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Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

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Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#331

Post by mint2 »

fennecfoxen wrote: post #322
dragonwriter wrote: post #318

Earlier quoted context omitted.

> The price of anything is a result of its some intrinsic value and the volume of supply. No, it's the result of supply and demand not supply and “intrinsic value”. Demand is driven by subjective value, not “intrinsic value” which is a nonsense concept that misunderstands fundamentally how value and human action relate.

Demand for a stock is generally linked to the value of its future discounted cash flows, which is as close to a definition of "intrinsic value" as one can reasonably realize in the world.

Wrong, the P/E ratio dramatically increased this year.

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#332

Post by avisser »

andylei wrote: post #328
stupidcar wrote: post #147

Earlier quoted context omitted.

What your describing still sounds incredibly dodgy. The price of anything is a result of its some intrinsic value and the volume of supply. So a precious stone is valuable because of its beauty, but also because it's rare. If someone mines a billion such stones, it won't affect their individual beauty, but it will certainly reduce the price someone is willing to pay for one. Now, you seem to be saying that short sell…

> You can drive the price down simply by inflating the supply short selling does not increase the number of shares. if i borrow a share from you and sell it, you cannot also sell that share . the number of shares is constant regardless of how many shares are sold short (except for naked short selling). short selling increases the number of people that can sell, but that only increases symmetry in an otherwise asymmet…

> if i borrow a share from you and sell it

I think some of the confusion is people talking past each other.

I think some people latch onto the whole concept of "borrowing" as the supply inflation. In the housing market, when I buy a house it is OFF the market. There is no "borrow someone's house & reintroduce it into the supply and gamble on the direction of the market".

Can you comment on how that interpretation is wrong?

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#333

Post by yellowstuff »

pluto9 wrote: post #325
Lazare wrote: post #269

Earlier quoted context omitted.

Hilariously, the company going bankrupt can be even worse for shorts, since a bankrupt company will stop trading, and if it stops trading, the short position can't be closed. See, eg, https://www.bloomberg.com/opinion/articles/2018-04-11/-go-to... > Seems like a potential strategy hedge funds can use (and maybe are using) Anyhow, no, doesn't work. Even apart from getting burnt when the fraud is finally exposed and th…

> they take out a large short position, then they publicise their research. If the market agrees with them, the uncovered fraud tanks the stock price, and they make a healthy profit. This is giving the market a lot of credit for being a rational and well-informed actor. The market is not full of people who calmly evaluate a short seller's argument and make a logical decision. It's full of people who lack the time, ex…

Normally that's not really the case. There's a lot of academic and practical evidence that the most rational investors generally determine the prices of stocks, because even if there are a lot of irrational investors making random or systematic errors, a minority of rational investors all betting in the same direction ensure that prices are close to "correct", for some reasonable definition of correct.

In practice you just don't see examples of productive companies driven into insolvency by short sellers.

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#334

Post by [deleted] »

varispeed wrote: post #288
cousin_it wrote: post #274

Earlier quoted context omitted.

The rules of the stock market say reselling borrowed securities is ok though, and both borrowers and lenders agree to these rules when entering into deals. I'm not sure why anyone needs to turn a blind eye.

But the rules of stock market is not law. If this was legal then you could do any sort of money laundering, so why authorities turn the blind eye to this?

[deleted]

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#336

Post by Specie33 »

I believe this whole GME and AMC deal was perpetrated by the owners of those companies debt and pushed through by people who owned a mouthpiece on WSB and other platforms. Way too many coincidences. Everyone left that has been trading stocks for 2 days will be holding the bag on this and will be left with nothing as Blackrock and Burry and others have already liquidated their positions. Two basically bankrupt companies that owed debt suddenly funded/bailed out by autists? 600 mil in debt repaid by selling stock on AMC? Anyone else think like this?

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#337

Post by jjav »

mklauber1 wrote: post #242
beowulfey wrote: post #215

Earlier quoted context omitted.

>Person A has 1 share of company Y. Person B borrows 1 share of company Y from person A, and then sells it into the market. This is called a short sale. But person B just sold their borrowed share. Now that share is owned by person C. What happens to Person A in this scenario?

They get interest from Person B, and when the short contract is up, they can force Person B (or more accurately their broker who passes the price on) to buy a replacement stock, regardless of the price. Alternatively, they can attempt to open another short contract, paying more interest to have continue to borrow the stock. Sooner or later, however, person B is legally and contractually required to to return an ident…

> when the short contract is up

Options are contracts which expire. A short position is not that, it doesn't have any expiration date.

It can be untenable to maintain that short position forever due to costs, but that's a different discussion.

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#338

Post by Chris2048 »

stupidcar wrote: post #147
darawk wrote: post #139

This is mostly nonsense. There is nothing wrong with there being more shares short than shares outstanding. It just seems problematic, until you think it through. Person A has 1 share of company Y. Person B borrows 1 share of company Y from person A, and then sells it into the market. This is called a short sale. But person B just sold their borrowed share. Now that share is owned by person C. Person C can now lend i…

What your describing still sounds incredibly dodgy. The price of anything is a result of its some intrinsic value and the volume of supply. So a precious stone is valuable because of its beauty, but also because it's rare. If someone mines a billion such stones, it won't affect their individual beauty, but it will certainly reduce the price someone is willing to pay for one. Now, you seem to be saying that short sell…

> messes with the valuation by inflating the supply

If a casino allows you to make play as long as you want, i.e. unlimited bets, does that de-value the bet?

If the shorted stock doesn't go down, people need to pony up the difference to buy it back; it is that capital risk that represents the "skin in the game", and why shorts aren't really unlimited, any less than an insurance company is limited in how much insurance it sells, by the capitol it holds to pay out on claims.

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#339

Post by dhruvdh »

dcolkitt wrote: post #319
dhruvdh wrote: post #292

Earlier quoted context omitted.

Okay, for anyone who agrees with you on this the price of shares are predominantly decided by irrational investors. And in a market where price of shares are predominantly decided by irrational investors, none of your purported benefits apply.

That's the point. Short selling acts as a tax on irrational investors. That's why short selling is linked to a reduction in speculative[1], corporate fraud[2], and price inefficiency[3]. It makes the market more rational, by driving irrational investors out of the market. [1] https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.... [2] https://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12369 [3] https://acad…

Again, you are living in a textbook. See the real-world effects of short selling on TSLA, and all the irrational investors that made bank on the same.

If irrational investors are being driven out why is there an evident trend of increasingly irrational stock prices over time?

Re: Counterfeiting Stock – Explaining illegal naked shorting and stock manipulation

#340

Post by sidibe »

kgwgk wrote: post #264
sidibe wrote: post #192

Earlier quoted context omitted.

And the whole "fractional" word. You can't lend someone 10 shares based on the one you bought.

In fact the "fractional" part goes the other way. You can lend the whole share you bought. But the bank cannot lend the whole dollar you deposited, they have to keep a fraction of it as reserve.

You and I can lend each other all of our money. The bank can lend more than they have.
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