The mathematics of shorting is not fair. And this is a serious issue.
Let’s say with all things being equal you decide to go long and short a 100 USD stock for a period of one year, and your starting capital is 100 USD. In each case we will calculate the gains or losses of each position with a movement of 10 USD. For calculation purposes the interest rate would be libor which will be 4%. If you are borrowing money it would cost you 4.5%, and if you want interest you will get 3.5%.
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Tuesday, Oct. 7, 2008
by Christian
Wait Wait I need a rate cut… No Wait Wait I need more liquidity… No Wait Wait I need a common European approach… No Wait Wait I need capitulation…
Get the idea! When I hear these traders I just gag! I am not kidding here.
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Monday, Oct. 6, 2008
by Christian
Whenever I tell people that I work in a bunker they think, "oh Christian you are working in a concrete basement and speaking metaphorically" No folks, I am speaking very seriously, I have a bunker!
My buddy who visited also did not believe me, but when I showed him the doors and window doors he said, "Holy s**t you have a real bunker!" The door is 10 inches think and weighs a ton. I literally mean a ton!
I replied, "what have I been saying all along?"
Second question, why do I have a bunker? Swiss laws! All houses in Switzerland must have bunkers. Who knows there might be a need to use them, and in days like today who knows. 
Thursday, Oct. 2, 2008
by Christian
Many people were complaining about how the central banks and Fed kept pumping in money. You know trying to keep things afloat. The reason has to do with confidence (which you already heard) and keeping credit moving (which you also already heard). Though when I hear these politicians sometimes I wonder. Let me explain the lending model a bit and you will understand why we have an increasing Libor rate
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Thursday, Oct. 2, 2008
by Christian
Many critique Wall Street on this mess. Well, folks, yes Wall Street bears some blame, but let me remind you the reader on what was a prime motivator. Read the blog, I really want you to. This blog entry was written in February 2007, just months before this mess was about to start.
Same payment with each scenario…except you’re able to buy $132,725 more home using a 40 year fixed over the 15 year fixed and $107,750 more home with the 30 year fixed mortgage. With an interest only product, such as a 30 year fixed rate with a 10 year interest only payment, the savings (or how much more home they could buy) would be even more substantial.
I hardly ever recommend 15 year fixed mortgages to my clients…unless they’re doctors or someone who makes so much money that their mortgage deduction is reduced and they all ready have all the investments they need.
Even if Christy and Tom’s case where they want to ”look around and buy the home where, if we’re lucky, we’ll grow old together”. Why pay off your mortgage and lose one of your best income tax deductions?
Christy, Seattle is not too pricey for normal people…your 15 year fixed mortgage is.
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Monday, Sep. 29, 2008
by Christian
Time and time again I hear about how banning shorting, or restricting shorting is counter-productive and would require banning or restricting going long. I had a think about this over the weekend and have come to the conclusion it is not the same thing, but very different in two major aspects; psychology, and impact on the innocent.
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Monday, Sep. 29, 2008
by Christian
You have all probably heard what Steinbrueck has said..
Steinbrueck criticized the United States for failing to adequately regulate investment banks and said free-market policies embraced by the United States and Great Britain that emphasized a short-term "insane drive for higher and higher profits" were partly to blame for the crisis.
So what is his solution?
The finance minister said he would push for a global ban on speculative short selling and would use next month’s meeting of the Group of Seven finance ministers and central bankers in Washington to press for new rules that would prevent banks from fully securitizing loans and selling them to third parties.
But here is the irony as per the German news today… And PLEASE any reader who wants to disprove me do it with facts. The banks that are having problems and did the worst trades are…
…drum roll…
…banks owned or heavily influenced by the German government…. You would figure that the government who is proposing regulations would have regulated their banks?
I cracked up laughing!!! So when the German news asked Steinbrueck about this he said, "well, ahh, oohh, ummm…" Come on Steinbrueck stop the rhetoric and get back to reality! Oh wait, I forgot it is, do as I say, not as I do!
Thursday, Sep. 25, 2008
by Christian
Daily Kos is a left-wing political blog, but they have a pretty good writeup of what is happening with these “credit swaps” and AIG, etc.
It reminded me of reading about mortgage-backed securities about this time last year, just as the shit was hitting the fan in the mortgage market. Now I’m learning about credit default swaps and credit-linked notes.
My questions is: what obscure trading vehicle am I going to be reading about next year? What are the other iffy, confusing, opaque, speculative trades that are going on out there?
Sunday, Sep. 21, 2008
by Jason
A couple of days ago Cramer ranted on how the SEC should do something about shorting. On July 30 of this year I complained about naked shorting! I have had debates with many people on this issue. What the SEC has done is superb!
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Friday, Sep. 19, 2008
by Christian
The market is down because of the de-leveraging taking place. They are selling because they have to sell…
How do I know? Whispers and those stocks that have been heavily shorted are up. I also don’t think that there is money waiting on the sidelines. I think that is a fairytale!
BTW I am putting in my orders to buy heavily!
Wednesday, Sep. 17, 2008
by Christian
