5/20/2010

Going after short and naked sellers

If you are short and naked, and a seller in stocks, the German Stock Exchange will ban you from trading. You can be short but not naked, or naked but not short. Or better to be tall. The action by the German Stock Exchange to curb wild sellings led to another rout yesterday. Edward Krudy reported in New York that the SEC was treating the symptoms instead of the cause of the failures of the stock exchange. The stop gap measures of having circuit breakers are not dealing with the cause of the big plunge in the market. They must go after the high frequency traders. All of them are treating the symptoms and not the cause. The real cause is the problem of being too big. In the past, local syndicates were considered too big to manipulate the stock markets and were watched like a hawk. They were monitored and policed very closely to prevent them from doing mischiefs and harm. But these syndicates are like a little mouse compare to the hedge funds and investment banks with their billions to thrash around. These are the biggest threats to the stability of stock markets, currencies and countries. They could ruin them by their concerted effort to sell down markets or currencies and destroy a country and its economy. Then the investors have suddenly realised that Goldman Sachs was making billions of profits while their clients were losing billions following their recommendations. Why? It's elementary. Conflict of interest. Investments banks must not be allowed to make recommendations and trade for themselves and their clients. Period. All the regulators must wake up from their stupor to rein in the big funds and banks from their destructive selling and buying activities. The big funds have a huge unfair advantage and are hundreds of times more dangerous and destructive than the local small syndicates. Would anything be done? I doubt so. And stock markets across the world will continue with their roller coaster rides, dictated by the big funds. And the victims are the small innocent investors.

2 comments:

Matilah_Singapura said...

Believing that the govt can regulate “human nature” is believing that there are special people who can do “magic”.

Those folks should come over to Aust and see how our various private exchanges (some of the world’s best in equity and debt markets) deal with shorts – all naked position must be covered (with money), no exceptions. The regulation is mostly privately enforced with the govt doing its proper job – to back up any untoward behavior with the full force of the law.

Anonymous said...

The irony of this world is that the wise people with the right solutions do not hold power. Those that hold power will not follow the right solutions.

And the human and non-human beans of all colours can only shout and rant, until they turn into one colour, ie blue