Phantom Shares

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Phantom SharesThere is a large portion of America’s middle class that turns to investments as a means of retirement. A lot of people like to keep tabs on stock they have invested in, or receive as benefits. Some might receive shares of a stock as an incentive to take care of the company they work for insuring they and the company are profitable.

Then one day the moment in the spotlight comes and the company goes public on the market. The glitter quickly fades to gloom as the company you and so many worked so hard for falls in value %15-%35 in the first month continuing the trend over the next year. Someone must be to blame but not who you might think.

Welcome to the realization you have been the target of “naked short sales” of your stock. Small cap companies are at the greatest risk. While there are efforts in place to regulate it, there are still many investors and companies paying the price. To bring you up to speed here is a interesting piece Bloomberg news did on how and why it is happening.

The DTCC, the company behind all wall-street transactions processes $1.4 quadrillion in trades per year and by the way here is what that number looks like $1,400,000,000,000,000! The SEC stated that %1.5 of trades per day are not settled now in small amounts %1.5 might seem like a drop in the bucket but when that much money is changing hands it is a more than substantial sum, $6,000,000,000 in trade do not clear every day. But is that really all that does not clear?

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7 Comments / User Reviews

Leave a Reply to Bilbo Baggins Cancel reply

  1. DustUp

    No doubt Bloomberg failed to inform regarding "the rest of the story". The information of who is making these Phantom Share trades is available to the SEC and congressional investigators, if there was anyone there who cared. Why don't they care? You keep voting the bums back in.

  2. DustUp

    Answer to Phil above: The only way Naked Short Selling is supposed to occur is for "day traders" or trades lasting a duration less than the length of time regulated for an outright owned stock to be delivered when sold. Not sure of the exact length of time that is but something like 3 days. So if that is THE time, if your short sell is going to be closed out in 2 days or less, your broker will likely approve of your trades because they like commissions. Practically speaking, if you are a declared day trader and regularly close out most of your trades the same day, 2 days max now and then on short sales, then you may never know there ever was any restriction on short selling a stock due to what some brokers call "hard to borrow" stock. They keep a list of such stocks and the regular dupe cannot sell it short on the days it is on that list.

    Now these day trades of unborrowed shorted stock should NOT be a problem because the trades are closed out, amounts cleared and settled properly just like any other day trade.

    The problem is that the big boys are CHEATING as they have in various ways for a long time. Recall the Mutual Fund scandal where certain parties were allowed to trade mutual funds after hours when no one else could.

    It would be a very EASY fix to just prohibit ANY naked short selling. Requiring that shares of a company MUST be available for anyone to short (the condition Phil assumed).

    What is easier money than causing a stock to drop by "carpet shorting" it and then buying it at a severe discount when it starts to perk up by "carpet buying"? Regardless if any shares are available to short or to buy. Obviously the big boys don't care about the rules. The rules are only for the dupes.

    Clearly the big boys don't want that and they own the regulators for the most part because they own the people who appoint the heads of those agencies if not placing their minions as the chief of those regulatory agencies they care about. Note that most US Treasury Secretaries come from Goldman Sachs, etc.

    If anyone disbelieves the financial markets, all of them, are not manipulated, they are living in fantasy land.

  3. Bilbo Baggins

    Can we trust a Bloomberg production to give us the full story regarding a complicated situation shortly BEFORE the global economic collapse?

  4. David Choi

    Terrible. Put on your critical thinking caps on people. This is probably the worst of the worst I've ever seen. Couldn't even get through the first 10 min. Ask yourself, do you know when you've been mind-manipulated?

  5. Phil Atio

    This explains how financial institutions are able to underwrite massive stocks. Ie. buy 1 million shares. I always found it strange how this was possible to do in a day because back in the 80s when leveraged buy outs where the thing it took a long time as many as 6 months to buy up 51% of a company.

    The thing I don't get is how is naked short selling possible. For example, in normal shorting, you borrow a stock, hope the price goes down and if it does you swap back the cheaper stock, making money. But in naked short, you have no borrowed stock, so when it is time to return the stock you either have to give back nothing, or give the stock and lose your money. One should results in the other guying calling the cops and you going to jail for theft/fraud, the other results in you losing all your investment

  6. CuriosityKilledTheCat

    Wow just wow. No wonder I've always had suspicions about all the money on wall street being fake and just playing with numbers.

  7. denalaza

    Great! This is where the american stock exchangers should aware of. Short selling is an increase tool uses by hedge funds to make money and in between alternative arrangements such as Naked short selling could occur. All the moves are very speculative and almost closer to gambling.

    Remember the fact that stock market is a place created by wealthier individuals to make more money out of middle class people. Trading stocks is not investing but speculating.