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Sold Short

By Dave F in Reader

Posted in In the news, faith, Northern Rock, e-commerce on September 18, 2008 at 9:01 am

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How can it be right for a bunch of rich guys to make money out of MAKING misery for the rest of us?
By selling short (http://en.wikipedia.org/wiki/Short_selling) you can gamble on a share price falling. The problem is if you are big enough you can influence the price down just by selling, so by selling short you push the price down and increase your odds (guarantee would be pushing it) of making a profit. Even worse if the target is a bank (like Halifax / HBOS) as you push the share price down little people (in financial terms) panic and remove cash and so the circle is made more vicious. The price falls more and some people make lots while the rest of us run the risk of our  bank crashing and see millions wiped off our pension funds.
Fortunately HBOS now looks safe - I say fortunately as that is where my savings(*) are but not so fortunate for the thousands that will be looking for work once the merger has maximised its efficiency savings… 
Short selling seems to be a way for the rich to gamble and the richer you are the better the odds which doesn’t seem fair but what seems criminal is that the rest of us suffer as a consequence. Isn’t there a way to stop it?

(*Savings - don’t worry I don’t really have savings they are just offsetting my mortgage!)

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Comments

Comment by Mark Tennent - September 18, 2008 on 3:07 pm

It’s time to make such scams as short selling, illegal. If you or I were to sell something we don’t actually possess, we would be done for fraud. As far as I am concerned that is exactly what short sellers have committed.

There have been too many whistle-blowers who once they made their cash in the stock market are telling exactly what goes on: insider-dealing, talking stocks down and so on.

Like MPs’ expense claims, it’s time to take away their privileges and make share traders accountable and open.

Comment by davef - September 22, 2008 on 8:46 am

wow - it looks like Gordon Brown agrees with us. At least shorting in banking and insurance is being suspended for some time. Didn’t realise we had so much influence ;-)
And now Dubya too…
http://www.nytimes.com/2008/09/20/business/20sec.html?hp

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