Return on Equity
I don't know about you but I am really angry. I don't know you, I don't care about you, dear reader, I am a shareholder. You, you are a slave. You work in order to achieve a return on my equity. I thank you. Not.
You work from 8.30 to 5.30 every day to get me at least 12% or I will put my money elsewhere. Not.
Luckily the markets are efficient and overseen by grandees such as the SEC and the NYSE so the inefficient firms will go the wall. The wheat will be sorted from the chaff and the sheep separated from the goats. Unless we short your stock. So you work for 30 years of your life to pay your bills buy your house and support your family and then, well then someone was allowed and encouraged to destroy your savings and your pension.
Lies, Damned Lies and Statistics
Lie number one: People will restrain themselves
Tosh. Untrue, demonstrable garbage. So, faced with an easy way to borrow money in order to invest a sure fire winner, such as rising real estate prices, people will say, No, I will not overstretch myself. I know that there has to be a market correction sometime and when it happens I will suffer. Sure they will
Bankers and lenders watching their friends take home big bonuses based on the lending that they have been doing, unchecked uncaring, will say, “No we should be responsible. We will not enter this race. In the end there will be a market correction and many will suffer”. Yeah right. Easing credit restrictions and offering money to people expecting them not to take it is like.....is like... Nancy Reagan saying to an addict, JUST SAY NO!
So when it all goes wrong we just blame the people who borrowed the money. Right. Give a kid a sweet and say don't eat that. Time it.
We blame the shareholders? They invested in the banks that were distributing the candy faster than the US marines in Paris, 1944. Nah. The poor saps, they believe the lies and anyway, most of us don't even know we are shareholders; do you know where your pension is invested?
Lie number two: Markets are efficient
Think so? Check it out. Only the people that work in a market and then only a few of them have any idea of what is going on. Financial markets are not made up of individuals each reaching an informed decision based on transparent and reliable information Markets are made up of sheep.
Don't believe me? Check out the last week. Look at the faces of the dealers and the mass panic. This was group behaviour in its purest form.
Shorts- I find a holder of shares and “borrow” their shares and sell them on at a lower price than the current market price in 7 days time to another buyer. So far so good. If the price falls, I get the difference, if it goes up I lose.
Naked shorts-a contradiction in terms? Not really, equally as perverse as a banker standing naked on the underground. I find, I “locate” a holder of shares. I “borrow” the shares but am not obliged to take possession of his or her shares. I just have to locate the shares. Cool. Many people can locate the same shares and short them. Maths lesson: You have 100 shares. 10 people locate them. They all short them. What do you think will happen to the price of the shares?
Ask your self how it that an international financial institution with 1 trillion dollars (US) of assets can be nationalised à la Soviet Union, Venezuela etc. in order to stop it going bust?
Shorting has nothing, say it again, nothing, say it loud for the regulators, NOTHING, NOTHING, NOTHING, to do with market efficiency and everything to do with greed. It could have some relevance for efficiency if I was forced to take the hit when I got the bet wrong, but naked shorting does not do that.
Look what happened... the SEC stopped naked shorting....after the taxpayer got hit with more than 3 trillion dollars (US) more debt and after thousands lost homes, pensions and jobs, market went up. Make no mistake if you are losing money and you are, someone is gaining. A lot.
Lie number three: The market is based on financial analysis
You read the papers, research the markets, look at the analysts' views and invest in stocks based on annual reports, estimations of market share, where you think chocolate is going etc. Problem is most financial markets are made up of sheep in a casino. Naked shorting is a bet, a gamble. Don't believe me? Count how many times the words gamble and bet are sued in connection with shorting in the financial journals over the last week. If the NYSE, the DAX, the Stock Exchange and the SWX do not have casino licences that ought to be enough in itself, on its own and without more to make it illegal.
At least a casino, is:
- Licensed
- Regulated
- Controlled
- Honest about what it is
- You play roulette, you know the odds are against you
Lie number four: It will get better
The practice of shorting has for the time being been made illegal on the New York exchange. Too late for some, but at least now. Wait. There is a 30 day period for consultation. Who can consult? The dealers, including the shorters. What do we think that they will say. It is like asking a Colombian coke cartel to consult on the drug trafficking laws. Okay all you vultures, how do feel about vegetarianism? No, naked shorting is a TEMPORARY measure.
What will happen?
I have no idea. No one does, that is the thing about the future. Just watch out for the day when naked shorting is allowed again and call the New York Gaming Commission immediately.
Tell them the residents of the asylum appear to returned and the sheep have flooded the floor of the casino again.
