Gladys Posted September 21, 2008 Share Posted September 21, 2008 Yes, but they are doing it with someone else's stock who will lose if their gamble that the stock will fall sufficiently to enable them to buy it back fails. As I said, creating markets in things which are so remote from the real economic activity can only be bad when markets become unstable. I am no expert either and I do not understand how selling short has weeded out inefficient or corrupt organisations. Link to comment Share on other sites More sharing options...
P.K. Posted September 21, 2008 Share Posted September 21, 2008 The other thing is mortgage interest rates - you've never had it so good! The worry is that people have been borrowing large salary multiples to create a monthly repayment they can afford...a couple of points increase in the base rate and it's a huge problem. As we're starting to see now, banks often put UP interest rates in a downturn, which to me is counter-intuitive as it only magnifies the problem. Of course, on Planet Stu we have a solution to all this. Governments to freeze trading in shares in financial institutions (banks etc - they've already gone part-way in banning shorts trading) and a mandatory cut in interest rates across the board to stimulate the economy, rather than compound the problem. Trouble is, we don't have an economist on Planet Stu...so how would YOU fix the current problem? I remember the 70's but for all the wrong reasons! What really pisses me off is the way tax dollars have to be used to make good a situation brought about by the likes of the fat cats at the top of lenders like Northern Crock. They deliberately instigated a policy of irresponsible lending. Giving a 110% mortgage = instant negative equity. Not exactly rocket science but I'm sure their promotional glossies convinced Billy Bunter everything in the garden was roses. Call that prudent? It's bollox. Never mind, they all got a fat pay-off I'm sure. At least in the 70's there were rigid rules around affordability and mortgages were issued only if they were sure you could pay them back. De-regulation and it's a pile of poo. So regulation is Plan B, time it was put to work. Link to comment Share on other sites More sharing options...
keyboarder Posted September 21, 2008 Share Posted September 21, 2008 Yes, but they are doing it with someone else's stock who will lose if their gamble that the stock will fall sufficiently to enable them to buy it back fails. If the stockholder is prepared to lend it then that is up to them surely? (and just to be clear, they earn a fee for doing so) Although how do they lose? If the hedge fund manager gets it wrong the original stockholder doesn't wear the losses surely? The hedge fund does. Link to comment Share on other sites More sharing options...
Gladys Posted September 21, 2008 Share Posted September 21, 2008 Yes, but if the hedge fund can't pay all the losses then how do they pay it back? Yes, a fee is earned by the stockholder. Also, does the stockholder ever actually get the opportunity to say yeah or nay, especially if it is in a managed fund? Link to comment Share on other sites More sharing options...
keyboarder Posted September 21, 2008 Share Posted September 21, 2008 Yes, but if the hedge fund can't pay all the losses then how do they pay it back? That's probably where AIG step in........ ; )) Link to comment Share on other sites More sharing options...
Gladys Posted September 21, 2008 Share Posted September 21, 2008 Exactly. So no losers then? Still interested to understand how these activities weed out corrupt organisations though. Link to comment Share on other sites More sharing options...
The Old Git Posted September 22, 2008 Share Posted September 22, 2008 Yes, but they are doing it with someone else's stock who will lose if their gamble that the stock will fall sufficiently to enable them to buy it back fails. As I understand it, they're not borrowing stock from an individual.etc., they're borrowing it from the market makers, who have to hold stocks for there to be liquidity in the market, and those market makers are happy to have a turnover in shares as that's what keeps them going. There's nothing special in shorting a stock, as a very small individual investor I can short stocks through my online NatWest stockbroker account, although the period I have to pay them back in is limited to around 5 days. Link to comment Share on other sites More sharing options...
ai_Droid Posted September 22, 2008 Share Posted September 22, 2008 Trouble is, we don't have an economist on Planet Stu...so how would YOU fix the current problem?. Regulation of some of the more exotic instruments that have fuelled the mistrust has to be part of the long term answer. You'll see that happen naturally in some ways now that investment banks seem to be extinct. Link to comment Share on other sites More sharing options...
Bombay Bad Boy Posted September 22, 2008 Share Posted September 22, 2008 The power of Credit compels thee Link to comment Share on other sites More sharing options...
oldmanxfella Posted September 22, 2008 Share Posted September 22, 2008 Regulation of some of the more exotic instruments that have fuelled the mistrust has to be part of the long term answer. You'll see that happen naturally in some ways now that investment banks seem to be extinct. Its wider than that. I'd be asking the UK regulators how derivative backed 'guaranteed' structured products ever got sold in a retail environment. I hear that there are a few banks now shitting themselves as the investment banks they have used to back their equity participating structured products are looking very shitty indeed. http://www.citywire.co.uk/adviser/-/news/a....aspx?ID=314792 http://client.ndfstructuredproducts.com/ I wouldn't like to be in the call centre ... yes Mr Customer the value of your guaranteed investment is currently ... em .... er .... oops ... are you sitting down? Link to comment Share on other sites More sharing options...
Gladys Posted September 22, 2008 Share Posted September 22, 2008 Yes, but they are doing it with someone else's stock who will lose if their gamble that the stock will fall sufficiently to enable them to buy it back fails. As I understand it, they're not borrowing stock from an individual.etc., they're borrowing it from the market makers, who have to hold stocks for there to be liquidity in the market, and those market makers are happy to have a turnover in shares as that's what keeps them going. There's nothing special in shorting a stock, as a very small individual investor I can short stocks through my online NatWest stockbroker account, although the period I have to pay them back in is limited to around 5 days. But that is the point TOG, the stock is not theirs (doesn't matter whose it is) in other words they are not trading in a real stock; in effect they are trading on an obligation. I also assume the market has controls so that the same stock is not traded numerous times? Link to comment Share on other sites More sharing options...
Bombay Bad Boy Posted September 28, 2008 Share Posted September 28, 2008 House prices should fall so that FTB's can get back on the ladder of home ownership House values will fall - Moffatt /puts in low offer on BallaShoebox Link to comment Share on other sites More sharing options...
willstain Posted September 29, 2008 Share Posted September 29, 2008 House prices should fall so that FTB's can get back on the ladder of home ownership House values will fall - Moffatt /puts in low offer on BallaShoebox Tuff times for everyone. Link to comment Share on other sites More sharing options...
jimbms Posted September 29, 2008 Share Posted September 29, 2008 Even the railways are cutting back Link to comment Share on other sites More sharing options...
Lee54 Posted September 30, 2008 Share Posted September 30, 2008 How safe are the Bankx here, RBS are having a bad time. http://news.scotsman.com/uk/RBS--shares-pl...t-as.4539882.jp Link to comment Share on other sites More sharing options...
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