One Word

Can make all the difference.

But that won’t stop the financial media from throwing a tantrum.

Santelli and the anchor cow at CNBC just got done reading the headline that Germany was going to ban naked short selling of certain stocks and bonds, and they couldn’t scream loud enough about how that was terrible for the markets.

Why short sellers shouldn’t always have to deliver what they sell is beyond me.  If other investors are going to own a security, shouldn’t they be compensated by being paid to lend those securities to short sellers?

If too many short sellers want to borrow, the cost of borrowing goes up.  That makes for a natural balance.  Without paying interest and actually borrowing securities made available to lend, there is no limit on the amount of the security that can be sold short. Without a limit, any security can theoretically be driven to zero.

Why should short sellers have the right to do this? And don’t give me the “liquidity” line.  When a short seller opens a new position, they are draining liquidity. If they can do it without limitation, they can drive everyone else to insolvency.

At least force them to pay the owners a fair interest rate for what they’re selling by forcing them to borrow it, and don’t give a few players (the naked sellers) a huge financial advantage over those that play by the rules.

Santelli is such a tool, deliberately misrepresenting the reality.  He knows better, but enjoys his new position as darling of the political thieving class.



One Response to One Word

  1. Fred says:

    Howard, I totally agree with you. Naked short selling is ostensibly banned by the DTC, but it happens. Just look at the SHO list.

    In addition to the ban on naked short selling, there should be an immediate buy-in on settlement day when the seller fails to deliver. No exceptions.

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