Our free(ish) market becomes less free with the ban of short selling

A couple of weeks ago, the SEC illegalized a type of investing that makes a market what it is – short selling. Simply put, a person can bet on the market going up by “going long” and buying securities in hopes of selling them for a higher price at a later date. Long positions can be leveraged by margin. A person can bet on certain stocks going down by selling them if he already owns them. The leveraged way to bet on the market going down is to “sell short” which is simply selling stock on margin.

Going long makes prices go up. Selling short makes prices go down. This is part of “price discovery”. Most people don’t even know about short selling or they’ve been convinced to not do it. Securities brokers don’t want people to know about investment strategies that will make market valuations go down because their commissions are tied to market valuations. Their entire system is a mechanism of inflating values to further inflate values.

SEC temporarily bans short selling of companies whose price will go down

Read the official SEC action here. They are, by force of law, inflating the value of the stock market. They are also prohibiting every day average Joes from profiting from market movement. Fincancial service companies are in bad shape because they sold and promoted crap. One by one, they are collapsing and going bankrupt. Ordinarily, average people could make loads of money in short periods of time by short selling these financial service companies. This year, I’ve been one of those people until the ban.

The effect of this ban is that we all must lose money in our securities holdings, but we are disallowed from recovering it by adjusting into short positions. Meanwhile, these failing companies are being injected with billions of dollars (that we will have to pay for ultimately) and many of the people involved at the top are being handsomely rewarded. The CEO of WAMU stepped down as it collapsed, and the new CEO was given a $7.5 million sign-on bonus followed by an $11 million severance package 17 days later when his job was over after WAMU declared bankruptcy.

The people “in the club” are making money when the market builds up, and they are making money when it collapses. It is now illegal for people not “in the club” to make money when the market is collapsing. If you’re reading this, you probably aren’t in the club.

If you want to do something about it, pull your money out of all American banks and brokerages and put it into a foreign bank. This entire corrupt system is dependent on our money being in the hands of these financial institutions. Only then will we be able to restore an asset-based, honest financial system that rewards sound decisions.

Reader Interactions

Comments

  1. This week received a notice from Entrust that the CFTC
    has “taken the position” that such custodians will have to register as a “futures commission merchant or introducing broker” if they wish to place customers funds with futures or forex brokers. Entrust is not hororing such placements until further notice.

    This would mean they would then fall under NFA/ Dodd/Franks restrictions on leverage etc. and eliminates the posibilty of investing at the world competitive leveraging levels with foreign brokers.

    I was in the process of moving all our IRA funds out of the country. Got my funds as far as transferred to Entrust but not on to the brokers and got half of my wife’s funds moved out.

    Looks like I must go the IRA LLC route to complete this strategy.

    Any comments on this development or on the Dodd/Franks bill in general.
    A free America?? Where?

  2. Charles,

    Looks like reason # 985,843 to take control of your funds yourself.

    You don’t need a custodian with a Solo 401k. Call my office 877-903-2220.

    Jeff

Leave a Reply

Your email address will not be published. Required fields are marked *

 

© Copyright 2003 - JeffNabers.com | Terms & Conditions | Privacy Policy | Contact

 

* DISCLAIMER

The information contained throughout this web site is not a substitute for professional advice you would receive from an accountant, attorney, investment adviser, or qualified tax preparer. The information provided does not constitute professional advice nor is it conveyed or intended to be conveyed in the course of any adviser-client discourse, but is provided for informational purposes only. If you enter your email address on our web site, you are also requesting and agreeing to subscribe to our free email newsletter, and you can unsubscribe anytime if you don't enjoy it. References to investment performance of any kind is for illustration purposes only.