Short Sale
Borrowing a security (or commodity futures contract) from a broker and selling it, with the understanding that it must later be bought back (hopefully at a lower price) and returned to the broker. Short selling (or "selling short") is a technique used by investors who try to profit from the falling price of a stock. For example, consider an investor who wants to sell short 100 shares of a company, believing it is overpriced and will fall. The investor's broker will borrow the shares from someone who owns them with the promise that the investor will return them later. The investor immediately sells the borrowed shares at the current market price. If the price of the shares drops, he/she "covers the short position" by buying back the shares, and his/her broker returns them to the lender. The profit is the difference between the price at which the stock was sold and the cost to buy it back, minus commissions and expenses for borrowing the stock. But if the price of the shares increase, the potential losses are unlimited. The company's shares may go up and up, but at some point the investor has to replace the 100 shares he/she sold. In that case, the losses can mount without limit until the short position is covered. For this reason, short selling is a very risky technique. For a while, SEC rules only allowed investors to sell short only on an uptick or a zero-plus tick, to prevent "pool operators" from driving down a stock price through heavy short-selling, then buying the shares for a large profit. Most do not think the rule was eliminated in July 2007 by the new SEC rules or newer coming rules. These World Wide rules have no teeth.
Naked Shorting
An investment technique in which an investor sells shares short before actually borrowing the shares or before determining if shares can be borrowed. The practice is often illegal, but the SEC has allowed its use under certain circumstances. Naked shorting has been attributed as the cause for several instances of market manipulation.
Russia today: US then the world is still being screwed by Goldman Sachs aka short selling of CDOs.
You teach a person how to fish you feed them for a life time.
Collateralized Debt Obligation
1. CDO. An investment-grade security backed by a pool of various other securities. CDOs can be made up of any type of debt, in the form of bonds or loans, and usually do not deal with mortgages. CDOs, like CBOs and CMOs, are divided into slices, each slice is made up of debt which has a unique amount of risk associated with it. CDOs are often sold to investors who want exposure to the income generated by the debt but do not want to purchase the debt itself.
2. A general term used to refer to collateralized bond obligations (CBO), collateralized loan obligations (CLO), and collateralized mortgage obligations (CMO).
More Details about the "tools" used by Bankers.
Credit Default Swap
A specific kind of counterparty agreement which allows the transfer of third party credit risk from one party to the other. One party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange of regular periodic payments (essentially an insurance premium). If the third party defaults, the party providing insurance will have to purchase from the insured party the defaulted asset. In turn, the insurer pays the insured the remaining interest on the debt, as well as the principal.
You teach them how to teach fishing and you feed the world!
From Webster’s New World College Dictionary Fourth Edition, 50th Anniversary Revision. Page 1043.
Paradigm: an overall concept accepted by most people in an intellectual community, as those in one of the natural sciences, because of its effectiveness in explaining a complex process, idea, or set of data.
Carl writes:
“Economics is now accepted by some intellectual communities as a natural science and thus why you see Economists on many TV talk shows. Shows whose host knows less then anyone reading this blog."
"The Paradigm allows the so called intellectuals to control thir acceptable vocabulary and thus definitions of invented words. Let us not forget that being an intellectual does NOT make one more honest. In fact more dishonest in a Capitalistic World Wide environmental society. An environment like the World Wide Banking Investment and Bond market is by design to be Capitalistic."
