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Naked Short-Selling Banned

It has finally been decided that the art of naked short-selling will be banned from now on, which is a good thing since that technique of trading is what caused the demise of Lehman Brothers and many other stocks of the financial sector.
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I’ve never really been a fan of short-selling any stock even though I’ve done a handful of times. Short selling is the idea of betting against the stock, expecting it to go down in value. A trader will borrow and then sell shares of a company, only to buy them back at a lower price to return them back to the entity that they borrowed them from. With naked short-selling, the trader doesn’t worry about borrowing the share before he sells them. At that point he/she has to look around for someone to borrow the shares from. In most cases there aren’t enough shares to go around, causing turmoil and wild swings in the stock price.
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Now the SEC has included a requirement that all brokers must buy or borrow the shares promptly to cover the short sale. The SEC is also considering several other ways to limit short selling. Let’s not forget that it was the SEC that removed the up-tick rules a few years ago.
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The up-tick rule refers to the price of a stock has to move up in price by at least a penny before anyone else can short the same stock. That helps avoid a runaway drop in the stock price.

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Bankruptcy In America

In America, if a company can’t make a profit and loses money, they have one choice and that’s to file for bankruptcy.  Just because a company is big doesn’t mean that the government has to lend them taxpayer’s money to save it.
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It’s amazing to see how the CEO’s of these big corporations have destroyed the company so much that they need the assistance of the U.S. government and the American taxpayer to save their skin. How can these men with such education be so stupid to take on the extreme risks that they did?
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What I really want to know is how stupid is Congress to keep on bailing out these companies that shouldn’t even be allowed to operate as a business after losing that much capital. Using the excuse that they’re such big business’ within the United States is a lame one at that. Yes, many people will lose their jobs and the unemployment rate will jump into the double digits, but what other choice do we have? Do we keep giving them money until the Federal Reserve runs out of paper to print more? The airline industry went through bankruptcy years ago and they’re still in business (except for Eastern of course).
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Do you really think that if the big three automakers go into bankruptcy that they (or we) won’t survive? We as American people have to not fall for the hype that the CEO’s, Congress and the mainstream media are trying to feed us. Look at all the money that’s was given to the financial industry and now it turns out it wasn’t used for what it was meant to be used for.
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What about the banking system mess? These companies along with Congress have also done the wrong thing to the American people. If it wasn’t for Congress passing all those bills in the 1990’s that allowed the financial sector to lend money out in sub-prime mortgages, we wouldn’t be in this mess.
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What has me really PO’d is that none of the people who are actually at fault, are being held accountable. Hank Paulson, Dick Fuld, Christopher Cox, Frank Dodd, Barney Frank and the President-elect are all to blame for the financial mess. Dick Wagoner, Alan Mulally and the UAW are to be blamed for the failure of the auto industry. I would like to blame Bob Nardelli from Chrysler too, but he just got there (I will blame him for the fall of The Home Depot).
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Capitalism is what this country was built on, if we are to continue as a capitalistic country we need to let companies fall when they fail to make a profit.
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When the decision was made to let Lehman Brothers filed bankruptcy, the company had no other choice but to restructure everything and sell of the assets that they had to clear their debt. If the American automakers are forced to do the same, they too will do what they have to to make the company survive. If they need to sell off assets, I’m sure that there’s an entrepreneur some where in this country that is willing to make profitable business out of the ashes. He could name the first model Phoenix.

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Hedge Funds Part Duex

Today five of the most powerful men in the hedge fund world are in Washington speaking to the Oversight committee. The were invited (told) to testify in Washington to the effect that hedge funds had in the economic crisis that is upon us now.
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George Soros Of Soros Fund Management, John Paulson of Paulson & co., Jim Simons of Renaissance Technologies along with Citadel Investment Group’s founder Ken Griffin appeared in front of Committee Chairman Henry Waxman.
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Ironically they agree that there needs to be more transparency from the industry of secretive funds. They also gave different views on whether or not they contributed th the financial crisis. George Soros di say that hedge funds were part of the reason for the financial bubble. Mr Soros wrote in a statement “A deep recession is now inevitable and the possibility of a depression cannot be ruled out,” sent to the Oversight and Government Reform Committee hearing.
This is the ma who is know for betting against the British pound back in 1992 and recently backing Senator Barack Hussein Obama for President.
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The Committee wants to hear from the leaders in the hedge fund industry about the role of these funds as well as their tax status and regulation. Oddly enough when the financial and economic world was falling apart, these gentlemen made on average $1 billion last year. That is also why they were called to appear in Washington.
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“Currently, hedge funds are virtually unregulated,” Waxman said. “They are not required to report information on their holdings, their leverage, or their strategies. Regulators aren’t even certain how many hedge funds exist or how much money they control.”
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I don’t know about you but this is quite fishy. Why is it that these guys can do what they do and not have to be accountable for their actions? Yes I know that many of them are operated outside of the United States, but they trade in U.S. currency and it’s assets.
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I also know that they are not the only reason for the collapse of the financial industry. Most of that blame does have to fall on the managers of those institutions, rating agencies, investment banks as well as the people who over-extended themselves with credit.
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As to the regulations that were non-existing for the last several years. Most of that blame must be put on Congress, the Treasury Dept. and the Federal Reserve. It’s their job to keep things in order. Unfortunately, many of those politicians were re-elected. Barney Frank, Henry Dodds along with Obama who was able to deflect most of the blame during the election. We will have to wait until 2010 before we have a chance to remove some of these lazy, elected government officials.
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David Ruder, a former chairman of the U.S. Securities and Exchange Commission tried a few years ago to force the hedge funds to register with the agency, but failed was also present at the hearing.
“Although hedge funds have been active participants in the financial markets during the past years, they do not seem to have played a major role in the events precipitating the crisis,” Ruder told the hearing.
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The men who were summoned to the hearing today are some of the leaders in the hedge fund industry. These guys are known by playing by the rules. The bad thing is that there aren’t that many rules for them to follow. Many of the hedge funds that we’ve been hearing about going under are the less respectable ones. The ones that don’t really follow any rules and leveraged the hell out of their funds.

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The Obama Effect In The Stock Market

Now that Barack Hussein Obama has won the election, what will it do to the stock market? At this moment no one is really sure. I will say that since Tuesday morning the Dow has lost 600 points, that’s a drop of 6% in one week.
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During the campaign, we heard that a new President will save this economy as well as the stock market, President bush has ruined this country and many other negative comments.
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We are to believe that President -elect Obama is exactly what this country needs to bring us back from the disaster of the last eight years. it’s not a new President that this country needs, it’s fiscally responsible policies that will save it and nothing else.
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The markets are showing us in the last week that they are still not confident in what is presently going on in Washington. When Obama spoke last Friday, the DOW dropped 100 points, it did gain back those loses by the end of the day, but not any more.
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Obama’s camp announced this morning that they would be making any more cabinet selections this week, which again gave more reason to feel confident.The markets were up big again today when the bell rang (+200 on the DOW),but started selling off immediately where at 1:00pm it gave back 300 points. Since then it has started to climb, but who knows where it will close at the end of the day.
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There is still to much fear and uncertainty in the stock market and we should all be ready for anything. I don’t see good thing in the rest of this year and I’m prepared for it. If I’m wrong, well then the worse thing that will happen to me is that I’ll miss out on some gains, but if I’m right I’ll save myself alot of trouble.
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P.S. Want to learn more about the stock market? take a free two week trail with Jim Cramer from TheStreet.com

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What Will Happen To The Investor Class?

investor
photo by joe shlabotnik

In this election year we have heard a lot about what will happen to the American people more than I can remember since I’ve been voting (which covers over 25 years). One of the major things being spoken about is taxes and yes it’s a topic that is discussed every election, but with the condition of the economy, it’s more important than ever.
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I’ve mentioned in an earlier post that I’m a Libertarian (a party that doesn’t get the recognition it deserves). I believe that our federal government has gotten too big, it spends way too much money than it should. The one true way to reduce taxes is to reduce spending.
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The reason why I bring this to light on a blog that deal solely with the stock market is that this year we could have our investments effected in ways that will hit us on many levels. If some of these ideas come to pass we may have more money pull put of the markets that will continue to cause the markets to fall.
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Take into consideration that if any one political party was to control the Presidency, the Senate as well as Congress, they would be able to mold the laws and pass bills that could take decades to change. At the present time the Democratic party controls the Senate and Congress. With the way Congress has been sitting on their a$$ for the last two years from all the filibustering that causes the delays in decision making, we can’t afford to let most of the candidates go back to Congress to serve this country again.
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Please be aware of the politicians that were involved with the issues that help cause the collapse of the housing market as well as the credit crisis. These candidates will most likely continue to do more of the same if they were to get re-elected.
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As for the Presidency, below is a link to help you think of a few other things that will be effected if the wrong person is voted in office. Remember Wall Street and Main Street are one and the same. Where does average Joe have his 401K plan? On Wall Street, that’s where we all have them.

Target the Investor Class in 2009

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The Credit And Housing Crisis Downfall

The stock market has taken a beaten for the month of September (as well as the last twelve months) and I do expect more of the same as the rest of the year. The main reason for it is the credit and housing crisis issues that have plagued us for some time now. I spoke about it before on this site and have voiced my opinion on it.
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I don’t know where many of my readers stand on many issues, but I’m pretty sure that most would agree that this issue came about from the greedy people in the business as well as irresponsible borrowers. Some people out there feel that this issue started in the last few years and the powers-that-be are to blame.
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What people need to do is to go and get the information for themselves because “knowledge is power”. Someone may be able to take your car or your money, but they can’t take away what you learned. Once you learn something, no one can take it from you. This is why I’m putting up this video for my readers. We as investors and traders should know the history that brought us to this problem, so we can reconize the pattern for the future.
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This video is meant to be politically related, but it deals with the history of the credit and housing crisis. (I will tell you that I’m a Libertarian, I don’t agree completely with either the Democrats or the Republicans. I’m an American that believes in a smaller government, and less government involvement in my life). For that reason you need to watch it. If there’s anything that you dispute or disagree with being truthful, then do as the video says and Google any of the information that’s in this video. The video is almost eleven minutes long, but very informative.
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Please feel free to voice your opinion on this video or if you want to vent, be my guest.
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P.S. Want to learn more about the stock market? take a free two week trail with Jim Cramer from TheStreet.com

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Congress and the President Come To An Agreement Fo...

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photo by NCinDC1

It looks like the Congressional leaders and the President have come to an agreement to save the financial industry with the $700 billion that the Treasury Department has been asking for. Lawmakers pushed for joint spending controls with the Bush Administration. The Bill will go to the house tomorrow for a vote. President Bush feels that Congress will pass this Bill without any problems, He said in a written statement released today, “Without this rescue plan, the costs to the American economy could be disastrous,”
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It seems thought that others don’t share Bush’s optimism.Capitol Hill leaders are now moving to sell it to colleagues in both parties and acknowledged they were not certain it would pass. “Now we have to get the votes,” said Sen. Harry Reid, D-Nev., the majority leader.
Of course we have Nancy Pelosi, who is always looking for a photo “op” as well as showing that she actually cares about the American people said “This isn’t about a bailout of Wall Street, it’s a buy-in, so that we can turn our economy around.”
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The plan would let Congress hold on to half the money and force the president to jump through some hoops before using it all. The government could get at $250 billion immediately, $100 billion more if the president certified it was necessary, and the last $350 billion with a separate certification — and subject to a congressional resolution of disapproval.
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“This is the bottom line: If we do not do this, the trauma, the chaos and the disruption to everyday Americans’ lives will be overwhelming, and that’s a price we can’t afford to risk paying,” Sen. Judd Gregg, the chief Senate Republican, told The Associated Press. “I do think we’ll be able to pass it, and it will be a bipartisan vote.” Some of the lawmakers feel that it might not pass until possibly Wednesday.
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“This is something that all of us will swallow hard and go forward with,” said Republican John McCain. “The option of doing nothing is simply not an acceptable option.”
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Barack Obama Of course is trying to claim credit for taxpayer safeguards added to the initial proposal from the Bush administration. “I was pushing very hard and involved in shaping those provisions,” he said.
I don’t know how we even need the other politicians in Washington when we have this man who thinks of everything for the American people (yes, I’m only joking). Sort of the way that Obama is a joke of a candidate.
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The best part of the plan is that there will be guidelines to the fact of the “Golden Parachutes”. Executives whose companies benefit from the rescue could not get one, as well as any firm that benefits the most (receiving more than $300 million) would be taxed highly on any compensation for their top execs over $500,000.
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I look forward to see how Wall Street views this tomorrow morning. I don’t see this being anything but a good thing throughout the week. I expect the financial sector to be up at the end of the week.

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SEC Chairman Chris Cox Releases Statement

On Friday September 26, 2008 the Chairman of the Security Exchange Commission (SEC) released a statement in regards to to mess in the financial industry. I’m not surprised that no where in the statement does he say that because of his lack of leadership skills and responsibility that he will resign from his position. Instead he puts the blame on Congress and the bill that they passed.
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Why is it that we have the two entities, the SEC and the Federal Reserve, that are to keep an eye on the economy and the way the financial companies do business, not do their job for the last few years? Now that the economy is in dire straits, they want to step up and get something done. Let’s not over look the fact that it’s not themselves that the total burden falls on, no they have to run back to Congress (the entity that they blame in the first place) to rush and get it done. It’s a shame that our own government and it’s administration refuse to take the blame for this mess.
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Chris Cox’ statement is full of what is going to be done now, after the fact of him and his staff have sat back and watched this unfold. It speaks about what changes are recommended to be made to have this Consolidated Supervised Entities (CSE) program work. The same program that was passed by Congress that didn’t work in the first place. In his own words he says that “the program was fundamentally flawed from the beginning”.
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He even goes on to say that there are still other gaps in the regulatory framework. Mr Cox stated “Unfortunately, as I reported to Congress this week, a massive hole remains: the approximately $60 trillion credit default swap (CDS) market, which is regulated by no agency of government.”
Why is it that this is only being reported this week?
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If Mr Cox has been informing our Congress of the situation for the last few years, why hasn’t anything been done until now?
Here is the statement from Chris Cox that was posted on the SEC website for anyone who wants to read it all. I suggest that you take your ulcer pill first before reading.

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Security Exchange Commission (SEC) Under Investiga...

The Security Exchange Commission is under investigation for not doing their job. The investigation will be conducted by the Inspector General according to news reports. The SEC is at fault for missing red flags in regards to Bear Stearns as well as allowing them to use inside auditors which is clearly against the rules.
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What I’m really surprised at is that it took this look to make the decision. Why is it though that the Inspector General hasn’t opened other investigation against Chris Cox and SEC for the lack of regulations that should have been done for the last three years?
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In a statement from Chris Cox, He comment that he’s spoken before about the voluntary regulations rules are not the way things should be. What is he talking about? He’s the man in charge for making these regulations and he’s already stating that someone needs to do his job. It’s the job of the SEC to do these regulation investigation and to make sure that the guidelines are enforced.
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This is one of the many reasons why this country’s economy and credit crisis is spiraling out of control. Accountability is something that is disappearing in this country’s government and it looks like it won’t be coming back anytime soon. This investigation is just a joke anyway because what are they going to do to the SEC? They can’t arrest the whole commission and there won’t be any fines that Chris Cox would have to pay. The worst thing that is to happen is the he will have to step down from his position as the Chairman. We all know what would happen then. he will be offered a position with one of the many financial institutions that he looked the other way for. It’s a shame that this corruption is going on right in front of our eyes and it seems that nothing can be done about it.

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The Bailout Continues, But What’s Next?

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photo by mikelicht

I’m not surprised that Ben Bernanke and Hank Paulson would be running to Congress to get them to rush this bill through, after all It’s the fault of the three stooges (Bernanke, Paulson and Cox) that this has gone on this long and to this extent. The two of them are warning that letting problems persist would have dire consequences for the national economy. Why didn’t they think of that last year when this was first rearing it’s ugly head. I forgot, Bernanke was in denial, he was saying last year this this was normal and expected.
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Now they want our politicians to hurry up and get something done right a way. Which I think is funny when you think about how all Congress can rush is themselves out the door for vacation (which will happen again at the end of this week. Senator Chris Dodd D-Conn said, “We all recognize the gravity of the situation,” said Sen. Chris Dodd, D-Conn., presiding over the congressional hearing on the crisis. He said the “economic maelstrom” was caused by a combination of “private greed and public regulatory neglect.” I wish he would be more specific on names instead of saying “public and private”
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This administration has become a joke. The SEC isn’t regulating any of these companies, we have Senator being paid off to look the other way for the last three years, Bernanke in denial for the last year, and last but not least we have Paulson (the biggest joke of them all) spending our tax dollars on this bailout. As it is we don’t have the money to save these companies, never mind the economy. I got a great idea for starters, why don’t they take all the monies that the CEO’s are going to get for their great work that they have done for the companies?
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