OT: This how stocks come back � government corporations paying 10 and 12%!

[Colin]

well I quoted facts, are his facts wrong? NO.

[artto]

Larry Kudlow does NOT know any facts and he's not capable of understanding them even if he did. He may make what he says sound like facts, and then spins it to his own liking and objectives. He's that *****ing stupid. And so is anyone who puts any credence in anything he says. He's a disgusting individual who has no place in the human race, or the entire universe for that matter. It's a sad day when someone who has had only one year of college economics and a substantial amount of self-taught hard earned school of knocks (like myself) can shoot holes in virtually anything this supposed "economist" and TV financial show celebrity has to say. But hey, he's only on CNBC. He blongs on FOX. Neither of these networks and most of the con artists they have on there are worth what I put down my toilet every morning. And that goes googolplex for Kudlow.

I'll be glad to take him or anyone who listens to him to task any time, any day.

[Colin]

Your rant is still about Kudlow’s opinion.

What about “foreclosures today are less than 3 percent?”

“Home prices … still about 50 percent higher than at the start of the decade?"

[artto]

[*-)]

good one Mark!!!

[artto]

For those who prefer to “quote facts” ~ without the spin, here are the headlines from The New York Times, February 19, 1932:

“NEW EXCHANGE RULE PUTS DRASTIC CURB UPON SHORT SELLINGAfter April 1 Brokers Must Obtain Written Consent From Clients to Lend Stock.” “END OF BIG BEARS IS SEENMarket Rallies on Advance Rumors -- Orders Sent to Coast After Close Here.” “BAN HAILED IN CAPITALBut Members of Congress Disagree on Whether It Will Head Off Legislation.” “NEW EXCHANGE RULE CURBS SHORT SALESIn the most drastic reform introduced since the country-wide controversy over short selling began, the New York Stock Exchange announced yesterday that, beginning April 1, its member firms would be required tc obtain the express consent of customers before their stock could be lent to protect commitments on the down side of the market.” “ACTION BY EXCHANGE GOOD, SENATORS SAY But Disagree on Whether Curb on Short Sales Will Head Off Legislation.” “SOME FOR CONGRESS BANCapper Believes Restrictions on Bears Were Prompted by Fear of Inquiry.”

And also shown here is the graphic result of their intervention

[InnerTuber]

Note that on commodities options as they go deeper into the money the margin calls become more similar to a futures contract. Also, futures/options margin calls are marked to market every day so there is little financial exposure to the exchange, in spite of the fact a single investor is losing his shirt!

Stocks are different.

[artto]

Your rant is still about Kudlow’s opinion.

What about “foreclosures today are less than 3 percent?”

“Home prices … still about 50 percent higher than at the start of the decade?"

Colin, you said you "quoted facts". And I say you didn't because you quoted Kudlow and Kudlow doesn't know any facts. Figure it out my friend.

And furthermore, at the top of the previous page you said "Of course naked short selling isn’t wrong."

What's wrong with this picture? It's the fact that apparently you, who was supposedly in the financial securities industry, doesn't know that NAKED short selling has in fact been an illegal practice since 1934, and what's worse is that you obviuosly don't even understand the difference between NAKED short selling, and "short selling", because, in fact, you provided a rather warped, inappropriate, and misleading explanation of short selling, naked or otherwise (note: I'm cutting you some slack here and stopping "short" {pun intended} of calling you an outright liar since you obviously don't know nor understand the facts, umm, just like Larry Kudlow).

[Colin]

From Wikipedia:

Naked short selling, or naked shorting, is the practice of selling a stock [italics mine] short without first borrowing the shares or ensuring that the shares can be borrowed as is done in a conventional short sale.

In finance, short selling or "shorting" is the practice of selling a financial instrument the seller does not own, in the hope of repurchasing them later at a lower price.

I think my examples are close enough to prove my point.

I am aware that naked shorts violate SEC rules, that does not mean the rule is right.

In fact, I think short sellers should be allowed to hammer overpriced stocks, as long as buyers have the same rules and restrictions. Will allowing naked and other forms of short selling lead to more volatility in active stocks? Yes, I believe it will. In the long run however, more price discovery is good for markets.

Of course, we will know soon enough. Single stock futures are coming. It will be interesting to see if stock volatility increases, or stock option volatility decreases. Since the SEC temporarily outlawed shorts on 800 (800!) financial stocks, it will especially interesting to see the effect of single stock futures on financial stocks.

Kudlow’s point was that this correction in the overhyped and over-leveraged, unregulated credit swap market and its impact on investment and other banks is not the end of the world as we know it. I agree.

[artto]

Colin, your examples are flat out wrong, and they do not prove your point. If anything they demonstrate what, in fact, you do not know.

If you are going to quote the definition of something, the least you can do is use some sort of source that is a widely accepted as an authoritative one on the subject. Wikipedia? Surely you jest!

But, in general, the definition they provide is correct, if not quite complete.

And since you don’t see any difference between the two I have to wonder what you were ever doing in the financial industry. And quite frankly, I think you shouldn’t be making comments about something you obviously (to those of us who know better) know very little about. Someone here on the Forum may inadvertently take your incompetent comments to heart, and act on it, most likely to their own financial demise.

Here are definitions “from the horse’s mouth”:

http://www.sec.gov/answers/shortsale.htm

http://www.sec.gov/answers/nakedshortsale.htm

They do not say the same thing.

Or perhaps you might prefer this:

http://www.investopedia.com/terms/n/nakedshorting.asp

http://www.investopedia.com/terms/s/shortselling.asp

And of course there’s the classic text “Economics” by Paul Samuelson. Surely you have a copy of it in your personal library?

I could go on and on but I guess it doesn’t make any difference if Colin thinks he can just change or “combine” the accepted definitions into one or something else not accepted by law or by people who do this for a living (except of course for the crooks that do naked short selling), choosing to ignore what you want, and then say that just because its law doesn’t make it right. No, you’re correct, it doesn’t make it right. But it’s still wrong in the context of the law. And what’s worse is the fact that the people empowered with enforcing the law have not been enforcing it!

I can agree, so far that (probably) “it’s not the end of the world as we know it”, only because this time (as opposed to the 1930’s) we are stepping in relatively quickly to curb, support and correct the situation. In the 30’s it took them 3-4 years to even start lowering interest rates or create an RTC. I’m not sure if you or Kudlow have a clue how close we came to Depression Part Two last week (yes, it's true, I do have a clue), and we’re not out of the woods yet. That is my point. And I can guarantee you Kudlow would not have the faintest understanding about any of the recent statements I’ve made on this thread. He is pro “goldilocks”, but he seems to have forgotten the story. It’s not named “Goldilocks”. It’s “Goldilocks and the Three Bears”. (he actually used this terminology on his show without my permission a few days after I emailed him and “called” him on the subject). He obviously still doesn’t know the meaning of what I said. He never will. Because he’s extremely biased and that will hold him back from the truth forever. Go ahead, keep on quoting Kudlow the SpinKing. If you do you will remain as ignorant as he is.

[artto]

Of course, we will know soon enough. Single stock futures are coming. It will be interesting to see if stock volatility increases, or stock option volatility decreases. Since the SEC temporarily outlawed shorts on 800 (800!) financial stocks, it will especially interesting to see the effect of single stock futures on financial stocks.

We have already seen what the effect of outlawing SHORT SELLING is (not NAKED short selling). I already posted an example from the US market in the 1930's. Would you like to see more? (HINT: the results are the same) (do you know what the results are and where they are from and when they occurred? I think not, otherwise you would have conceded this argument long ago).

[Coytee]

Brokers Must Obtain Written Consent From Clients to Lend Stock

Just a little side comment here in case anyone reading might not realize....

All it takes for someone to give written permission for your broker to lend out your stock is to open a margin account. To be 100% honest, I'm not sure if the stocks in the account have to be literally HELD in the margin side of the account "type 2" or if the mere agreement on file will allow the broker/dealer (not your individual broker, but the custodial firm) to lend stocks out...even those that are still held in the cash account "type 1" side of your account. I've always believed the stocks had to be held in "type 2" for it to apply but another part of me says "permission on file is permission on file" regardless of where it's held. That's always been one of those things I've wondered about but never bothered to find out about.

Bottom line....don't be thinking there is a specific 'stock lending form' that allows your stock to be lent out...the fine print in the margin account agreement is what does it.

[Colin]

From your sites:

• A short sale is generally the sale of a stock you do not own.

• The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller.

• In a "naked" short sale, the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer within the standard three-day settlement period.

• The illegal practice of short selling shares that have not been affirmatively determined to exist.

So you have to “borrow” the shares to short stocks. So what? Big difference. What are you so upset about that you are resorting to insults?

I was thinking of commodities, not stocks, at the time I wrote about shorts. Naked shorts are sells without “borrowing” the stock first. While I believe that this rule is an attempt by the exchanges to limit the impact of short selling, it is a rule and should not be violated. What I should have said is “Short selling is a proven trading technique that brings liquidity and rationality to free market discovery of price.”

Anyone foolish enough to act on my investment advice will certainly meet their financial demise.

And yes, I have Samuelson here somewhere.

I do not think that a temporary lack of liquidity in the short-term U.S. markets will bring us to “Depression Part Two.” I think it threatened Paulson’s holdings in Goldman Sachs and his investment bank cronies.

It has been a while, I admit, but I believe that a type 2 margin account gives the brokerage permission to hypothecate the shares.

[Colin]

I didn’t dummy down a second time on FRE and FNM, too bad, if I had, I would have almost tripled my investment, still need share price to triple from here to break even on my original bet (that feds wouldn’t let GSE fail)

[Colin]

not nosy, I started this thread about GSEs paying 10 and 12%, not any more

"need share price to triple from here to break even on my original bet"

[Colin]

In prepared testimony before the Senate Banking Committee, Lockhart said roughly 33 percent of the companies' business involved buying or guaranteeing these risky mortgages, compared with 14 percent in 2005. At Fannie Mae, roughly 40 percent of mortgages in the first half of 2007 fell into that category, compared with 26 percent in 2005.

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/23/AR2008092301718.html

[Colin]

One concern is the size of the credit-default swaps market, which has ballooned very rapidly, using non-standard, paper-based contracts that don't trade on exchanges. Cox said the notional market in credit-default swaps stands at $58 trillion, double the amount outstanding in 2006, yet the market "is regulated by no one."

http://money.cnn.com/news/newsfeeds/articles/djf500/200809231536DOWJONESDJONLINE000620_FORTUNE5.htm

[Colin]

Up 40% on my second (dummy down) purchases of FRE and FNM; could have been 400% if I dummied down again (but I did not)

So far, my tiny investment in the, Freddie Mac and Fannie Mae, is wrong. Their shares are not worth more than $4 each. Yet, the government did not take them over. They still exist as government sponsored mortgage market makers. FRE and FNM stocks still trade actively on public exchanges. In fact, the Treasury was careful to preserve shareholders equity (albeit what little remains). They bought preferred shares. They invested in them to prop them up; they replaced their heads and created an oversight agency, but they did not literally take them over. Small difference, yes. But a difference that preserves the public’s investment in their equity and keeps the government (barely) out of the ownership position.

[Colin]

By the end of 2009, about 100 U.S. banks with collective assets of more than $800 billion will fail, predicts Christopher Whalen, managing director of Institutional Risk Analytics, a Torrance, California-based firm that sells its analysis of FDIC data to investors.

http://www.bloomberg.com/apps/news?pid=20601103&sid=amZxIbcjZISU&refer=us

[Colin]

"

Rather than bailing out Wall Street, we propose that the government should buy up the actual mortgages in question and do nothing else. The government should not touch any derivatives; that is, claims that do not directly tie into the actual mortgages. If money becomes too tight, then the Fed can certainly increase its loans to financial institutions.

Let the poorly managed, overly risk-taking financial institutions fail! Always remember that Wall Street and the real economy are not the same thing.

— Ari J. Officer has completed his master of science degree in financial mathematics at Stanford University. Lawrence H. Officer is a professor of economics at the University of Illinois at Chicago. "

http://www.time.com/time/business/article/0,8599,1845209,00.html?cnn=yes

[JJkizak]

The problem with buying up the "toxic stuff" is that no one, anywhere, anytime, any institution, any computer can put a value on the stuff. The only person who knows the valure of his mortgage is the person that walked away from it. That means its worth is in the negative scale of evaluation which hasn't been created yet. In my astute evaluation the stuff is worth "zero" dollars.

JJK