%HTMLlat1; %HTMLsymbol; %HTMLspecial; ]> Naked short selling
Roland van Ipen­burg
To be stolen or blogged

Naked short sell­ing

Satur­day 29 May 2010 17:57

The blog frei­heit­denken.org usu­al­ly has good stuff, but I'm not buy­ing Robert P. Mur­phy's crap.

The eco­nom­ic the­o­ry is all OK, I'm not ar­gu­ing with that. But what we're deal­ing with here is the re­al­i­ty of a fi­nan­cial in­dus­try that some­how trans­lates that the­o­ry to the right to make a liv­ing out of how the econ­o­my or­ga­nizes it­self. Traders aren't peo­ple who are will­ing to get an­oth­er job when there isn't enough trad­ing to do to make a liv­ing, they will just keep on trad­ing to make more mon­ey even if the econ­o­my doesn't even need that trad­ing to func­tion prop­er­ly. In the­o­ry the econ­o­my needs traders to de­ter­mine the price of stuff, but do we re­al­ly need to sup­port a whole in­dus­try of traders to de­ter­mine the price of stuff hun­dreds of times per sec­ond with the ac­cu­ra­cy of frac­tions of a cent? No, only oth­er traders need that so they can make more mon­ey us­ing that data. The trans­paren­cy of the sys­tem has got­ten to the point where de­pend­ing on the scale you're op­er­at­ing at you're look­ing at a brick wall or through in­ter­mol­e­c­u­lar space. For those who can af­ford to mon­i­tor the mar­kets on the lev­el of in­ter­mol­e­c­u­lar space it's all trans­par­ent, while for the rest of the world it's about as trans­par­ent as a brick wall. It's hard to jus­ti­fy what's hap­pen­ing when only a cou­ple of or­ga­ni­za­tions can see through the brick wall, and call that trans­paren­cy.

"Bill Gates could spread ru­mors about Mi­crosoft and be­gin un­load­ing his huge po­si­tion." I hate Bill Gates as much as the next man, but com­pared to price ma­nip­u­lat­ing traders he's a de­cent guy. And what strikes me is that this ex­am­ple shows Robert P. Mur­phy's to­tal lack of ethics in this. Can't we as­sume Bill Gates val­ues the lit­tle trust peo­ple have in him more than a cou­ple of hun­dred mil­lion dol­lars? Are traders re­al­ly so­ciopaths that lie and cheat when­ev­er they think they can get away with it and make a quick buck? Just be­cause de­cent peo­ple don't do bad things doesn't mean the gov­ern­ment shouldn't be in­volved in reg­u­lat­ing those bad things and let a cou­ple of so­ciopaths ruin so­ci­ety.

"Go­ing the oth­er way, why don’t ma­nip­u­la­tive spec­u­la­tors spread pos­i­tive ru­mors about com­pa­nies?" Well, be­cause it's for ex­am­ple a bit eas­i­er to spread the ru­mor Steve Jobs has died than to spread the ru­mor he is alive again - even when it's Steve Jobs. And there is of course the psy­cho­log­i­cal ef­fect that fear caused by a neg­a­tive ru­mor re­sults in a much more emo­tion­al re­sponse than a pos­i­tive ru­mor pro­vokes. Robert P. Mur­phy's point just makes no sense, it only em­pha­sizes he's just spread­ing cap­i­tal­ist pro­pa­gan­da the sheeple that buy his books like to hear. They prob­a­bly also like to hear they are not stu­pid. But if they are all not stu­pid, who are they trad­ing with? Either you're smarter than the trad­er you buy from, or you're more stu­pid than the sell­er. You can't be both not stu­pid and do the right thing.

"Short-sell­ing vast­ly broad­ens the num­ber of peo­ple, and thus the per­spec­tives and in­for­ma­tion, in­volved in the pric­ing process." And all those peo­ple ex­pect to make a prof­it to make a liv­ing from be­ing in­volved in the pric­ing process? If I as an in­di­vid­ual won't ever need mas­sive amounts of for ex­am­ple rub­ber, how do I con­tribute to so­ci­ety by spend­ing my life gath­er­ing huge amounts of in­for­ma­tion and have a per­spec­tive about the rub­ber mar­ket when my only goal is to trade in it to make a prof­it so I don't have to get a prop­er job? At some point it just gets cheap­er to em­ploy all those "not stu­pid" peo­ple in a cen­tral plan­ning bu­reau and go for com­mu­nism as the pric­ing process. War­ren Mey­er doesn't like to see any­one who has a ca­reer as a trad­er has a per­son­al in­cen­tive to keep that ca­reer go­ing, whether the world needs it or not, try­ing to make mon­ey for no good rea­son in the big pic­ture.

Ban­ning naked short sell­ing isn't the right so­lu­tion, but if the fi­nan­cial in­dus­try doesn't see how it's in­volved in an arms race that is go­ing to cost more than the plan­et is worth they shouldn't be sur­prised some­one starts to get in their way in a man­ner they don't like or un­der­stand. And then hav­ing naked short sell­ing banned is prob­a­bly a bet­ter op­tion than be­ing burned alive in your of­fice by some rev­o­lu­tion­ary forces.

Soul­less bor­ing dorks…


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