Comments on: Explaining Credit Default Swaps http://itsrainmakingtime.com/2010/creditdefaultswaps/ Amazing Breakthroughs, Conversations, & Discoveries For Everyone Thu, 09 Feb 2012 13:21:19 +0000 hourly 1 By: bammbammhttp://itsrainmakingtime.com/2010/creditdefaultswaps/comment-page-1/#comment-6369 bammbamm Tue, 04 Oct 2011 15:16:42 +0000 http://itsrainmakingtime.com/?p=2128#comment-6369 I'm not an investor, but seems to me that "selling short" can trigger a chain reaction of pre-programmed stop orders. It can also create the idea that someone out there is selling and they must know something I don't - so I'm getting out too. So it can be destructive. One might argue that buying with "irrational exhuberance", can create a false reality as well, but, last I checked, an increase in wealth is a better thing than a destruction of wealth.Secondly, according to my understanding, a short seller is temporarily borrowing someone elses stock, and will have to return that person his shares in a given period of time. But "naked shorting", means that the stock was never borrowed, even though the sell transaction was made. In this case, you have artificially created more outstanding shares then are actually in existence and you are debasing the share value. You have, in fact, counterfeited stock certificates. I’m not an investor, but seems to me that “selling short” can trigger a chain reaction of pre-programmed stop orders. It can also create the idea that someone out there is selling and they must know something I don’t – so I’m getting out too. So it can be destructive. One might argue that buying with “irrational exhuberance”, can create a false reality as well, but, last I checked, an increase in wealth is a better thing than a destruction of wealth.

Secondly, according to my understanding, a short seller is temporarily borrowing someone elses stock, and will have to return that person his shares in a given period of time. But “naked shorting”, means that the stock was never borrowed, even though the sell transaction was made. In this case, you have artificially created more outstanding shares then are actually in existence and you are debasing the share value. You have, in fact, counterfeited stock certificates.

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