Short selling lies

esbo

(Title should be short selling lies, can it be changed?)

So we hear al his crap about short selling.

So we hear they borrow shares and selll then and buy them back cheaper.

So just who to they borrow the share from? Not me I hope. So who?

So his is the idea, you are a fund manager and someone comes along and says

SS: "Mind if I borrow your shares me old China???"

Me: "Why?"

SS: "So I can short sell them and give you them back when they have lost half their value".

Me: "Fook off you spiv". :rotfl:

So it can't happen can it?

purch

So it can't happen can it?

Easy....

Me: Mr Esbo can I borrow your HBOS shares for a coupla days ??

You: What ??? Just so you can short sell them you spiv !!!!

Me: No No....nothing like that.....I just want to take them home to show the kids

You: Oh okay then....make sure you bring them back by the weekend

Me: Sucker !!!!!

esbo

No purch that could not happen, certainly not whilst the shares had been faling and there were 'rumours' of short selling. Under those circumstances *nobody* would have lent their shares out.

esbo

Short selling is just a rumour put out by big insitutions so they can dump thier shares whilst you hold onto yours.

MarkyMarkD

If you are an institution investing in the whole index because you are running an index-tracking fund, you HAVE to hold the shares in the index, even if there is an indication that the price will fall. (And, I realise that some index-tracking funds don't hold all the shares in the index, but a proxy for them, but the point still stands).

Given that they have to hold the shares anyway, they might as well lend them out to short-sellers and earn a return for doing so.

It doesn't matter that the price goes down - that's part of the performance of the index and hence the index-tracking fund doesn't under-perform. Whereas the income for lending the stock is real income.

It is a bit mad, but I can see how it makes a weird sort of sense.

StevieJ

esbo wrote: »

(Title should be short selling lies, can it be changed?)

So we hear al his crap about short selling.

So we hear they borrow shares and selll then and buy them back cheaper.

So just who to they borrow the share from? Not me I hope. So who?

So his is the idea, you are a fund manager and someone comes along and says

SS: "Mind if I borrow your shares me old China???"

Me: "Why?"

SS: "So I can short sell them and give you them back when they have lost half their value".

Me: "Fook off you spiv". :rotfl:

So it can't happen can it?

I must say I did wonder that myself, having said that they have been shorting shares without even borrowing them in the first palce.

StevieJ

MarkyMarkD wrote: »

If you are an institution investing in the whole index because you are running an index-tracking fund, you HAVE to hold the shares in the index, even if there is an indication that the price will fall. (And, I realise that some index-tracking funds don't hold all the shares in the index, but a proxy for them, but the point still stands).

Given that they have to hold the shares anyway, they might as well lend them out to short-sellers and earn a return for doing so.

It doesn't matter that the price goes down - that's part of the performance of the index and hence the index-tracking fund doesn't under-perform. Whereas the income for lending the stock is real income.

It is a bit mad, but I can see how it makes a weird sort of sense.

Do you know for a fact that they actually do that?

esbo

MarkyMarkD wrote: »

If you are an institution investing in the whole index because you are running an index-tracking fund, you HAVE to hold the shares in the index, even if there is an indication that the price will fall. (And, I realise that some index-tracking funds don't hold all the shares in the index, but a proxy for them, but the point still stands).

Given that they have to hold the shares anyway, they might as well lend them out to short-sellers and earn a return for doing so.

It doesn't matter that the price goes down - that's part of the performance of the index and hence the index-tracking fund doesn't under-perform. Whereas the income for lending the stock is real income.

It is a bit mad, but I can see how it makes a weird sort of sense.

Nope if you HAVE to hold shares in an index you can't lend then out because you
HAVE to hold them.

poppy10_2

esbo wrote: »

(Title should be short selling lies, can it be changed?)

So we hear al his crap about short selling.

So we hear they borrow shares and selll then and buy them back cheaper.

So just who to they borrow the share from? Not me I hope. So who?

So his is the idea, you are a fund manager and someone comes along and says

SS: "Mind if I borrow your shares me old China???"

Me: "Why?"

SS: "So I can short sell them and give you them back when they have lost half their value".

Me: But if the shares go up in value, you have to buy them off me at the higher price.

SS: Oh Noes! :eek:

. .

Debt_Free_Chick

I thought very many funds had stock lending options in them. Certainly, pension funds have to specifically authorise stock lending (the big funds that have their own investment portfolios, not the ones that have units in pooled funds).

The borrowing is usually collateralised, although that could be done simply by a letter of credit (a formal IOU). In practice, they're not loaned at all - there are two complementary agreements. One transfers the stock from the lender to the borrower (so the borrower does, actually, own it); and a mirror agreement is an undertaking from the borrower to the lender to transfer the stock back by/on a certain date or within a certain period. The borrower has the voting rights and the legal title to sell the shares.

A good plain English guide here from the International Securities Lending Association.

Anyway .... it's the short selling that's being banned. Not stock lending.

It's been around for ages - there's nothing "new" in it. Shorting - alone - has not caused the current crisis. I don't doubt it didn't help HBOS, but it was targetted for "good reason", even if that reason was just market jitters about how it would fare in the short/medium term. Apparently, less than 3% of HBOS stock was on loan in September

The whole market is so bizarre at the moment - no decisions are being based on "fundamentals" - it's more a case of "how do we feel about this today?"

MarkyMarkD

esbo wrote: »

Nope if you HAVE to hold shares in an index you can't lend then out because you
HAVE to hold them.

If you own them, but lend them out, you still have the right to get them back and you still have the financial interest in their value. It's irrelevant if they are lent out or not because you will, eventually, get them back.