Monday, October 30, 2006

Yes Virginia, there are Vampires

Halloween is a fun and scary holiday.

So what is scary?

Short selling small and medium sized businesses into the ground, using a convenience loophole, that’s what. A shady stock broker deliberately fails to deliver on his end of a trade, but closes out the money transaction. The result is money in the pocket of the broker, follwed by a damaged budding business and a individual stock holder with worthless stock. This does not get much press, you see, because mutual fund investors and very large companies, are insulated by mass and capitalization.

Take this Forbes article.

This is all part of the debate on whether aggressive short-sellers are gaming market rules on stock borrowing and trade settlement to drive down the shares of targeted stocks (the "short and distort" trick), reaping big profits in the process.

Too much gobble-dee-gook to understand? Here is an excellent on-line presentation, which describes what all the anger is about. I love the use of grandma as the victim, which is so often true in these situations.

BTW, Larry Thompson is the tight lipped lawyer over at the DTCC, who is under fire for muddling with the numbers and resisting the public's queries.

American innovation is born in small businesses and start-ups. They are the future of all unborn markets.

Happy Halloween, folks.



RT said...

I read quickly, but sounds like some real-life vampire action.

Uber said...

Dang, even the modern vampire doesn't bleed little old ladies.

Happy Halloween, Insolu, good post.

Insolublog said...

rt - It's pretty nasty stuff.

Uber - Thanks and spread the word. We need to save old ladies from these vampires