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"Wall Street has turned the economy into a giant asset-stripping scheme, one whose purpose is to suck the last bits of meat from the carcass of the middle class

"Wall Street has turned the economy into a giant asset-stripping scheme, one whose purpose is to suck the last bits of meat from the carcass of the middle class . . . an economic drought temporarily left the hyenas . . ." I can't take this sort of writing seriously in an article like this. It's fine for an internet rant that is supposed to make me laugh. In an article that is pretending to be an economic analysis, well, I quit reading. I did see something about naked short selling. Naked short selling sounds fraudulent to me, but I'd like to read a intelligent defense of it from supporters of the practice. Anyone know of one?

michaelbuckbee 17y ago
Within the framework of current regulations, I'd consider naked short selling as a close cousin to something like insider trading. It's not so much fraudulent as it is both an indicator and piece of knowledge that the rest of the market doesn't have. In general it's disallowed because people just betting on the price of stocks instead of owning them (at least in some derivative way) is considered a bad idea.
- yangyang 17y ago
  It's disallowed because it can cause failures to deliver if a borrow can't be located. Lots of fails can lead to systemic problems.
- anamax 17y ago
  Insider trading is actually a form of fraud against the entity that owns the information. For example, Google is allowed to trade on the fact that it's doing biz with Intel. Google's employees are not.
  - joezydeco 17y ago
    But let's say Google enters a deal with Intel that is going badly. Let's say it's 100% Intel's fault. Google shorts Intel stock just before announcing to the public that the deal is off and it's Intel's fault? I don't think that's exactly allowed.
Dilpil 17y ago
Not too many people will defend naked short selling, it is an illegal scam.
- deleted 17y ago
  [deleted]
- j2d2 17y ago
  It's perfectly legal. http://www.businessinsider.com/john-carney-why-matt-taibbi-is-dead-wrong-on-naked-short-selling-2009-9 http://www.businessinsider.com/john-carney-why-matt-taibbi-i...
  - hristov 17y ago
    Your link said absolutely nothing about the legality of naked shorting. It instead just made a half assed and rather incorrect argument how naked shorting is beneficial or how it is not that different from ordinary shorting.
    - j2d2 17y ago
      It's perfectly legal and the link was for information about how naked shorting works. What was incorrect?
- anamax 17y ago
  Does this judgement apply to all forms of getting paid in advance? If not, what makes stocks different?
  - borism 17y ago
    No. Other party still has to deliver your order and you enforce the delivery vigorously. The speed and extent of stock price changes is what makes them different.
    - anamax 17y ago
      > No. Other party still has to deliver your order and you enforce the delivery vigorously. One expects "no" will be followed by supporting argument. Instead, we see more argument for same. After all, the "other party ... vigorously" is just as true of stocks as everything else. Note that the argument against short selling is actually driven by folks who argue against it because they think that it "unfairly" drives prices down and lets people profit from that. They bring up non-delivery because that's an appealing argument, but it's not a huge problem and it's not what they're trying to stop. Yes, I know about the VW short-squeeze a year or so ago. What of it? (Before you get too excited about the fact that some folks lost a lot of money, make sure that you understand WHO lost a lot of money.)
davidw 17y ago
> I can't take this sort of writing seriously in an article like this. I flagged it - it doesn't seem very germane to hacker news, and comments like the one you cite seem to set people off in directions that meander ever further away from the topic. And that includes 'intellectual curiosity' as part of the topic; mine certainly isn't satisfied by politicized ranting.
- Xichekolas 17y ago
  I'd agree that it starts out as rather polemic, but if you start reading from "The roots of short-selling date back to 1973...", it's quite an informative article. It's also amazing that we have to turn to Rolling Stone for this kind of investigative reporting. Where is the rest of the Fourth Estate?
  - e40 17y ago
    Being told on what they can report, and it doesn't include this or anything else that they masters don't want the light of day on.
  - Harkins 17y ago
    Most of the rest of the Fourth Estate is large, publicly traded companies who are already taking a beating in the stock market.
- tibbon 17y ago
  I think it shows a rather interesting way of 'hacking the system' actually for a worldwide system- and getting away with it.
bayes 17y ago
Perhaps I'm stupid - certainly I'm no economist - but I don't see what's wrong with naked short selling. For a market to work well you want liquidity, in order for the traded prices to reflect all the information known to market participants. One of the problems in the UK electricity market (which happens to be my day job) is that relatively few companies trade other than those who physically produce or use electricity, which hampers the effectiveness of the markets and (probably) increases the prices customers end up paying for their electricity. So why are shares so different to any other market? Why should only people who physically own them be able to trade them? Presumably the attraction of such a policy is that it allows share prices to remain artificially high. Even if many market participants believe that a price is too high, they won't necessarily be able to act on that belief, and the bubble will remain inflated. But is that such a good thing in the long run?
borism 17y ago
The article is not pretending to be economic analysis! It is author's investigative piece on collapses of two huge firms and practices that contributed to them. Economy related, sure, but not an "analysis"! Naked short selling sounds fraudulent to me, but I'd like to read a intelligent defense of it from supporters of the practice. So you think it is illegal, but would like to know how would practitioners justify it? Kinda perverse, like asking rapist how would (s)he defend rape. Here's standard Naked Shorts' defense: it provides liquidity and makes markets more efficient.

michaelbuckbee 17y ago

Within the framework of current regulations, I'd consider naked short selling as a close cousin to something like insider trading. It's not so much fraudulent as it is both an indicator and piece of knowledge that the rest of the market doesn't have. In general it's disallowed because people just betting on the price of stocks instead of owning them (at least in some derivative way) is considered a bad idea.

yangyang 17y ago
It's disallowed because it can cause failures to deliver if a borrow can't be located. Lots of fails can lead to systemic problems.
anamax 17y ago
Insider trading is actually a form of fraud against the entity that owns the information. For example, Google is allowed to trade on the fact that it's doing biz with Intel. Google's employees are not.
- joezydeco 17y ago
  But let's say Google enters a deal with Intel that is going badly. Let's say it's 100% Intel's fault. Google shorts Intel stock just before announcing to the public that the deal is off and it's Intel's fault? I don't think that's exactly allowed.

Dilpil 17y ago

Not too many people will defend naked short selling, it is an illegal scam.

deleted 17y ago
[deleted]
j2d2 17y ago
It's perfectly legal. http://www.businessinsider.com/john-carney-why-matt-taibbi-is-dead-wrong-on-naked-short-selling-2009-9 http://www.businessinsider.com/john-carney-why-matt-taibbi-i...
- hristov 17y ago
  Your link said absolutely nothing about the legality of naked shorting. It instead just made a half assed and rather incorrect argument how naked shorting is beneficial or how it is not that different from ordinary shorting.
  - j2d2 17y ago
    It's perfectly legal and the link was for information about how naked shorting works. What was incorrect?
anamax 17y ago
Does this judgement apply to all forms of getting paid in advance? If not, what makes stocks different?
- borism 17y ago
  No. Other party still has to deliver your order and you enforce the delivery vigorously. The speed and extent of stock price changes is what makes them different.
  - anamax 17y ago
    > No. Other party still has to deliver your order and you enforce the delivery vigorously. One expects "no" will be followed by supporting argument. Instead, we see more argument for same. After all, the "other party ... vigorously" is just as true of stocks as everything else. Note that the argument against short selling is actually driven by folks who argue against it because they think that it "unfairly" drives prices down and lets people profit from that. They bring up non-delivery because that's an appealing argument, but it's not a huge problem and it's not what they're trying to stop. Yes, I know about the VW short-squeeze a year or so ago. What of it? (Before you get too excited about the fact that some folks lost a lot of money, make sure that you understand WHO lost a lot of money.)

davidw 17y ago

> I can't take this sort of writing seriously in an article like this. I flagged it - it doesn't seem very germane to hacker news, and comments like the one you cite seem to set people off in directions that meander ever further away from the topic. And that includes 'intellectual curiosity' as part of the topic; mine certainly isn't satisfied by politicized ranting.

Xichekolas 17y ago
I'd agree that it starts out as rather polemic, but if you start reading from "The roots of short-selling date back to 1973...", it's quite an informative article. It's also amazing that we have to turn to Rolling Stone for this kind of investigative reporting. Where is the rest of the Fourth Estate?
- e40 17y ago
  Being told on what they can report, and it doesn't include this or anything else that they masters don't want the light of day on.
- Harkins 17y ago
  Most of the rest of the Fourth Estate is large, publicly traded companies who are already taking a beating in the stock market.
tibbon 17y ago
I think it shows a rather interesting way of 'hacking the system' actually for a worldwide system- and getting away with it.

bayes 17y ago

Perhaps I'm stupid - certainly I'm no economist - but I don't see what's wrong with naked short selling. For a market to work well you want liquidity, in order for the traded prices to reflect all the information known to market participants. One of the problems in the UK electricity market (which happens to be my day job) is that relatively few companies trade other than those who physically produce or use electricity, which hampers the effectiveness of the markets and (probably) increases the prices customers end up paying for their electricity. So why are shares so different to any other market? Why should only people who physically own them be able to trade them? Presumably the attraction of such a policy is that it allows share prices to remain artificially high. Even if many market participants believe that a price is too high, they won't necessarily be able to act on that belief, and the bubble will remain inflated. But is that such a good thing in the long run?

borism 17y ago

The article is not pretending to be economic analysis! It is author's investigative piece on collapses of two huge firms and practices that contributed to them. Economy related, sure, but not an "analysis"! Naked short selling sounds fraudulent to me, but I'd like to read a intelligent defense of it from supporters of the practice. So you think it is illegal, but would like to know how would practitioners justify it? Kinda perverse, like asking rapist how would (s)he defend rape. Here's standard Naked Shorts' defense: it provides liquidity and makes markets more efficient.