JP Morgan Chase Smith Barney whatsis

[Hungary Jack]

Is there an echo in here?

[Jocephus]

oops

[AdmiralKird]

If this sounds complicated, just focus on this: naked short selling, in essence, is selling stock you do not have. If you don’t have to actually locate and borrow stock before you short it, you’re creating an artificial supply of stock shares.

In this case, that resulted in absurdities like the following disclosure in this document, in which a Goldman executive admits in a 2006 email that just a little bit too much trading in Overstock was going on: “Two months ago 107% of the floating was short!”

In other words, 107% of all Overstock shares available for trade were short – a physical impossibility, unless someone was somehow creating artificial supply in the stock.

The import of this is that it made it cheaper and easier to bet down the value of a stock, while simultaneously devaluing the same stock by adding fake supply. This makes it easier to make money by destroying value, and is another example of how the over-financialization of the economy makes real, job-creating growth more difficult.

This happens quite a bit.

1) Broker's hold all the stocks you buy on e-trade, scotttrade, etc under their own name.
2) Brokers have thousands+ of customers and companies buy and sell on their system.
3) In the event someone wants to short a stock, they use the purchased stock of another buyer as collateral against that short.
4) When the amount of shorts exceeds the number of purchases, they send out a notice to the short-sellers to close their positions, or they will do it automatically in a few days.
5) During this lag time, it is possible to overshort a stock.

[Joe Shlabotnik]

Some more fascinating reading:
Rolling Stone: Accidentally Released - and Incredibly Embarrassing - Documents Show how Goldman et al Engaged in 'Naked Short Selling'

Now, however, through the magic of this unredacted document, the public will be able to see for itself what the banks’ attitudes are not just toward the “mythical” practice of naked short selling (hint: they volubly confess to the activity, in writing), but toward regulations and laws in general.

Doesn't surprise me one bit. You knew it was out there. Remember the way the utilities traders laughed when they held California hostage back about a decade ago? This is the kind of people corporations are. Ruthless sociopaths. If they were really people, they'd be in prison for being violent criminals.

But don't worry, no matter what those documents say, the Supreme Court, Congress, and Obama have Goldman's back.

Check out who and who else run the world:

Former employees of Goldman Sachs Group, Inc.:
Bradley Abelow – Former Chief of Staff and Treasurer of New Jersey under Jon Corzine, and President of MF Global, Inc.
Olusegun Olutoyin Aganga – Former Nigerian Finance Minister, current Nigerian Minister for Trade and Investments
Joshua Bolten – Former White House Chief of Staff
Mark Carney – Governor of the Bank of Canada[155][156]
Michael Cohrs – Member of Court and the Financial Policy Committee at the Bank of England
Jon Corzine – CEO of MF Global, Inc., former Governor of New Jersey (2006–2010)
Mario Draghi – Governor of the European Central Bank (2011–present)
William C. Dudley – President of the Federal Reserve Bank of New York
Henry H. Fowler – Former United States Secretary of the Treasury (1965–1969)
Reuben Jeffery III – Under Secretary of State for Economic, Business, and Agricultural Affairs (2007– )
Neel Kashkari – Former Assistant Secretary of the Treasury for Financial Stability
Mario Monti – Prime Minister of Italy and Minister of Economy and Finance since November 2011
R. Scott Morris – Former CEO of Boston Options Exchange
Ashwin Navin – President and co-founder of BitTorrent, Inc.
Henry Paulson – Former United States Secretary of the Treasury (2006–2009)
Romano Prodi – Prime Minister of Italy (1996–1998, 2006–2008) and President of the European Commission (1999–2004)[157]
Robert Rubin – Former United States Treasury Secretary, ex-Chairman of Citigroup
Robert Steel – Former Chairman and President, Wachovia
John Thain – Former Chairman and CEO, Merrill Lynch, and former chairman of the NYSE
Massimo Tononi – Italian deputy treasury chief (2006–2008)[157]
Malcolm Turnbull – Australian politician, former federal leader of the Liberal Party of Australia
George Herbert Walker IV – Managing director at Neuberger Berman and member of the Bush family
Robert Zoellick – United States Trade Representative (2001–2005), Deputy Secretary of State (2005–2006), World Bank President

Former employees of JPMorgan Chase:
Tony Blair – Prime Minister of the United Kingdom (1997–2007)[74]
William M. Daley – U.S. Secretary of Commerce (1997–2000), U.S. White House Chief of Staff (2011–2012)
Michael Forsyth, Baron Forsyth of Drumlean – Secretary of State for Scotland (1995–97)
Thomas S. Gates, Jr. – U.S. Secretary of Defense (1959–61)
Rick Lazio – member of the U.S. House of Representatives (1993–2001)
Antony Leung – Financial Secretary of Hong Kong (2001–03)
Frederick Ma – Hong Kong Secretary for Commerce and Economic Development (2007–08)
Dwight Morrow – U.S. Senator (1930–31)
Margaret Ng – member of the Hong Kong Legislative Council
George P. Shultz – U.S. Secretary of Labor (1969–70), U.S. Secretary of Treasury (1972–74), U.S. Secretary of State (1982–89)
David Laws – UK Chief Secretary to the Treasury (May 2010)

[JackofDiamonds]

If this sounds complicated, just focus on this: naked short selling, in essence, is selling stock you do not have. If you don’t have to actually locate and borrow stock before you short it, you’re creating an artificial supply of stock shares.

In this case, that resulted in absurdities like the following disclosure in this document, in which a Goldman executive admits in a 2006 email that just a little bit too much trading in Overstock was going on: “Two months ago 107% of the floating was short!”

In other words, 107% of all Overstock shares available for trade were short – a physical impossibility, unless someone was somehow creating artificial supply in the stock.

The import of this is that it made it cheaper and easier to bet down the value of a stock, while simultaneously devaluing the same stock by adding fake supply. This makes it easier to make money by destroying value, and is another example of how the over-financialization of the economy makes real, job-creating growth more difficult.

This happens quite a bit.

1) Broker's hold all the stocks you buy on e-trade, scotttrade, etc under their own name.
2) Brokers have thousands+ of customers and companies buy and sell on their system.
3) In the event someone wants to short a stock, they use the purchased stock of another buyer as collateral against that short.
4) When the amount of shorts exceeds the number of purchases, they send out a notice to the short-sellers to close their positions, or they will do it automatically in a few days.
5) During this lag time, it is possible to overshort a stock.

Beat me to it. It's not really that controversial, naked options are incredibly common.

[AdmiralKird]

Sometimes, when I get a naked option back at my place during after-hours, I like to get under the covers and really give it to the underlying security.

[SHOW]

The only problem with that is I have to go the other way,

[SHOW]

if you know what I mean.

[pioneer98]

This is not what the article is accusing Goldman et al of doing, guys. Did you read it? The article is accusing Goldman & friends of selling short positions with no stock as collateral at all - no one in their system owned anywhere enough of the stock or anything. Not even close. They are arguing that this wasn't "pending transactions" that caused this. It was creating transactions out of thin air.

Among other things, they are also accusing them of telling their larger hedge-fund customers about the short positions of their smaller customers (known as "Muppets"). Was this also common practice and I just need to be brought up to speed?

[AdmiralKird]

Edit: Jack's Exp. is better.

Among other things, they are also accusing them of telling their larger hedge-fund customers about the short positions of their smaller customers (known as "Muppets"). Was this also common practice and I just need to be brought up to speed?

They also accused Glen Beck of raping and murdering a girl in 1990.

[Joe Shlabotnik]

This is not what the article is accusing Goldman et al of doing, guys.

And not only that, its not an accusation any more. Rolling Stone has the paper trail where Goldman is executing the [expletive] pioneer is talking about. Caught red handed.

I am not holding my breath that it will matter though. Goldman Sachs IS America so its a national security issue. Nothing to see here folks, take your reaming and move along...

[JackofDiamonds]

This is not what the article is accusing Goldman et al of doing, guys. Did you read it? The article is accusing Goldman & friends of selling short positions with no stock as collateral at all - no one in their system owned anywhere enough of the stock or anything. Not even close. They are arguing that this wasn't "pending transactions" that caused this. It was creating transactions out of thin air.

Among other things, they are also accusing them of telling their larger hedge-fund customers about the short positions of their smaller customers (known as "Muppets"). Was this also common practice and I just need to be brought up to speed?

Part 1) Not an issue, it's not even a remotely complicated/sophisticated move. Naked shorts are particularly aggressive, but they're not crazy. The issue here is the size/stupidity of the bet considering the bettor. The derivative market has much more exotic plays and combo plays (big fan of the Iron Condor and the Iron Butterfly, but everyone always wants to talk about a Naked Straddle.)

Part 2) Big issue. Not uncommon (allegedly happens behind closed doors at every major firm), but super illegal if discovered.