margin” back in the 20s? Same result anyway: people making irrational decisions with fiat money.
Naked shorts.
http://conceptrends.com/wp-content/uploads/2008/05/naked_shorts_humor.jpg
(Don’t blame me if you click the link.)
“buying on margin”
Not really. When you lost on margin you paid on that margin. With naked shorting a seller can walk away with no liabilities.
......If you can’t sell a government bond short, then how is the market going to be deep and legitimate......
The old fashioned way. You borrow the bond, then sell it short.
Good point. Absolutely no liability with naked shorting. I have lost ALL faith in our markets. No where left to put my $$$ (whats left). My theory is that we continue to see this shift of investments from the Eurozone into US Treasuries. After the EURO falls apart (taking the UK w/it, and rightfully so), there will eventually be a failed US Treasury auction which sets off the mother of all crashes. Then Asia deteriorates with no one to buy their goods. Almost like another good ‘ol Dark Ages. Maybe not quite as bad and prolonged this time. But the Great Depression will look like a damn good time compared to what i see coming.
The only way out of this mess is through a complete and total global economic reset unfortunately. Of course, this scenario implies a linear progression, which never happens in reality.
At the very least it would cause comment on the trading floor.
I clicked the link.
I blame you.
lolol
Now I know what you want for your birthday.
(Not that I’m getting them for you. But I know you know - You want them.)
lololol
This has the makings of the threads where we analyze the value of the Dong.
” complete and total global economic reset unfortunately. Of course, this scenario implies a linear progression”
Toally agree. History is non-linear. Today, peace; tomorrow, war. I bet no one in Germany in 1933 thought they would be in a world war in 1939. IN the US, December 6th, 1941 was a good day. December 7th was non-linear.
Naked Short Sales pushed more than one business under in 2008, and can be cited as a major contributory factor to the Great Recession.
You want to sell short, do it by “borrowing” the stock, so that the seller has liability and responsibility to replace the stock at the end of the trading session. The player should have “skin” in the game, not a total lack of liability.
No thanks. People could tell what religion I am.
Or discuss the Moro Islamic Liberation Front.
Do you think that the uptick rule should be reinstated for regular shorts if they ever banned the naked shorts? Just curious
Nope. Shorting is fine. It is a valid technique and should be employed as anyone wants. The reason the uptick rule was established was because there is extreme naked shorting. I have personally been involved with stocks that have been proven to have been naked shorted for many times the amount stock was ever issued.
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