Naked Short Selling Ban It

Naked Short Selling – Ban It

Short selling is the practice of selling shares that you do not own yet and then buying back them later at a lower price and making a profit of the difference.

In simple terms, it encourages market traders to drive share prices down and we suggest that this sort of speculative share derivative has been the root cause of why Banking stocks have plummeted so dramatically on the back of their own liquidity problems.

The process has basically been banned temporarily in both the UK, Europe and the US.  However, this is only temporary and we suggest the problem will only come back.

Do you remember the 1987 crash?  Do you remember Nick Leeson and Barings Bank?

Whilst these were not caused by ‘short selling’, they were caused by another type of derivative, the 'financial future'.  In simple terms buying and selling contracts with a future date on them at a huge discount, known as gearing.  

For example, a 10% deposit on a Bond Future, gives you 100% market exposure but with nothing to pay until the due date - the ‘future’.  If you own £100 pounds only and you bet £100 on a future contract, this gives you £1,0000 exposure to the market.  The market only has to fall 10% and you lose £100 i.e.  you are bankrupt.  The risks are huge!

We suggest all derivative trading should be banned.  Shorts, Futures, Options, total return funds and all.

The only way for a capitalist market to survive on its merits is for business and their shares to trade at their normal value with the pressure of financial instruments and speculators ‘playing’ with the value of a business removed.  

If you wish to buy a share then buy it!

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