Posted by: graemebird | June 19, 2008

See To Your Super Fund/ Our Stockmarket Will Dive.

Sorry about not mentioning this earlier. But you see I had to cash out my own shares and didn’t want to contribute to sparking off further nasty sell-offs before that transaction took effect. 

I read that super funds have fallen about 5% in value since last June or so. I think they could go another 30% if the Reserve Bank does not change its ways.

YOU HAVE BEEN WARNED AND YOU OUGHT TO MAKE HASTE.

 

 

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Responses

  1. Done! I have sold my vast portfolio and put it all into property. Hope this works out but I believe in you.

  2. By the way I think you should be charging for your insights and wisdom. what happened to ‘most expensive blog’? You could make a killing, Bird.

    your disciple

    Parkos

  3. Ha Ha. I would stay away from property. The best thing would probably be to sell the banks short for awhile.

    Actually I ought to make it clear. I’m only talking about Super Funds. If there was some stocks you thought were good for some reason or other, I’m not saying to sell them. But you don’t get to choose with these super funds so its best for Australians right now to go with the capital preservation fund, or the most conservative fund out of all the ones their work-super has access to.

    That stockmarket cannot go anywhere but down until the Reserve Bank realises it better pump money out like there is no tommorrow. This is not to say that some individual companies might be worth buying or holding.

  4. No I wasn’t. Shorting is fine and good for the market. It makes the pricing mechanism doubly effective. Its hitting things from both sides.

    Its NAKED SHORT-SELLING which is the problem.

    Every time you think you are right and I’m wrong its only because you’ve imagined that I’ve said things that I have not. Get used to it.

  5. That amounts to a lie Mark. I couldn’t have been clearer in spelling this out in the thread fully devoted to the topic. What is it with you and JC? Your post cannot last.

    It makes me sad. Why do the people lie all the time?

  6. graeme, if we naked short then prices will move much faster to the new equilibrium and people will learn faster about the danger of ponzi money. i think you should advocate naked shorting.

  7. No thats not right. Naked shorting with impede such movements. For example in Canada and the US there are small undervalued mining stocks that have stayed undervalued and unable to get hold of capital for years on account of naked short-selling. Wherever it can be found it will be doing damage to price signals. In all its forms it is distorting price signals.

    Ordinary short-selling will achieve what you are saying. Not naked short selling. Ordinary short-selling.

    An ordinary short-seller might on his own short-sell a large blue-chip. But naked short-sellers club together and pump-and-dump small-caps. Its pretty easy to see that the naked shorters must pick on small companies that are not in a position to pay dividends. That is to say they must pick on small companies that are in that part of their life-cycle where they must chew-up rather than create capital. So naked short-selling is killing the growth of new business.

  8. Ordinary shorting is a promise to buy-back shares in a market of limited shares. Hence it is doubly stabilising because its a sell at a too high price and a promise to buy at a lower price. But naked short-selling is telling the market that the shares are being diluted even though no new capital is being added.

    When you cash out to gold and take a position in Gold if the person who has made this sale is acting like he’s got the gold but he does not have it.. What he is doing is telling the market that there is more gold out there than was thought. Prices don’t rise. Less mining gets done. Its a perversion of the market pricing system all the way down the line.

    The mainstreamers wouldn’t see this as an important issue. Because they tend to only think in terms of price signals as information coming from consumer prices. Whereas producer prices are at least twice as important and prices to do with financial and commodity markets are more important still.

    The good news is that Australia could take the world financial markets by storm if it were the only people offering a proper financial system. Without the bogus regulation that we don’t need and making sure that people aren’t getting away with inherently dodgy practices.

  9. “But naked short-selling is telling the market that the shares are being diluted even though no new capital is being added.”

    Explain how that works.

  10. Suppose I borrow some shares off a stockbroker in order to short-sell them. These are the shares of a small-cap. And they haven’t issued a great deal of shares. The owner of those shares knows he doesn’t have access to them. He cannot sell them himself. He cannot short them. He cannot lend them out again. Hence as part of the market there is no perception that there are more shares than there was ever issued.

    Suppose I have sold 20,000 shares and have to replace them. But there is only 60,000 shares ever outstanding. From here on in the market still only perceives there is only 60 000 shares. This is important because it relates to how buying and selling affects the share price. If there is only a few shares a relatively small amount of buying can send the shares higher.

    So normal good backed shorting is inherently good for the market. And I better be selling an overpriced company. Or there is no end to the losses I can sustain. If others are reluctant to sell an overpriced company can stay overpriced on thin trading. The management can go on in delusional fashion and not deal with the problems that may be involved. We want to knock them off their pedastal by selling the shares without having to buy them. But there is inherent stabilization in this process. Since we will have to buy the shares back.

    If the stockbroker does not have posession of the shares when he lends them to me the perception will now be that there is 80 000 shares out there. Supposing a few of us are doing it. And it winds up that the market perceives that there are 120 000 shares out there. Then somebody buys shares there will not be the sort of price movement for a limited good that you would expect. The shares have been diluted then, even though the company has not received any extra capital. Any extra cash with which to develop their business. You don’t want to dilute your shares if you can help it. You do so only to raise capital to bring your company to a level of operation where it can be profitable.

    This sort of behaviour is a thing that must be done to a company in the part of its life-cycle where it cannot afford to pay dividends or buy-back shares. It needs capital to develop its business. At the moment its happening to small-cap mining stocks who have some debts. Like gold and silver mining stocks. They might be in a position where if they could invest $100 million more they could be pulling ounces of gold out of the ground at a variable cost to themselves of $50 with the gold price $900 dollars. They cannot divert money away from this project to buy back shares. Their shares are underpriced so they cannot have another share issue to raise further capital. So though they are almost ready to go into production they are starved of cash.

    Meanwhile these naked short-sellers have all these short positions in a small-cap which they cannot allow to go to their market price. If they do so there will be a Opes Prime-style debacle and they’ll all be thrown in jail. They are locked into a rabid game of intense market deception. They may try and quietly buy back these shares to unravel their position. But when push comes to shove they have to use all sorts of underhanded tactics to destabilize the share price. The whole market therefore becomes a fountain of misinformation and a vehicle for missallocating capital. Brokers will have to quit and do a runner if they perceive that they cannot keep the shares low.

    Here is a buying opportunity. If you knew of these shares you would find that if the law got onto these short-sellers and you could buy these stocks then the share price could multiply through the roof. Thats a happy end to this story. But you can’t be sure that you won’t be caught without any shares at all unless you take delivery of the certificates. And the fact remains that the efficient capital allocation has been halted for a number of years until the scam comes unravelled.

    Its inherent to the scam that they must pick on smaller companies at the part of the lifecycle where they need to use up the capital. They try it on a healthy blue-chip they’ll get burnt.

    The healthy blue-chip who can rightly pay dividends is the stock that the stock-options bandit can make endless fortunes on in an unstable and inflationary environment. In a condition of growth-deflation these stock-options would be a good and just payment for the executive. Since they would reflect good performance. If they were paid for in a company that was small and needed to be expanded they would be still better. If a gang of illegal traders tried to naked short the mature yet profitable company (eg Telstra) they would get rolled. But if they tried that on a small startup they can impede their growth. They can impede their ability to borrow money with shares as collatoral or issue new stock for a lot of cash and a small dilution of capital.

    It might be argued that the gold and silver will still be in the ground. So its no great tragedy. But think of another type of business. Suppose its a startup with an efficient new engine. Like Angelo Di Pietro in Melbourne. If this is going on such companies might also be denied new capital and so the practice is really hampering the economy.

  11. Dammit I can’t resist.

    Graeme – Parkos was just me.. The real Parkos hasn’t seen the straight and narrow yet.

  12. Right. No more impersonations. Parkos suffers from impersonations too much.

  13. While we are on the subect of impersonations I must ask, whoever it is impersonating Percival Dandy, to please stop. Have some human feeling please. As if it wasn’t harrowing enough for Mr Dandy to have to bear the slings and arrows of growing up with the name “Percy.” Thats a weighty burden for such a proud and upstanding man to live with. But whats been going down on this forum, has been a terrible humiliation for Mr Dandy. The impersonator has brought up a dark, and all but forgotten shadow, in the Dandy family history.

    Mr Dandy’s ageing Mother is still alive. She is alive and feisty. But old and in convolescence. As a proud Mother its not beyond the reaches of all possibility that she might not seek to “google” her distinguished sons name. We (Percy and I) fear for her health at the hands of this callous impersonator. If she were to be mislead into thinking that the ancient shame of the Dandy line had re-emerged in her sensitive and distinguished son, this would be enough to carry her away.We both fear for her health. Or rather her very survival.

    It is many generations since the wicked spectre of sodomy has haunted the house of Dandy. So many generations has it been, that in some circles, it was possible to pass it all off as an evil legend. And evil myth brought about by rival households and jilted suitors. By rival households and the jilted suitors from households of a lesser pedigree. Those households whose names have been long lost to the upper reaches of respectability, in the most eminent circles of merry-England and her former colonies.

    I said “callous” impersonator but in truth I don’t make it that way. I just think we are talking about someone trying on a bit of honest mischief, who does not realize the hurt and distress that he has unwittingly caused, albeit in good humour. Well actually I don’t know whether this has all been just a bit of fun and mischeif. It may INDEED be the product of extreme malice. We shall see. We shall see one way or the other. We will judge the situation one way or another by whether the “practical joke” continues after the hurt that these potentially innocent jibes, has caused Mr Dandy.

    I’ll say one thing though. Mr Dandy can thank his lucky stary that OLD MAN DANDY is dead, buried, and with a giant monument upon where he lies. Because if OLD MAN DANDY was led to believe that Percy had turned out a SISSY, he would shoot Percy dead and shoot him some more. He would strangle all Percy’s children. He would drown all Percy’s grandchildren.

    OLD MAN DANDY would figure that his own seed was no good after all.

  14. “Graeme is still asserting that naked short selling, which can’t occur in Australia, is somehow fraudulent.”

    So says Mark Hill on Catallaxy. And I say “SOMEHOW”?????

    For fucksakes man its a straight fraud. You cannot get more fraudulent than that. If naked short-selling is not fraud then the term “fraud” has no meaning.

    But what I really wanted to comment on is the following idiocy “which can’t occur in Australia…” Its occuring all the time. It has to be. We saw that with the OPES/ANZ debacle. And we know that from pure logic and the history of fractional reserve. The temptation to do it is just too strong. If there is short-selling there is the temptation to not have all the shares covered. And thats a temptation that will not be resisted if it doesn’t have to be resisted.

    Make not mistake about it. Its happening alright.

    Its happening and its happening all the time. Legal or not. I did not know that until I saw all the comments of Scrooge, Reynolds and JC.

    Actually. I did not know until this very week that Scrooge was in the finance industry.

  15. Graeme, what’s the difference between regular short selling and naked short selling?

  16. I’ve gone over it a number of times. So go back and read it and then you have a bit of a license to harrass JC on his relentless misrepresentation.

  17. hey graeme
    there are lots of people who want to argue with you about mars, why not do a post on this?

  18. I’ll get around to it sometime. Its a tough one because I couldn’t draw any real argument out of you guys. Beyond the one which says that if those artificial-looking things really were artificial the taxeaters would be right on the job. I don’t see that as an argument since I’m constantly surprised at the level of organizational dysfunction there is. People just don’t work together well except in some narrow circumstances.

    NASA has gone out of its way to get as far from anything mysterious as they possibly can and still be on Mars. Thats taxeaters for you. The sum is less than the totality of its parts.

  19. Graeme
    who the hell is this Percival Dandy you’re talking about?

  20. “Graeme, if you think naked shorting is fraud, then you don’t understand what it is.”

    No you are lying. No lying on this site Hill.

  21. “Graeme
    who the hell is this Percival Dandy you’re talking about?”

    Yeah right. That your version of deep cover? And the confession for the lesser crime of impersonating Parkos. You leave Percy alone.

  22. err no Graeme I don’t know who the heck you’re talking about. Where is this guy? I don’t see him elsewhere on this site.

  23. I wipe him whenever he shows up. Because he dirties my site with the unhygenic spectre of homosexual intent.

  24. oh right. that guy. now i remember ….

    one of your secret admirers

  25. A dirty-homo. An horrendous impersonator. And probably a spreader of the AIDS virus.

    Aids is a hard virus to catch don’t you know? So if people are catching it someone is to blame.

    Personally I blame the sodomites.

  26. err or perhaps percival is trying to provoke you into insulting any gay conservative readers. looks like he succeeded. would you say such a thing to hoover or tailgunner joe?

  27. Neither were Gay. You fall for the most lame marxist lies there are. This I believe shows your true pegigree. McCarthy was ahead of his time in that he had no bigotry towards patriotic homos. You would have troubled him much more than a patriotic homo. Actually you worry me much more than any patriotic homo. If such a creature could be found.

  28. You should come along to a League of Rights meeting sometime Mr Bird. you will meet some like minded patriots. do you live in Queensland?


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