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Hi Baa,
Thank you for contributing. The following is very
disturbing and suggests an absence of opportunity to apply equal force (counter
strategy).
' ... In stocks, similar circumstance pervades, where short positons can be
taken
-without the underlying ability [or requirement!]- to recompense an
exercised position with the stock [asset] itself, and instead, cash
compensation as closure is -acceptable- without regard for provision of the
asset itself! Extraordinary, but real. ... '
Hmph! What is a girl to do?
Regards,
Cris
----- Original Message -----
Sent: Thursday, March 25, 2004 9:35
PM
Subject: RE: [sharechat] Short Selling
Conditions
Some excellent points made and noted, however within a narrow
context of
local AUS/NZ markets, as opposed to the accessible opportunity
of the really
large markets ...
In precious metals (as extreme, but
still real example), -ergo commodities,
where trading regulation extends
only to alleviating counterparty risk
through ability to cover positions
'in currency' versus the commodity
actuallly traded(!), such exemplifying
disparities emerge where paper short
positions actually exceed the entire
known existance of the commodity
itself, let alone the annual production.
(silver, and gold). This is an
extreme, but real, example of short selling
(hedging in various forms) gone
mad, and a fundamental driver for [long /
speculative] investment based on
'overhang', -ergo against the
counterparty, those with the capacity and
capability to sustain short
sales, and roll-overs ad infinitum, position as
effective market
controllers, until such time as the price increase [for
whatever reason]
forces [short] capitulation, hence the short versus long
battle is
concluded.
In stocks, similar circumstance pervades, where short
positons can be taken
-without the underlying ability [or requirement!]-
to recompense an
exercised position with the stock [asset] itself, and
instead, cash
compensation as closure is -acceptable- without regard for
provision of the
asset itself! Extraordinary, but real.
Short
selling is a reality of the stock and commodities markets, and a
useful
vehicle for taking positions in a declining market circumstance, or
in
commodities as a hedge against falling prices where inventory is held [or
speculative profit can be garnered], however, the travesty occurs in the
situation where settlement is permitted [by the mediating party - the
exchange commissions] .. -in cash-, as opposed to the -assets- sold
short.
One does not need to be Sherlock Holmes to determine that
circumstances
exist where some stocks are sold short to such an extent
that the entire
market cap is in fact exceeded in the short position! This
can only be
achieved where it is permissable to settle in currency as
opposed to the
asset itself. Think about it.
IMO, the system is
seriously fecked, but the system does exist, and while it
does, this
presents opportinuty, which, for those of moral fibre might
appear
appalling, whereas, for those of interest in material gain, it
appears
compelling.
So while such circumstance exists, why focus ones capital
gain outcome
solely on appreciating assets when one can achieve the same
desirable
outcome within an asset class that is in price decline?
Especially when the
mechanism not only exists, it is advocated and
supported by regulations
which permit settlement in other than the
underlying assets sold short! What
a gift.
It is a strange and
obsequious world we live in. But it is real, and
knowledge of how to
particpate is critical, as is complete lack of emotional
ties to ethical
business practice. History may eventually show that the
-mode- of profit
achievement which exists in this -form- is both unethical
and
unsustainable. But for now, it is -in fact- real. [for those
knowledgable,
willing, and able to participate].
BAA
p.s. one shouldn't read
neccessarily that that one does indeed participate,
moreover, that one
understands/interprets the ethical and practical hurdles
of doing so, and
shares that with you. On the other hand, why wouldn't you,
or I, do so?
[while such incredible opportunity presents itself].
It is indeed, a
strange and obsequious world we live in.
>From: "Karyn W" <karyn_in_oz@hotmail.com>
>Reply-To:
sharechat@sharechat.co.nz
>To:
sharechat@sharechat.co.nz
>Subject:
[sharechat] Short Selling Conditions
>Date: Thu, 25 Mar 2004 04:19:02
+0000
>
>Short selling doesnt have much effect on a market as
there are VERY strict
>conditions placed on such sales by the stock
market. It is not something
>that everyone can do, even if they
wanted to, unlike buying shares.
>eg. only a limited number of companies
can be short sold, only a small
>percentage of their shares may be
short sold in any one day, sales must
>usually be settled within 3
days, requirements for margin cover, etc ...
>for more detailed
information see the ASX conditions
at
>http://www.asx.com.au/markets/l3/ShortSales_AM3.shtm
>
>Automatic
stop losses are a more potent tool to put a market into a
>spiralling
decline, and indeed has been given as the reason for the big
>"one day"
market crashes that have occured - ie. as the price falls,
>pre-determined stop losses are triggered, the stock is sold
automatically
>without human intervention, the increased volume of
sellers pushes the
>price down, triggering more stop losses, and so
on.
>
>Now that people can set auto stop losses via online
brokers, it will be
>interesting if we see the same type of volatility
in the Aust markets as
>has been seen in the
US.
>
>Karyn
>
>_________________________________________________________________
>Personalise
your phone with chart ringtones and polyphonics. Go to
>http://ringtones.com.au/ninemsn/control?page=/ninemsn/main.jsp
>
>
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