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My uncle is a day trader. Retired from the police force, he spends his mornings in his Florida dream home (something he bought after becoming a successful day trader) and bets on the market. He does very well for himself. Speaking with him several weeks ago, while the debt ceiling "negotiations" were in full tilt, he let me know that it didn't matter if the country defaulted because he was "shorting the whole thing." I'm sure many of you already realized this, but it dawned on me: the stock market HAD TO CRASH even if a debt agreement was reached. There were too many people betting on that to happen.

My uncle is not alone. Even Eric Cantor was accused in the middle of the debt ceiling debacle of shorting the market and profiting from the inevitable crash. You may have heard of the infamous "Black Sox," the Chicago White Sox baseball team of 1919 (http://en.wikipedia.org/...) that threw the world series because they bet against their own team. That is exactly what is going on with the stock market today (or more specifically, yesterday).

It is no coincidence that the nation of Greece decided to put a moratorium on shorting, a process that has devastated that country: http://www.huffingtonpost.com/...

But the "big short" is over. Yesterday was the big day to sell for those who shorted the period leading up to the debt ceiling deal. Those shorting the market can buy again today at discounted prices and make tons of money--my uncle included.

Yup, and it appears that is exactly what is going on: http://www.huffingtonpost.com/...

Now, back to our regularly scheduled program...

Poll

Would it help to regulate the market to prevent shorting?

60%24 votes
12%5 votes
2%1 votes
15%6 votes
5%2 votes

| 40 votes | Vote | Results

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Comment Preferences

  •  Why would that surprise you? (3+ / 0-)
    Recommended by:
    phonegery, byDesign, mikeconwell

    According to The Financial Times, one person or company doubled down on July 21st with a billion dollars worth of trades on 5,370 ten-year Treasury futures and 3,100 Treasury bond futures.  Whoever made that bet earned 1,000 per cent return on their money.

    The odds on it being Goldman Sachs, anyone?

    Anyone who is making something new has to break something else - Taylor Goldsmith

    by SpamNunn on Tue Aug 09, 2011 at 08:10:11 AM PDT

  •  Insider trading is a way of life in financial (1+ / 0-)
    Recommended by:
    mikeconwell

    markets. There are always new and better ways to communicate, and few enough regulators to catch anyone in the act of inside trading.

    Goldman got away with frontrunning even when it hit international headlines. A market run isn't so difficult to maneuver, even with present safeguards in place. Once the market went digital, newer and slicker ways to engineer markets soon followed.

    Regulation didn't.

    The supercommittee is about as likely to come to an agreement as Charlie Sheen is to become a spokesman for Focus on the Family. Michael Tomasky

    by 4Freedom on Tue Aug 09, 2011 at 08:25:56 AM PDT

  •  So what though? (0+ / 0-)

    When the market moves, in either direction, there are just as many winners as there are losers. It's a zero-sum game. And with the availability of "short" mutual funds, anybody (including the smallest retail investors) can be on the short side if they want to.

    I'm in the I-fucking-love-this-guy wing of the Democratic Party!

    by doc2 on Tue Aug 09, 2011 at 08:37:37 AM PDT

  •  When T Bonds stayed up and stocks went down (0+ / 0-)

    my first suspicion were the big cats were selling stock and caching money into Treasuries for a short term windfall.  This led the amateurs to sell, Sell SELL!! in a panic.

    Today, the big cats start buying stock at the newly discounted prices with their money they stuck in treasuries over the past week.   Meanwhile, everyone who panicked is out for a large portion of that 1 Trillion dollars.

    Meanwhile NPR sounded like Fox News and was beating the drum for buying gold! noting gold was at a historically high price, although not reaching it's peak from 1980 ($2,400 in todays dollars).   Those poor teabagging bastards are gonna get fleeced when the gold sell off begins.

    Republicans: They hate us for our Freedom.

    by mikeconwell on Tue Aug 09, 2011 at 08:44:19 AM PDT

    •  correction: I didn't mean to write 'windfall' (0+ / 0-)

      I meant some kind of storage / holding for a day or two.

      I was thinking of windfall for later in the post, and my brain must of typed in what I was thinking.

      Republicans: They hate us for our Freedom.

      by mikeconwell on Tue Aug 09, 2011 at 08:47:21 AM PDT

      [ Parent ]

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