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March 09, 2009

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kim

Not to mention sound science and climate. Hoo, Baby.
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kim

This is just the kind of irony that makes me dance and sing. The climate true believers think the science is settled; the skeptics, with few exceptions, understand that the science is corrupted with politics.
============================================

kim

This can be thrown directly into the faces of Holdren, Chu, and Browner. And when some wise guy over there catches on that carbon taxes are regressive and holding up the recovery, we may get somewhere.
=========================================

bgates

Plainly unconstitutional. It takes an act of Congress to increase the President's renumeration, but at Saddleback Obama said that as President this kind of decision would be above his pay grade.

Porchlight

You can't be twenty on Sugar Mountain
Though you're thinking that
you're leaving there too soon,
You're leaving there too soon.
Now you say you're leavin' home
'Cause you want to be alone.
Ain't it funny how you feel
When you're findin' out it's real?


Love your lyrical allusions, TM. I only wish Barack would do a little more findin' out about reality.

kim

I felt like I woke up this morning on Mockingbird Hill.

Can we mock Obama? Yes, we can. The Mock President.
=====================

Captain Hate

I wish aome troof-to-power hard hitting journalist would dig up the Columbia transcripts of President DynOmite so we could find out how many science courses he's taken and mastered because he's so effing smart. My guess is about as many as fat tub of carp Algore, who last was seen ducking global warming skeptic Vaclev Klaus, who surely has a more solid scientific background than Full Metal Keyboard.

Captain Hate

aome == some

E. Nigma

Maybe he was just "Blinded by Science!".

It happens.

Next up: Obama Administration defines pi, squares the circle, re-writes the 1st and 2nd laws of Thermodynamics (which makes solar power work a lot better today!), then goes to lunch.
Science!

Extraneus

6 weeks and 6 days after innauguration, and they're still taking pot shots at the previous Administration. Their internal polling must be pretty bad.

Charlie (Colorado)

Everyone knows that "science" means "that which agrees with my preconceptions."

MayBee

I'm just trying to figure out how in the same speech Obama can say choosing between morality and sound science is a "false choice" AND say cloning for reproduction has no place in our society.

bad

Easy answer to that Maybee. The flow of the words matter much more than what the words say.

Pofarmer

This kind of science based policy?

LUN

"King Coal's reign challenged in courts, D.C."

These idiots are gonna put us in the dark.

clarice

chaco preemptively pre answered your question MayBee.

MayBee

heh. He sure did, clarice.

hit and run

Obama:
To ensure that in this new Administration, we base our public policies on the soundest science

Hmmm....

Pofarmer:
These idiots are gonna put us in the dark.

Well.

--------------
Hello darkness, my old friend,
I've come to talk with you again,
Because a vision softly creeping,
Left its seeds while I was sleeping,
And the vision that was planted in my brain
Still remains
Obama's soundest silence.

In restless dreams I walked alone
Narrow streets of cobblestone,
'neath the halo of a street lamp,
I turned my collar to the cold and damp
When my eyes were stabbed by the flash of
A neon light
That split the night
And exposed Obama's soundest science.

And in the naked light I saw
66,882,230 people, maybe more.
People talking without speaking,
People hearing without listening,
People writing songs that voices never share
And no one dared
Disturb Obama's soundest silence.

Fools said I, you do not know
O's sound science like a cancer grows.
Hear my words that I might teach you,
Take my arms that I might reach you.
But my words like silent raindrops fell,
And echoed
In the wells of O's soundest science

And the people bowed and prayed
To the greenie god they made.
And the sign flashed out its warning,
In the words that it was forming.
And the signs said, the words of the prophets
Are written on the subway walls
And tenement halls.
And whispered in O's soundest silence.

Frau Jedöns

Mock on, mock on, O-Mockery of State! What's *not* to mock?

If Daddy Soros was planning on bursting the bubble of U.S. supremacy, he has the right fellas in place.

Matt

it's Musical Monday!

He appoints some of the most vocal greenies in the world to his policy team and tells us he wants it based on sound science now? The man knows not the depth of his perfidy.....

Captain Hate

Speaking of scientific mensas, it's too bad that Silky Pony didn't practice safe sex, otherwise he could've been there as Ambulance Chaser General or Secretary of Healthy Hair and Excessive Self Esteem. There could've been a moment of silence for Christopher Reeve who, if Breck Girl and Lurch hadn't been rejected by all us knuckle draggers, would still be with us and running in marathons because of the miraculous research done by whatever Mengele descendent those two assbags would've named Sturgeon General.

E. Nigma

Pofarmer,
Interesting comments on your linked article. There seem to be people other than JOM commenters that are skeptical of the Obama Plan to Fix Global Warming.

In regards to a question that you asked on another thread, Ohio utilities are guaranteed a return on their investment, hence their ability to raise rates (through PUCO) when their expenses increase. So if there is a cap and trade tax, the coal-burning utilities in Ohio will be able to pass SOME of that cost on to users, through rate hikes. If they are allowed to pass NONE of the cost, then they might just start shutting down power plants. Darkness ensues.
Perhaps the most interesting aspect of this is that Ohio is a net electricity exporter, with most of the surplus going to New York.
Perhaps the state utilities will throttle back their evil coal and nuclear plants, and have no excess to sell to New York State utilities.
Sad.

drjohn

"That is how we will harness the power of science to achieve our goals – to preserve our environment and protect our national security; to create the jobs of the future, and live longer, healthier lives."

How easy it must be to be a Democrat. All one need do is spew pablum for the useful idiots and you're a hero!
Obama makes it sounds as though he is Abraham Lincoln of stem cell research.

drjohn

Posted by: Frau Jedöns | March 09, 2009 at 05:53 PM

Wanna bet Soros is shorting the US right this minute?

Rick Ballard

"The man knows not the depth of his perfidy....."

He's nowhere close to a Bubba class liar but he managed to snooker a higher percentage of the electorate than Bubba ever did. Some days I lean towards "dumber electorate" as the answer and some days I really wonder about the ACORN early voter drive among the hopelessly limited.

Would "Obama policies will raise your electric bill by 42%" work? Use the silliness of CT as an example of the destination of a "green" USA?

Rick Ballard

drjohn,

You put the / behind the i to close try and close italics. It needs to go in front of the i.

I wonder if Typhus will let me fix it now?

Rick Ballard

Nope. SixApart still sux.

Paul Zrimsek

"I wish I knew how to quit U-238." -- Yuccback Mountain

bad

It's fixed for me,Rick.

Tommy Flanagan

I got an idea. While Obama is reaching out to the moderate wing of the Taliban , perhaps he can convince them to store our nuclear waste in Tora Bora for the next 10,000 years. Yeah, that's the ticket .

PeterUK

"Would "Obama policies will raise your electric bill by 42%" work? Use the silliness of CT as an example of the destination of a "green" USA?"

"The Greens will kill your Granny".

Matt

"All those who used to give me advice
are crazier every day
Luckily I ignored them
and they went to another city
where they all live together
constantly swapping sombreros"

Parthenogenesis
Pablo Neruda

Matt

Craner is accusing the administration of allowing the shorts to destroy the banks. Sounds like Soros name all over this one.

Gee, wasn't Soros one Obama's biggest backers?

Scott

PeterUK
Nah In CT The greens say it's all the greedy electric companies fault. Plus judging by my CT Bill 42% is toolow more like 53%

Rick Ballard

Scott,

It's the 100%+ pop to commercial/industrial users that should make the good citizens of CT eyes bulge. It's a helluva way to turn the state into a nature preserve.

It's all good though - the state can just tax "the rich" to cover additional costs occurring due to employers pulling up stakes and heading for redder pastures. You are rich, right? I mean, according to the CT tax authorities?

Rick Ballard

The future of American finance.

I sure hope I don't read about BAC or GE having any idiotic counterparty liability on this stuff. When does C get their shot at the trough?

mel

Matt-

The administration has deemed fit, as did the prior administration, to ignore naked shorts, and for "shorts against the box" no need for reinstating the "uptick" rule.

Rich & Rick-

I am wading through September's commentary. In the mean time, here's where you can get historical CDS data, however, not the actual cash involved in the transaction. The info is free, just click through the agreement page and you should be able to pull the complete tables. LUN.

This is what you're looking for: (a bit like the open interest on an exchange)

DTCC Deriv/SERV Trade Information Warehouse Reports

Rick Ballard

Mel,

Thanks for the link. It's definitely worth a bookmark.

qrstuv

And of course, yet again, failure of the Federal government to fund a specific type of stem cell research is equivalent to banning that type of stem cell research.

I hate these assholes. Would it kill them to tell the truth for once?

Scott

Rick

That just means those greedy corporations charge more. CT authorities don't define rich. They go for milionaires taxes you know $250K per couple, $125K singles. And please don't get me started on what they do to drive out business it would take way too long.

Pofarmer

Some days I lean towards "dumber electorate" as the answer and some days I really wonder about the ACORN early voter drive among the hopelessly limited.

One of those voters called in to Hannity today. The speil was that the free market had failed in energy projection, had failed in health care, had failed in the morgage market. Sean asked him what was the failure on energy, seeing is how there's gas stations on every corner and electricity to every building. He said "where are the alternatives?" Sean just cut him off. These are the Obama voters. They don't realize that oil and gas and coal fired electricity ARE the alternatives. And, if something cheaper comes along, then it will get used. I don't think you're going to get through to people like that.

Matt

mel;

I know. This is part of the problem at present. I think we're going to find the shorts tank Wall Street very successfully and move their money offshore where there's no way to get it back. Basically Wall Street is set up to allow these things to happen until the cow leaves the barn.

Scott;

California defines rich at $49,000.

Pofarmer

Would it kill them to tell the truth for once?

Yeah, probably.

Mel,

Why are there allowed to be shorts on stock trades in the first place?

PeterUK

Scott,

Then you just have to keep repeating it until it is true.

"The Greens will kill your Granny".

You need to take command of the meta content,a strategy the left learned a long time ago.

Extraneus

I hate these assholes. Would it kill them to tell the truth for once?

They mentioned a "type" of stem cell? That's surprising.

BobS

Science is just another area that Dem/Libs are hijacking the truth...climate junk science and now stem cell research....

Captain Hate

Why are there allowed to be shorts on stock trades in the first place?

I've never understood the logic behind it, Po; but it's been around as long as I can remember.

 Ann

‘Manchurian Candidate’

Are You Ready To Take The Pledge

What a bright future. Obama's plan is so bad that he has to get his army of acorn thugs out to twist our arms. I just hope they don't knock on Pofarmer's door. :)

Fresh Air

There's nothing inherently wrong with shorts, Bermuda or otherwise. The uptick rule does serve a purpose, however. I wish I had shorted NYT when I had the chance; there's no profit left in it if goes to zero now...er, I mean when it goes to zero, natch...

Jane

Hey guys, someone suggested tonite that every week on the radio I tally up the per capita spending changes from week to week - and make it an ongoing feature.

Anyone have an idea where I can get that info?

Scott

PO

You buy a stock when you think it is going up (long) So why not sell more than you have when going down(Short)(buy it back later at lower price) Shorts have been around since 1600's. Somer argue they make markets more effiecient by acting as a counterweight to normal overbullishness, others say they are a mechanism that helps dig out fraud and phony bookkeeping.
Me - i just think of them as another way to make a bet.

By the way IMO need return of uptick rule

Extraneus

Great idea. Here's an interesting-looking website.

usgovernmentspending.com

I don't see a weekly tracker, but it might be there.

kim

I'm hardly a market maven, but the logic of shorting seems obvious; it improves a market. If you think a stock is undervalued, buy it. If you think a stock is overvalued, sell it. If the only way for the market to react to an overvalued stock is to not buy it, you'd be missing a dimension of risk, which the market needs to be responsive. This seems obvious to me. What am I missing, those who don't like shorts?
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Extraneus

Here's a page on the Obama budget spending forecasts.

Scott

FA
Wish i had got on that short too! Sad news though WP Carey who bought the real estate has pretty good record on these buy-lease back deals. So either they got a great price or the times will be around a while. I'm hoping for great price!

Sue

http://www.breitbart.com/article.php?id=CNG.1da91b565bedacc6461ea17550408182.661&show_article=1>The campaign that never ends.

kim

I see Scott beat me to it. Shorting keeps a market honest, and more efficient, in my much humbled by the market opinion.
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Rick Ballard

Jane,

I'm not sure I follow. Do you mean a Fed Budget/population/52 type of number with a monotonic weekly increase? The Dems plan on stealing and spending $233 per week per capita. ($3.7T/306M/52)

Scott

Kim

Yea But you spelled efficient right

Captain Hate

What am I missing, those who don't like shorts?

You're missing absolutely nothing; in fact you understand it very well. Most people find the concept of making money on something losing its value somehow wrong or counter-intuitive. I'm pretty confident that less than 10% of the population understand shorts.

Pofarmer

Me - i just think of them as another way to make a bet.

I agree, but that really isn't the function of a stock market. Now, shorts in a commodities market I can understand. There you are essentially betting on the value of something down the road. However, a Stock Market ought to be about capitalizing firms, not about betting on their future condition, that can be done well enough through the normal price finding function of buying and selling the stocks.

kim

Heh, Scott, as a junior in high school in a class about economics, we were all given a certain sum of Monopoly Money to invest in the market. My Dad hinted to me that we were in a bear market, so I went short. Four months later, at the end of the semester, I was the only student ahead of the game. I've never forgotten that lesson, though I'd probably be better off had I done so.
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hit and run

FA:
I wish I had shorted NYT when I had the chance

I wish I had had the chance to short my 401K.

kim

Fortunately, CH, fewer than 10% of the population ever try shorting something. And oh, boy, can shortsellers take it in the shorts, and fast.
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mel

Po-

Great question, and we're going to tie in a commodity comparison to boot.

The stock, bond, futures, and options markets are all venues for price discovery. Not CDS's, they are a horse of a different color. "Everybody knows" (I hate that phrase) or understands the "buy side" of the market mechanism. You buy a stock, bond, future, or option and you own it and what ever price and benefits that go with ownership. The other side of price discovery is where participants are willing to sell that stock, bond, future, or option. where the two meet, we know as the "market price". Leaving aside bonds, which you can't sell without owning them in the first place (and what CDS's tried to "solve"), the markets have methods to sell stocks, futures, and options without ever having owned them in the first place. I'll get back to futures, where I think you'll be most comfortable, and we're going to leave the option can-o-worms closed. So, we'll keep it straight up and cover stocks.

Buying stock is pretty straight forward, so I'll leave that as a "given", or "a priori". Selling stock that you own is also straight forward, so we'll leave that aside as well, in the a priori pile. What if you hate a company's management so viscerally and you KNOW, with absolute certainty, that the are driving the company to bankruptcy? What to do, what to do.

This is where the term "short" comes in. If you went to a stockbroker and said I need to sell this company's stock RIGHT NOW because they're idiots, they would ask you for your shares. To which you would respond "i'm a little short, can I get them to you later?" Sure, we'll lend you the shares, and we'll hold the proceeds, plus a little extra you will pony up now, until you can buy them back to cover those we lent you. This, technically, is called "shorting against the box", where you are lent shares that are put in a box where everyone can see them. You pay interest on borrowing them, daily, and have put up the value of those shares , in cash, to cover the purchase of said short back. Here's the evil twist of "naked shorting", and why it p*((%# so many professionals off. On every balance sheet, of every publicly traded company listed in the US, they include shareholder's equity, the number of shares issued. It's a fixed number. That's what is out there to trade, no more no less. Every day, on any given exchange, the shares of a particular stock will trade a percentage of those issued shares, sometimes, as in GE or Citi, more than that, and that's where the sneaky stuff comes up.

What would you call it, if someone sold two or three times the number of shares issued on a particular stock? How, you ask, there's only so many shares issued? Well, if an unscrupulous trader keep hitting the sell key on his terminal, and his clearing firm never questions the trades, he or she can sell those shares til the cows come home, and the price is going to go down, without question. You get enough traders doing the same thing, and ta da! That stock is trading a buck.

Futures, on the other hand, let this happen willy nilly, and is why I was on the floor for so many years. Somebody tries that in the futures market, it's easy to spot the trader trying to push the price. It's like "open wallet surgery". The competition "fixes" the imbalance that's trying to be imposed.

I hope this helps.

Dinner time.

Captain Hate

Well yeah, the downward ride can be bruuuutal.

kim

Sell high, buy low, didn't yo Mama teach you that?
==============================================

Rick Ballard

Jane,

I'd like to hear what others think but I'd use the source linked by Extraneous and do a weekly update on the increase in debt incurred by a family of four. It comes to $300 per week and will add up nicely - by week 27 in June it will exceed $8K.

DebinNC

Interesting article, Sue. The WH internal polling must be brutal.

Scott

Po

Sorry i used the vernacular. Capitalizing is done by initial (and some times subsequent) offerings. After that the market is all about selling and buying or in other words what you think the future of that company is. Pre-Bailout world capitalizing the wrong company used too cost you money. Hence the term bet make money if right, lose money if wrong. While i know a lot of people like to compare the market to a casino, i don't. Casino's wins are based on luck Market wins(when there are any) can be luck but can also come from knowledge and analysis.

pagar

Ann, Great Link, thanks. For those who haven't read it here is just one sentence.

A leader who pulled off all that might be able to finish off the country.

Meanwhile, the battle to do away with Secret Ballots begins tomorrow, which should do everything necessary to finish off a once great nation.

Card check battle starts tomorrow

If one thinks an army of ACORN thugs is bad, just wait until the Democrats can put an army consisting of every working American on the street as union members. Just imagine every working American forced to contribute to Democrat election campaign funds.

Scott

Mel is right about naked shorts- should have mentioned them.

Fresh Air

Scott has it right. You only capitalize a firm when you buy the stock from the issuer (through its agents, the underwriters). After that, the market is simply a valuation machine with thousands of participants, each with their own belief about what fair value is. A short postion has only an indirect impact on a company in that it might, if large enough, depress the value of the stock and thereby make future offerings impractical or uneconomical. It's part of the deal when you go public--and one reason why so many companies don't.

Boatbuilder

Steve Forbes had a piece in the WSJ last week arguing for suspension of "mark-to-market" and reinstatement of the uptick rule. He said that Obama's hero FDR suspended MTM in 1938, and that the current crisis is similar in the way it is killing banks and contracting credit. Gingrich made a similar argument about MTM a couple of months ago.
I am not financially savvy enough to understand most of this, but I was able to follow the logic of why MTM is killing even reasonably well-managed banks, or at least making it impossible to lend because of capitalization requirements.
Given the extent of the crisis why wouldn't Obama suspend MTM (it's not like he's bound by any particular fealty to accounting principles!) unless he wants to keep it going?
And why didn't Bush and Cox (or for that matter, Congress) suspend MTM and reinstate the uptick rule? I understand that the potential for mischief in valuing assets is possible without MTM, but aren't we way past that point? If the danger is so great that we need to appropriate trillions, nationalize the banks, and restructure the economy, would it really be so bad to suspend MTM for a while? And the uptick rule seems to make a lot of sense, especially in a crisis. What gives?

Jane

Thanks Extraneus and Rick, I'll check it out.

Matt

nothing against shorts, but I think we're seeing a concerted effort to loot Wall Street. First it was the go go '00's in real estate. Then it was the confusion; now it's the shorts. There are a lot of people gaming the system out there, and I wouldn't be surprised if they're trading inside information like they usually have in the past.

Jane

BTW tomorrow I'm going to start hyping a revolution starting on April 15th.

I was at a meeting tonite and I can't tell you how much the mood has changed in the last 2 weeks. The natives are getting restless.

Fresh Air

Suspending MTM would certainly make some of the mortgage-backed securities that are performing more valuable. But it won't do much for credit default swaps, other insurance products and derivatives that are out there for which a market is thin or collapsed. If the $100 bond is performing, but the last trade was back in November at $25, what is it worth? Suspending MTM will just allow you to estimate its value at something between $25 and $100; it won't quadruple your capital position. In short, not a panacea, though I do think firms (and their auditors) are scared to write up anything right now, regardless of whether they have the flexibility to do so.

pagar

Question for those who understand the market.

Can someone explain the difference between shorting stocks vs buying puts. as far as the effect on the market?

clarice

Jane, if you can I'd throw in Yucca Mt..we spent over $10 billion dollars to come up with this solution for storage..the last objection to use of this clean energy source.To appease Reid, Obama's dumping it. And utility companies will sue successfully for billions of dollars because reneging on the deal will cause them to incur these additional storage expenses.
Not to say that storing the waste at plants all over the country is infinitely more dangerous in terms of national security.

Boatbuilder

Thanks, FA. What I don't understand (well, one of many things I don't understand) is why not suspend MTM?--where is the great danger?

Jane

Got it Clarice - and I hyped your unemployment benefit story last week in case you didn't know. So thank you again.

clarice

You're entirely welcome, Jane.

Extraneus

Hey, Jane. From that site -- assuming I understand the table correctly and don't add or drop any zeros -- projected 2010 Federal spending is $3.552T, with $1.171T or about 33% of that being deficit. Divided by 300M people, every person will spend almost $12,000 and borrow $3900 in 2010. According to that, in every week in 2010 the government will spend $68B of which $22.5B is borrowed. Every person will spend $228 and borrow $75 for the Federal government weekly.

You can multiply for a family of four if that might be more understandable to the audience. Hell, I'll do it. :-)

Every family of four will spend $48000 and borrow $15600 in 2010 for the Federal government. Every week in 2010, they'll spend $923 and borrow $300 for the Federal government.

If I got this wrong and anyone has corrections, please post.

bgates

that really isn't the function of a stock market

That's a dangerous way to think. Deciding shorting isn't part of the legitimate function of the stock market and should therefore be banned seems like a close cousin of deciding the legitimate function of automobiles is commuting and forbidding other uses.

Jane

Wow Extraneus, thank you.

mel

Jane-

I watch these numbers every week, they are issued (are you sitting down, 'cause this is irony in a nutshell) every Tuesday morning, except holidays. ICSC sales and Redbook, yes, you know them as publishers, but this is where they get paid to publish, and how the magazine has flourished.

Barrons schedule is at the LUN. Two notes on the data, ICSC is a "raw" data point and moves every week as reported by it's contributors, on the other hand, Redbook averages its data over the course of a month. As an example, the first data point for the month will reflect the jump or drop from the average of the month before, the next week's number adds both weeks together, then measures the change, and so on, and so on, for the balance of the month. Kinda tricky, but when you see the number stabilizing to an minimally changing number towards the end of every month, you start to get the method of their madness.

I've been watching them for years, and are a fair to middling reflection of elusive data. There are also monthly figures by various agencies, and, actually, by the retailers themselves.

If you have any questions beyond this, I'm happy to help.

jean

I was at my Bank today.It is just a small branch office.There was a sign by the safety deposit boxes."The contents of safety deposit boxes are not FDIC insured"It was a brand new sign.I guess they must be seeing a lot of cash going in those boxes

Fresh Air

Options trade in a parallel market, and are securities in their own right (i.e. rights to buy or sell at a given price in the future). Shorts don't trade at all; you simply have a sold position in your brokerage account. The counterparty to the trade "buys" the stock at the price at which you sold it. This has to be reversed eventually, at which time your profit or loss is recorded. Recordkeeping-wise, the stock is borrowed from another's account and has to be returned. My understanding of the back-office practice is that most firms try to borrow from within their own street name accounts for a host of reasons.

Arbitrageurs in the old days would find tiny differences between the primary (exchange) and secondary (options) markets and make money off of them. Computers have mostly ended this practice. Options generally only exist for widely held stocks, indexes, etc. You can short anything that's "short approved," i.e. borrowable. Some stocks are too illiquid to short.

bgates

every person will spend almost $12,000 and borrow $3900 in 2010

If government revenue were collected equally from everyone, yes; but if they did it that way, they could never get away with such numbers.

I worry that framing the argument as "the government is spending $12,000 of your money" leaves us open to the response, "no, we're spending $120,000 of a different and much richer person's money".

Charlie (Colorado)

I agree, but that really isn't the function of a stock market.

Sez who?

Every investment, long or short, is a way of making a bet.

Scott

Pagar

Wow tough question to simplfy. Lets think of this as two ways of saying you want to sell the stock. One you go ahead and sell(short) two you buy a contract to sell it if it goes down but if stock gains you don't have to sell(put). Buying the contract puts a lot less capital at risk per share involved so is a less strong position than a short, so would have less effect on the market. As to the effect of shorts there can always be shorts on actively traded stocks. Shorts can be used for a short or long time frame So without doing too much short short -long short realize they can be used for different things. I know lots of people who track short interest in a stock to help make decisions. If a stock is going up with lots of short interest you can get what is called a short squeeze where those who are short cover by buying the stock causing even more rise. If stock is going down you may get more short selling driving the price down faster.

Hope that helps

pagar

Shorts don't trade at all; you simply have a sold position in your brokerage account. .

My only interest in the market is trying to make a little bit of money. Until a few months ago, I had never done anything but buy/sell stocks and some covered calls.
With the sharp decrease in stock prices, I have gone to buying puts and it seems to be helping (when I buy the right ones). I only trade in IRA accounts so my options are more limited, it seems.

mel

FA-

I was hoping to avoid this tonight, but here goes. First, let's define terms. Options markets are markets that trade either calls, or puts, on specific securities, be they stocks, bonds, or futures. A call is defined as the tradable right to purchase the underlying security at a specific (strike) price within a specific time period (expiration). The seller of a call is obligated to buy that security at that price, within that time frame.

A put is defined as the right to sell the underlying security, at a specific price, within that time frame. The seller of a put is obligated to purchase the same security at the strike price, within that, ordinarily standardized, time frame.

As you might see, from those definitions, buying a put achieves the same thing as selling short. The only difference is that options usually (for the professional) involve much less cash than selling the stock outright, which involves putting up not only the proceeds, but another 50% of the value sold in cash. In other words, if you are shorting the stock (not naked, mind you) you have to put up half the proceeds again, at the brokerage firm. Not cheap. Options, on the other hand, it's just the stock value, and the option price that's involved. Less cash involved.

I know this is not intuitive as to how most people think about buying and selling securities, but this is how it works, on a simple scale. I know people who have been making markets (quoting a bid and an offer, and more than willing to put their money where their mouth is) since they were first allowed. It's not automated by any imagination, yet. They're called locals, and I've worked with the best and worst of them.

I'm happy to go through any mechanics, or questions, on options that anyone has a mind to bring up. If you don't get it, ask again, obviously I'm not explaining myself very well. Again.


Jane

Mel,

You are so over my head. If you can break it down to a weekly number that would be great.

mel

pagar-

You are definitely limited in an IRA, so mind the rules. It's important. Your broker, or clearing firm, should be making sure you are trading against an existing stock position. And checking at every trade, whether it is appropriate for you.

Very important.

pagar

Thanks Scott, FA and Mel,

One more question then its bed time for me.

One buys puts on a stock, the stock company declares bankruptcy, what happens to the put?

Part II, what happens to the covered call?

 Ann

Received THE LIMBAUGH LETTER TODAY...fascinating interview with Bernard Goldberg. Here is one of his answers to RUSH questioning the fact that the media has chosen sides:

Goldberg: I call it the "so-called stimulus package." Liberal newspapers have no problem calling it "the so-called War on Terror." There are people who are trying to kill us, but they put the words in quotation marks. So I'm calling it the so-called stimulus package, because this is only going to stimulate Nancy Pelosi's liberal buddies, who turned this thing into a Democrat liberal goodie-bag.

As far as the bigger picture is concerned, yes, they've crossed the line. They've crossed a very bright line. This isn't about media bias anymore, Rush. This is now about media activism. Just as there's judicial activism, where judges know what's best for all of us....reporters now outwardly , without any hint of embarrassment, without even trying to hide it, have moved from media bias to media activism, because they know...or more precisely, they think they know..what's best for all of us.

Usually they simply put a thumb on the scale for the Democrat.------This time, they were on a holy crusade.
--------------------------------------------
(Subscribe to The Limbaugh Letter and buy Goldberg's book "A Slobbering Love Affair Starring Barack Obama)

Scott

Bankruptcy
Buy Put-Big payday
Sell Put -ouch
Covered Call- expires stock is worthless anyway

plutosdad

Removing politics from science is great! I can't wait till Obama reverse's Gore's directives since '92 that no more federal funding go to universities or experiments that don't proclaim global warming is caused by humans. That will be a great day when scientists are allowed to explore their scientific curiosity. Plus if money corrupts private labs funded by corporations, certainly money corrupts univerities too right? I mean, that is the first thing I thought of. I can't wait I think I'll hold my breath till Obama reverses that.

Funny enough people think when Eisenhower warned of the "military industrial complex" they just think of Halliburton, when in reality Eisenhower was speaking more generally about politicial influence in money donated to research, since all money has strings attached, and therefore corrupts the results. This is the world we live in now.

 Ann

Didn't mean to interrupt your conversation, I will continue on the "Consider the Source" thread. Sorry! :)

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Wilson/Plame