11/14/2008

The lesser beings are trembling

The lesser beans in Japan and Australia are trembling in fear of short sellings in their stockmarkets. Australia yesterday announced that they would continue to restrict shortsellings in their market. The higher beans in paradise are still so confident that they can manage short selling in the market and are not doing anything about it. Or they are oblivious to the damage that it is causing to the investors here and the viability of the stock market in the long run. We are simply brilliant!

14 comments:

Anonymous said...

I was of the opinion that the Singaporean government has said that short selling is illegal, or am I wrong?

redbean said...

technically that is the case. but there are different ways of shorting. intra day shorting is ok. sell and buy back within the same day.

the authorised type is borrowed scripts to sell. this is what the big boys are doing to churn volume. they can deliver the shares when due by borrowing scripts.

the silly thing about this is that the lenders may earn a little commission for lending the scripts but have their shares battered to rock bottom prices. they can lose a lot to earn a little commission.

and this is the most dangerous part of the game. big funds can short a stock to any price they want and destroy the value of the stock. they sell, buy, sell, buy and settle the difference by borrowing scripts. and they collect the price difference as the stock goes down into the gutters.

a total disregard to stock fundamentals.

Anonymous said...

Well Redbean, that is the way the game is played in the city. How then would they be able to justify the big bonuses they get each yar end. They have no scruples and even less ethics. As long as No.1 is OK, to hell with the rest of the sheeples. They say if you cannot stand the heat, get out of the kitchen.

redbean said...

i hope people know how much money have been lost in the stockmarket to know the graveness of the industry. losing a few hundred thousand in a week is so common and no laughing matter.

when we design a system for the public, it must be a fair and equitable system. just like the lehman minibonds, if it is flawed, it should not be in that market.

i can sympathise with people who are retrenched. some are innocent and just got caught up by market forces. but some unscrupulous ones deserve what they are getting because of their unethical ways of conducting businesses.

Anonymous said...

Come on boys, everyone is out for no. 1 only, nobody care about others, Do we?. You all are moaning and groaning because you may have lost money. Do I feel bad about retrenchment,job lost ect... no, I pesonally had been marginalised, snub, look down because of being a less bean. All I got to say is feel the pinch.

"Satisfied people do not complain"

Anonymous said...

and "Prosperity brings us friends, adversity drives them away."

Matilah_Singapura said...

Public corporations who have been fucking around need to be punished, and have the values of their companies drop like buah nanka.

By banning naked shorts (in Oz) the govt is indirectly approving the behaviour of corporation who haven't been running as "honestly" as they should.

Shorting is a way re-valuation of a corporation occurs very quickly. It works as a clear market signal.

The best thing for the world is to allow markets to CLEAR PROPERLY — at TRUE market prices. By propping up the "bad guys" is to ensure everyone suffers in the longer term, and sets a precedence for "govt protection" for rich cunts.

Anonymous said...

re: matilah_singapura

Any books/resources you'd recommend on trading/investing? Preferably something which incorporates an Austrian understanding.

btw thanks for the introduction to Austrian economics some years ago. My doubts about orthodox economics were not only vindicated but answered; and everything was integrated into this coherent framework and made perfect sense. It was a revelation - like Neo discovering that all along he had been living in an artificial reality that is the Matrix.

It's amazing how it only took a few decades for classical economics (and common sense) to be relegated to the trash can. I like to believe that things are slightly better now.


(I might as well incorporate here our previous discussion at the Equal Misery thread too)

But you sure do relish the adrenaline spike from a good debate.

I haven't thought too deeply about the education issue - still, Singapore isn't too bad i.m.o. (despite the flaws and indoctrination). Especially
with the community courses etc.

I like the irony that in the free market of ideas, free market ideas have always fared pretty badly. We have enjoyed the fruits of capitalism but leftist ideas have remained dominant.

Most people start off with socialism because they can sympathize with its ideals, coupled with a (natural?) suspicion of corporations. What is not disclosed is the true cost of running a socialist state, and that powerful corporations are powerful mainly because of state patronage.

redbean said...

it is a good discussion, and a heavy one too.

as for short selling, it is not as simple as what you think, matilah. it does not weed out the sloppy and inefficient companies. it also destroys the good one by indiscriminate and purposeful selling just to reap profits from the sell off.

the destructive nature will destroy good stocks and companies. if it is like what you said, cleaning the pot from the shit, that is fair. but it is not. it is an artificiality, a trading methodology that cares for its own profit and nothing else, devoid of right or wrong.

Matilah_Singapura said...

The reason stock prices are (were) so high was fundamentally because of the increase in volume of money, especially credit money, but primarily US Fed created debt and money used to "back" money expansion in other central banks — like Asian and Australian central banks.

So in one sense everyone is overvalued on the bourses, therefore when there is a liquidity crisis — like what we have — you have to be an unreasonable dumb dolt of a CEO if you are "shocked" at your share-price's decline.

Nonetheless, the belief that "unscrupulous" operators attempt scams is not new. What people don't realise is that all so-called "scams" are short-lived, and the market soon discovers it, and corrects it.

The idea of "good" companies is relative or arbitrary. What do you mean by a "good" company?

If I were a CEO of a well-performing company, and people tried to short my stock, there's a chance they might lose because other punters might not fall for the trick.

But let's suppose other punters get the bait, and start selling heavily. Should I panic? Not in the slightest. Since my corporation is healthy in balance sheet, I will take the opportunity to BUY BACK MY ON STOCK at bargain prices, which means I get a "free kick" — my well-performing company is now going to pay me a bigger percentage of the profits, since I now hold more shares.

There is absolutely no valid reason for banning any form of short sales -- except to gain some political currency, and exercise state power so that the state and the big business community remain comfortably "quan xi'ed" — We scratch each others' backs, as required.

Don't misunderstand me: I am a capitalist. But when the state gets involved as "the protector" of certain corporations, then what you have is a form of socialism.

Does the state extend it's "merciful" hand to SME's or small business? No. They can fail and die like flies.... and the CEO's of GLCs can toast each other because now they can extend their "business empires" easily because the competition has been wiped out.

The unfortunate plight of the business man is that he has to choose whether to be a true privateer, or be in quan xi with the state.

Matilah_Singapura said...

anon 909

> Any books/resources you'd recommend on trading/investing? <

The Austrians don't make any claims to investment — what to choose etc etc.

Mises.com has very good financial tools – money supply, gold price etc. Amongst the audio lectures there are a few by fund managers and professional investors.

You could try Harry Browne's website — the audio archives of his radio show. There is also Richard Maybury of "The Early Warning Report".

Benjamin Graham, Warren Buffet and the people of the "value-investing" school are somewhat parallel with the Austrian school.

And there's of course Robert Ringer dot com. Ayn Rand and Robert Ringer were my starting points for a fabulous romp through libertarianism and free market economics.

> btw thanks for the introduction to Austrian economics some years ago <

You're welcome! On which blog was I writing at the time? I'll be interested to know.

Actually these days — in the real world that is — I am less and less "defensive" of my libertarian and free market positions, as compared with the on-off periods I was right into this stuff. I've found out that some of my stuff is just too "far out" for most people. Add to that my radical atheist beliefs — man, if I'm not careful, I can lose friends and isolate myself socially ;)

However, although most friends and families are varying degrees of socialist, I have a few friends of similar beliefs to mine... some so "hard core" I'm sure they'd be jailed or ostracised if ever the mainstream found out what they're up to.

Like I said before. I'm not "hard core" because I like a more relaxed existence and like to be comfortably under the radar. I don't have the goals of my hard-core friends, but they are an inspiration to me and I do admire their BALLS.

redbean said...

in the world of short selling coupled with the aid of programme trading have turned stock trading into a new ball game.

govt cannot wait until another minibond to happen to act when the flaws are so obvious.

Anonymous said...

> You're welcome! On which blog was
> I writing at the time? I'll be
> interested to know.

Oh, you posted a Mises link here some time ago. It was the other round for me - I was led to Ayn Rand's works through her links with the Austrians. I've only read Atlas Shrugged though (with which I violently disagree, but that's for another day).

I used to look up Richebacher's newsletters before he passed away. Occasionally I frequent Daily Reckoning, but that's all I think.

Thanks again

Matilah_Singapura said...

I must admit I was shocked when I first read Atlas Shrugged. But 2 readings later — 1 reading, 1 audio book listening the thing finally clicked.

Atlas Shrugged is essentially a story about a strike — a strike by the business people fed up with state intervention and socialism.

This book was Rand's answer to the Marxists who through their misguided hatred of capitalism (exploitation), argued that all value was derived from the labour input. Therefore the workers controlled the economy, and if the capitalists or the state tried to be funny, the workers could strike.

When questioned later about "shrugging", Rand admitted that it was not a good idea in real-life because of the total devastation it would cause and possibly lead to widespread nationalisation and totalitarianism.

However "shrugging" on a personal basis is still a very much favoured activity among humans of all political persuasions. For e.g. except for a few, the fist thing most people would do after winning a large lottery is fire their boss.

And of course in the present day there is the concept of having enough F.U. Money to shrug.

What is it about Atlas Shrugged that you don't like?