Grab a seat cause the music is about to stop...

[Highflyinpilot]

I think it has a lot to do with fear and what the media reports.

In any case, I hope for all you career pilots that the industry doesnt tank, I wouldnt want to see that happen to anyone.

Ill be honest though, Im glad i pulled out of the aviation industry a while back, Thats for sure.

[2R]

I am still laughing at the term: JOBLESS RECOVERY

What spin doctor thought that gem up.He should be first on the guilotine

Riots all over the world ,in just about every city where the police do not use machine guns and these clowns are talking like the only people suffering are the yuppies who will not be buying a new porsche this year.
The price of food is about to double in some parts of the world and these guys are only worried about how many weeks they will miss at the cottage this year.
Food riots are a part of human history and history will be repeating itself again soon.

[Mig29]

I am still laughing at the term: JOBLESS RECOVERY

What spin doctor thought that gem up.He should be first on the guilotine

Riots all over the world ,in just about every city where the police do not use machine guns and these clowns are talking like the only people suffering are the yuppies who will not be buying a new porsche this year.
The price of food is about to double in some parts of the world and these guys are only worried about how many weeks they will miss at the cottage this year.
Food riots are a part of human history and history will be repeating itself again soon.

That's my fear too....this s**t just doesn't sit right with me. People are literally fighting for survival all around us, starving to death, barely making ends meet, while we are (actively supporting and participating in) bombing the crap out of countries so distant from us and yet we pretend that everything is O.K. We are all disillusion and live in some 4th dimension, because we haven't felt what pain really is. I mean Vancouver riot short while ago is a joke to what is going on in London, we never had the killings here at home like Norway just had....all we worry about is the price of gas and if we can afford an even bigger mortgage for a house that's way beyond our financial and personal needs.....Is everyone here on tranquilizers but me? ?

[AEROBAT]

That's my fear too....this s**t just doesn't sit right with me. People are literally fighting for survival all around us, starving to death, barely making ends meet, while we are (actively supporting and participating in) bombing the crap out of countries so distant from us and yet we pretend that everything is O.K. We are all disillusion and live in some 4th dimension, because we haven't felt what pain really is. I mean Vancouver riot short while ago is a joke to what is going on in London, we never had the killings here at home like Norway just had....all we worry about is the price of gas and if we can afford an even bigger mortgage for a house that's way beyond our financial and personal needs.....Is everyone here on tranquilizers but me? ?

I know what you are saying, it seems as though people want to disconect with reality especialy if the reality is something they don't understand. I heard on the news they estimate 20,000 kids will starve to death in Somnalia but the headlines are about a bunch of degenerates rioting in England.

One economist figures the Dow will have to drop to 5000 before things actually stabilize again. The Federal Reserve board is hellbent on keeping the toxic assets from coming to market so this is only prolonging the agony.

[Tubthumper]

[2R]

At the present rate of decline the DOW should be at 5000 by the end of the month
Although i would make an uneducated wild ass guess that if it goes to 5000 it will bounce back up to its real value of about 8000 points by Christmas.
And who knows it could hit 8000 if they have four more days like today before i sell out.
Buy high sell low ,only works if you are selling short on the decline on the second tuesday of a 31 day month

[Beefitarian]

I wonder if it would be bonus to be in debt if the economy collapses? I think the banks will just shift you debt to what ever currency they switch to so no. But it would be cool if a guy could buy a bunch of things on credit and then be able to pay for it with a couple of Swiss francs because the Canadian dollar went Zimbabwe.

[DanWEC]

I'm simply incredulous at the singlemindedness of everyone on this board! You talk about the suffering in the world, and the people living in happy oblivion.
You are completely ignoring the most important survivalist aspect here....

The Zombiepocalypse! It will happen.


Braiiiiinnns........

[modi13]

I'm simply incredulous at the singlemindedness of everyone on this board! You talk about the suffering in the world, and the people living in happy oblivion.
You are completely ignoring the most important survivalist aspect here....

The Zombiepocalypse! It will happen.


Braiiiiinnns........

There is no greater threat to mankind than the zombie apocalypse. The only question is whether we have months, or only days...
Get your zombie plans in order. I for one am going to get into a safehouse with lots of other people, and when they think they're safe I'm going to infect myself so I can eat their brains. It's way more fun being a zombie than one of a handful of desperate survivors.

[Beefitarian]

They won't actually be zombies. It will just be the people that are hungry and confused that the ATM and grocery store shelves are empty.

[KAG]

Gold, guns, and god!!!
I'm kidding of course but as some on here have mentioned maybe lowering our expectations a bit is in order. We in the west enjoy a lifestyle most can only wish for, and yet we expect more.

[2R]

I'm simply incredulous at the singlemindedness of everyone on this board! You talk about the suffering in the world, and the people living in happy oblivion.
You are completely ignoring the most important survivalist aspect here....

The Zombiepocalypse! It will happen.


Braiiiiinnns........

HEADSHOTS go for the high score

[co-joe]

I was reading about this short selling bs the really rich do. In the paper there was a small article about Italy outlawing it for 2 years. Is this the kind of thing we should be doing to help stabilise things or is Warren Buffet's portfolio that important?

[North Shore]

^There's lots of bright ideas like that floating around out there. Trouble is, while 'we' might think that it is a bright idea, our politicians, listening to lobbyists who are louder than their constituents, tend to disagree, and so services get cut, and single welfare moms and healthcare get nickel-and-dimed, while bankers run off with bonuses and subsidies...

[North Shore]

^There's lots of bright ideas like that floating around out there. Trouble is, while 'we' might think that it is a bright idea, our politicians, listening to lobbyists who are louder than their constituents, tend to disagree, and so services get cut, and single welfare moms and healthcare get nickel-and-dimed, while bankers run off with bonuses and subsidies...

[trey kule]

there is some posters here that seem pretty emotional in their comments with regard to short selling.

what exactly is wrong with it....You can buy low and sell high, or sell high and buy low...two sides of the same coin.
In fact, short selling carries more inherent risk because your downside is theoretically unlimited while your upside is limited.
the exact opposite of buying with the intent to sell higher.

the problem is so many people simply cannot get their head around the concept that hey believe there is something evil in the strategy.

Market manipulation by big hedge funds....well they can just as easily pump a stock up so it is a bit skewed to only bleieve you can manipulate a market down, and historically, that is done much much less often than the other way

They would do well, I think , instead of criticising to learn how to invest in the market propelry.

[KAG]

Hasn't Korea and The UK banned short selling as well? While I understand the principle I still don't see how you can make money from a stock decline, make money from nothing. I just don't see how it adds to a stable market. If anything it helps to destabilize it.

[trey kule]

Well, to answer your question.

Lets look first at why stocks go up in price.. It is based less on the inherent value of the company in most cases and instead on things like demand, the investors needs, and emotions. When the P/E provides a net return of less than one can get with a savings bond for example, you are in fact, making money from the belief of others.. Look at exploration companies, where Canada is a real world leader and you will see stock prices rising on nothing more than the belief of future profits...The dot.com implosion was a perfect example of the artificial world.

Now, if you believe a stock is going to drop in price when everyone else believes it will not, you effectively rent or option someone elses stock, and then sell it. If the price, in fact rises, you will have to buy back the stock at a higher price to repay them, plus a premium.
If it goes down, you buy from someone else and replace the stock.

The problem is twofold. with huge investors, who sometimes have more information than the average general private investor, they are better able to predict a decline, and because they are so large, they can actually collapse a stock artificially. the abuses attributed to indsider knowledge are a bit skewed , as there are more abuses recorded and complaint made over insider information with reagrd to people buying a stock that they know will rise in price.

It really is not a technical or legal issue that gets them banned. It is because joe public, who has one vote the same as everyone else, bears the brunt of short trading, because they get emotional and sell at a loss. the big houses simply recognize a dip for what it is and ride it out.
One only has to look at 2008 and more recently to see how panic affects the small investors..it wipes them out of the market. and they vote, and they are vocal. It is very much political , and very much the unsphisticated trying to complete with big companies..Like the saying goes, When elephants fight, it is the mouse that gets sqaushed.
As a result, we get people complaining of the rich and sneaky taking advantage of them. They never condsider it to be the knowledgable and professional simply winning over the ignorant and emotional.

Just my opinion. I hate to see 1/2 of the market banned, as there is as much money to be made short selling as holding long or day trading.

[goldeneagle]

While I understand the principle I still don't see how you can make money from a stock decline, make money from nothing. I just don't see how it adds to a stable market. If anything it helps to destabilize it.

I quite disagree, and the principle is really no different than holding shares long.

A margin account allows you to buy more stock than you have funds to cover. Your equity is used to secure the loan for the difference in funds. So, when you buy stocks on margin, you are using borrowed money, and hoping for a rise, so you can repay the loan (with interest) and end up with a net profit.

For a short sale, principle is exactly the same, except, you dont borrow money, you borrow the stock. After securing a loan of the stock, you sell it. The goal is, buy it back for a lower price in the future, repay the loan (with interest) and end up with a tidy profit.

Both types of transaction are subject to the dreaded 'call' if the account ends up overextended. For the margin call, the account holder typically has 3 days to put up the funds to cover the difference, for a stock call, the short seller has 3 days to produce the shares to cover the short. If you fail to meet the call, then on the 3rd day, the brokerage will liquidate assets 'at market' toward the end of the day, to bring the account back into margin requirements. For the long shares, this typically means a forced sale, for the short shares, a forced buy. The large scale forced buy is referred to as a 'short squeeze', and can easily run a stock up 50% in a very short timeframe.

It's actually very easy to determine if the market is overextended on one side or the other, forced liquidations happen starting at 3pm eastern time. Watch the market direction from 3 till 3:30. If the market suddenly spikes up dramatically, the majority of margin liquidations are short postions in a forced buy situation, and if it spikes down, then the majority of over-extended accounts are in long positions with forced sales. There is a 3 day lag between a down day, and the forced liquidation of long positions, so, the way to tell if the market has started approaching short term equilibrium is to watch the tape from 3pm on, 3 days after a large move. If the tape remains stable, then the majority of over-extended players have been flushed out of the game, and stability will return on a 3 day timeframe.

Tuesday was a day of extreme volatility and movement, far enough to trigger margin calls on both sides of the equation. The last couple hours of trading today (Friday) will tell you the story. If the market spikes up, the squeeze is on the short side, if it spikes down, the squeeze is still on the long side. Volatility will be with us, until all of the weak players are flushed out of this market.

FWIW, the internet bubble was the largest short squeeze in history. Value investors that looked at internet stocks with no assets, no revenue, no profit, and no hope of ever generating any profit, were very appealing short sale targets. The problem was, a huge run of retail gamblers that ran the prices of those stocks up, irrational exhuberance was the term coined. Add into the mix retail shorts that really dont understand market and timeframes, net result a highly volatile market, with the short squeeze running up stocks every day.

Take a look at your portfolio Kag, if it's full of divendend producing stocks, then you are an investor. If it's full of stuff you hope will go up, and none of them produce dividends, then you are not getting a return on your investment, but, are hoping for a capital gain. That's trading, not investing. If you are trading the market, and, ignoring the short side, you are ignoring 50% of the opportunity.

[goldeneagle]

One only has to look at 2008 and more recently to see how panic affects the small investors..it wipes them out of the market
...
As a result, we get people complaining of the rich and sneaky taking advantage of them. They never condsider it to be the knowledgable and professional simply winning over the ignorant and emotional.

The real issue here is, most folks look at nothing more than capital appreciation of the market as an 'investment'. Reality is, true investors are not phased by the up and down swings, the stocks will continue to produce the dividends for which they were purchased, and in a long term, the capital will more or less preserve itself, possibly appreciate some.

But, most retail 'investors' completely confuse the concept of investing, and trading. Trading is all about capital appreciation, with no regard to investment returns. Every stock in the market that doesn't produce a dividend, is nothing more than a vehicle for trading. The situation gets compounded when folks become complacent, and start believing stocks can only go up, so, they lose fear of the market, and start nibbling away into the available margin leverage. It's an enticing thing, because, suddenly the gains get larger and larger, the more leverage, the more gain, in a market that's grinding up. But, one needs only look at the last 15 years of history to see, eventually gravity prevails, and things 'correct'. The leverage of the margin account during a downturn, eats away at capital as fast (or faster) than it accrued during the upswing. That leads to forced sales, and, once the forced liquidations begin, it becomes a downhill feeding frenzy, and continues. This cycle feeds on itself, forced liquidation causes a downswing in pricing, followed by fear of losses, which causes more selling, and the circle continues. Eventually the weak hands and over-leveraged accounts are flushed, which completes the correction cycle, and we head into the 'lather, rinse, repeat' phase.

In a lot of ways, the markets are much like aviation. As long as there is fuel in the tanks, and all systems are functioning, life is easy. But, when something goes wrong, it's not quite so simple. A trading desk is much like the cockpit of a modern jet, lots of electronic displays, providing the trader with a lot of information, all of which needs to be digested, and acted upon. It is one of those things, anybody can do it, on a good clear day, with all systems running. But, on a day when it's 300 obscured, 3/4 mile in fog, blowing from the east at 20 with gusts to 40, an engine out, and you've taken a lightning strike, that's not the time to have joe private pilot at the controls. On this day, you want a trained professional, that understands the systems, the weather, and the entire situation. That professional will probably be able to bring in the large, complex airplane in, and successfully land it. Joe private pilot without an instrument rating, and many many hours of simulator training, will likely make a huge smoking hole in the ground. And there are no shortage of incompetent traders at trading desks, quite capable of doing an imitation of the colgan dash-8 with your investment account, when the markets get bumpy. They work the desk for many mutual funds, an entry level industry position, kinda like the dash-8 seat at many small commuters.

Competent traders understand the market, and the forces that drive the markets, just like cmpetent pilots understand wind and weather. For such a trader, a down day in the market is just another day at the office, like the engine out approach is just another day at the office for the competent pilot. Said trader understands the forces that drive the market, and also understand the vehicles available for managing and mitigating risk.

The real problem with the markets today, there are far to many retail 'investors' that confuse trading and investing. Back in the day, the bonanza got a reputation for being a 'doctor killer', because a lot of doctors died by purchasing an airplane that was to much for the skill set they had. I see the online brokerage today as the modern version of the 'doctor killer', except, just about anybody with a few thousand dollars of spare cash can jump in and start to play. It all goes well when the days are sunny, wind is moderate, and systems function normally. But, just like that doctor in a bonanza on a nasty ifr day, a retail trader at the online brokerage, that doesn't really understand the forces driving the market, is going to end up just like that doctor trying to land the bonanza in 20G40 after popping out of the clouds only moments before. Bewildered, disoriented, and possibly more than a little bit frightened, they will make mistakes, bad mistakes. On the bright side, it's only money, and there are plenty of people with a lot more knowledge of the markets quite prepared to take that money.....