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Short selling
mullokintyre
post Posted: May 20 2020, 03:31 PM
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The big movers from shortman this week are the NewsCorp NWSLV and a mornningstar investment fund MSTR.
The latter has shot to 26% short in a week.
Obviously someone has some inside info thats caught on.
The shorting of Newscorp shares has been happening since early January.
Down about 22% from its $22 high.
Rupert may have to sell one his houses if this keeps up.
Mick



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lgrif
post Posted: Apr 8 2020, 12:05 PM
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In Reply To: nipper's post @ Apr 7 2020, 06:19 PM

Agreed liquidity issue is a worry (in the main for Industry funds I read), The 2 year $10000 draw-downs may require some funds selling down assets at in a depressed market. However it's a bit rich for the Fund managers to now ask the Government (Taxpayers) to lend them funds at .25% to cover the draw-downs.
I have a son who's super is an Industry fund & for 2 years he has been notifying them to change his investment mode at will( ie Balanced; High Risk; Low risk, cash etc) which they do for free. I often wonder how they could do that for free yet at arrive at fair values for non-liquid assets when he swapped. Recent articles in the news suggest some of the harder values for non-liquid assets were a bit hit-and miss, or out of date resulting in some members gaining and some losing a little. I realise carefully , timely valuations cost money, but can't see an option other than limiting a members annual investment mode swaps and perhaps charging a smallish swap fee (some do the latter).

 
nipper
post Posted: Apr 7 2020, 06:19 PM
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In Reply To: lgrif's post @ Apr 7 2020, 03:49 PM

I suspect the 'senior banker' was talking somewhat tongue in cheek; in his (I assume) eyes, the industry funds ate their lunch, and this is a bit of mischievous nose rubbing.

More seriously, the liquidity issue is a worry if, as could be the case, many thousands want to take out the $10,000 now and a similar amount next FY. Most of these people need it.

The past may be another country but the future is a set of unknowns.



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
joules mm1
post Posted: Apr 7 2020, 04:25 PM
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The_Real_Fly‏ @The_Real_Fly 12h12 hours ago Portnoy is now ALL IN short $BA from this morning, getting SQUEEZED -- down $500k




the above is how with decent timing on buying stock, forced short covering can aid an investor, it adds liquidity to the auction, forces trade by the shorter benefiting the buyer (when bought at the right time!)




#timing



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. . . . . . . . everything has an art.....in the instance of the auction process, the only thing, needed to be listened to; price
 
lgrif
post Posted: Apr 7 2020, 03:49 PM
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In Reply To: nipper's post @ Apr 7 2020, 12:16 PM

Hi Nipper. Leaving aside the complicated (S. 67A SIS Act) "Limited Recourse Borrowing Arrangements" which are only suitable for SMSF's; S.67 it seems , only permits borrowings by Funds in very limited circumstances and for very short periods ( 7 to 90 days depending on the few permitted reason) . However unlike the LRBA arrangements it seems clear the funds assets cannot be used as security for such borrowings, whereas the Senior Banker suggests banks could lend against the funds assets as security.
If the SIS Act requires amendments in this regard, I suggest the Funds with liquidity problems will have long met the problem or merged with others.
Just my thoughts. DYOR.

 
nipper
post Posted: Apr 7 2020, 12:16 PM
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What goes around, comes around
QUOTE
One senior banker points out that one way in which cash-strapped super funds can solve their short-term liquidity problems would be to borrow funds from the banks, using their funds' assets as security.

"A lot of super funds are happy to lend out their shares to short-sellers", he says. "This is just the other side of the equation."

[Unisuper, which has $85 billion in funds under management, called for an industrywide clampdown on short-selling last month, but this was resisted by other large super funds.]

The banker says any liquidity pressures are likely to be temporary because super funds will continue to see cash inflows from people who remain in employment, and who'll continue to make their regular super contributions....

A few Super funds with large allocations to unlisted assets, such as property, infrastructure and even venture capital, PE, have been rather embarrassed by liquidity . Tide's out, and unclad



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 

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nipper
post Posted: Mar 17 2020, 08:22 PM
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This is an opinion piece, dropping it in here . I'm agnostic really about the whole damn process. But we have just had the most remarkable couple of weeks, down 30%, swings of 10+ in a day, violent reactions, relentless searching for new equilibria.
.......
In this bear market, it's the longs who made the shorts' job easy

Vesna Poljak - AFR
QUOTE
It's the rumour that won't go away: was Friday's epic rally a Team Australia moment?

It's not for this column to speculate that the mysterious intraday swing of more than 12 per cent bottom-to-top was just a juicy short squeeze.

But Friday's winners had a lot in common with heavily shorted stocks and very little in common with classic passive buying that could easily be attributed to a rebalance: Perpetual (obviously, because it's a bear market), and WiseTech (activist short dependant upon freight).

It was all the more intriguing because no other market was rallying with the same intensity. But as other managers said, you had 10 per cent up days in the GFC. Bear markets are really weird.

Sudden shocks have become commonplace on the Australian sharemarket in the past fortnight.

On Monday UniSuper decided to declare it would no longer enable short-selling by recalling its securities lent out to hedge funds. For the record, UniSuper issued its recall instructions on Friday, but doubts its actions alone could turn the market around.

Maybe it took longer than expected, but the shorts are finally enduring the nonsense blame-shifting they've come to expect in this market. It may not have been the intention of UniSuper but it has fanned a wildly unfair assumption that hedge funds have caused market instability.

Well, well, well.

Many large (mainly) industry super funds lend out shares - entirely voluntarily - to shorts to earn a small securities lending fee. Presumably that offsets expenses and they can look more competitive on costs. It's hardly going to get anyone to the top of the league tables.

There's no good data on this, but super funds would account for at least a quarter of the borrow pool that hedge funds have access to via their prime brokers. Not the majority.

"It hardly matters, most borrow comes from foreign institutions," Bronte Capital's John Hempton said on Tuesday.

"Fund managers yanking their share lending gives them hope that their mistakes in capital allocation will somehow miraculously be papered over. Pulling back stock is almost certainly stock price manipulation, but it won't save the manager's career.

"It also makes them look baggy, and nothing is as pathetic as a hopeless bagholder managing what used to be $80 billion."

If you're using market drawdowns as the time to moralise or disable short-selling, why bother? This market is totally rational. Take Sydney Airport.

It was the most non-consensus short out there at about 0.55 per cent short interest. In an incredible coincidence, it's biggest long is UniSuper at 17.5 per cent of the register. Those are not hedge funds dumping Sydney Airport stock; those are longs.

Banks are all in deep bear markets. Well a recession will do that, it's just a leveraged play on the economy. Next.

Hedging by necessity

Industry funds are hardly typical market participants. This is an interesting time for them, because the sources of their contributions are highly specific to parts of the economy, and Covid-19 is highly discriminate in its destruction of jobs. It's tricky.

Finally, there's the reliably dumb idea of banning short-selling altogether, which always gets a hearing. Gratefully the Treasurer has already ruled this out.

"It does tend to come up every crisis and the first order thinking is, 'I've got a great idea, if I ban short selling the market doesn't go down as much'," said Montaka's Andrew Macken.

"Most short selling is used to hedge long exposure, most shorts are not people taking speculative positions on certain stocks - it's hedging the other side of the balance sheet."

And when people can't hedge their assets? They sell them.

https://www.afr.com/markets/equity-markets/...20200317-p54avh






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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
mullokintyre
post Posted: Feb 17 2020, 12:10 PM
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In Reply To: mullokintyre's post @ Feb 13 2020, 04:58 PM

James Kirby writing in the Weekend OZ

QUOTE
Big super funds that finance short-selling — especially industry funds that strive to take the higher ground in ethical investing — must surely be wincing at a remarkable story in the courts this week surrounding one of the nastier “short attacks” we have ever seen in Australia.

In principle, shorting keeps the sharemarket healthy. It spots weakness and, at its best, forces companies to clean up their act. (Shorting is where an investor borrows a stock for a fee, sells the stock, waits for the price to fall then buys it back, hopefully at a lower price.)

But how short funds actually work in practice is another matter altogether: a court judgment this week would seem to confirm our worst fears about shorts and how they operate in practice.
Many investors don’t like their super funds lending to shorters because they worry it can be unethical: they find it hard to see why their own super fund wants to ­finance an activity that can be trying to “short” the very same shares they probably own.

For example, it is beyond doubt our major super funds over the last year would have been holding JB Hi-Fi while also lending to shorts who were betting the JB Hi-Fi share price would fall (JB Hi-Fi has been consistently among the most shorted stocks in the market).

On Wednesday, Justice David Hammerschlag in the NSW Supreme Court gave Bonitas a beating around the ears that was something to behold.

Hammerschlag said the Bonitas report on Rural Funds was “materially misleading” and then he hit them between the eyes with this: “They (Bonitas) never took the trouble to check with or inquire as to any material which they broadcast … I have no difficulty in concluding that they did not care whether what they were saying was false.”

So it turns out that apart from the issues highlighted in that last statement from Hammerschlag, the self-described “activist short-seller” released a scathing report to start a short attack on an ASX-listed company, then instantly bunkered down in Texas.

As a precautionary measure, Bonitas fired off an email to their Australian target that revealed the Bonitas researchers had never visited Australia and they were sure the laws of the US would protect them should Rural Funds be so presumptuous as to try to defend itself.

Bonitas kept blazing away after the legal loss this week, suggesting the court judgment was “procedurally and substantively infirm”.

Meanwhile, Rural Funds’ share price — at $2.05 — has recovered to a point close to where it was the day Bonitas launched its attack.Hammerschlag will announce his decision on damages in the case on March 6. That decision won’t just be news in our market, it will be read by ever short-selling outfit around the world.

If the Rural Funds exercise ends up costing Bonitas big money in damages, it will change the numbers for anyone considering a short attack on Australian companies. Or, to be precise it will change how shorters behave in our market — and that would be no bad thing.


If there is a large damages payout against Bonitas, in some ways it won't matter if they thumb their nose at the ruling (something they give every indication of doing).
What it will do will give some others the gumption to take the shorters on.
I am seriously thinking of buying into some of these shorted stocks to bet on a rebound.
Mick



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sent from my Olivetti Typewriter.
 
mullokintyre
post Posted: Feb 13 2020, 04:58 PM
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From Todays Australian


QUOTE
A NSW Supreme Court judge has slammed the “materially misleading” and “deceptive” reports of a US-based short seller criticising the ASX-listed Rural Funds Group, in a move set to shake up the way high-profile shorts target the market.

In a landmark move, Rural Funds took the Texas-based Bonitas Research to court after a short-sell report authored by the research firm’s founder Matthew Wiechert called the stock “worthless”.

When the report was released on August 6, it triggered a 42 per cent drop in Rural Funds shares and has since kept trade in the company well below its pre-report levels.

In a decision presented to the NSW Supreme Court on Wednesday, Justice David Hammerschlag was scathing in his assessment of the hedge fund and Mr Wiechert, saying their comments were “false in material particulars and materially misleading”.

He found they had breached several sections of the corporations act and the ASIC Act, including engaging in deceptive conduct, and set a date of March 6 to consider the assessment of damages.

“Wiechert is no doubt a sophisticated operator. Yet, as earlier has been said, neither Bonitas nor Wiechert took the trouble to check with or inquire of [Rural Funds management] as to any of the matters which they broadcast. They had an obvious commercial interest in depressing the price. I have no difficulty in concluding that they did not care whether what they were saying was false,” Justice Hammerschlag said.

Mr Wiechert was formerly with Glaucus Research, best known for its take-down of Blue Sky Alternative Investments.

He put up a defence that as a business operating outside of Australia Bonitas was beyond local regulatory scrutiny.

In an email to Rural Funds lawyers in October, and noted in the court’s judgment as conveying the defendant’s “attitude”, Mr Wiechert had cited his constitutional right to free speech and Texan laws.

“We are not going to spend much time familiarising you with the laws of the United States as we assume you reviewed those laws before deciding to commence an action in Australia against an entity and person who do not do business there, and never been physically present there,” he wrote.

“… We will contest the enforcement of any orders or judgments you obtain that certainly will be contrary to the discoverable facts, as well as United States and Texas law and policy.”

Those defences were sharply criticised by the judge, who affirmed that the proceedings were governed by Australian law, as they were capable of being accessed in Australia and remained accessible by Australians.

“I am not qualified to express any view on the operation of the Constitution of the United States of America, or on Texas law and policy, and I do not do so.

“They play no role in the adjudication of these proceedings, which are governed by the laws of Australia.”

His judgment highlighted the dissemination of the report via Twitter and on the research firm’s website as well as through its subscriber channels, finding that Australia was indeed an intended destination for the statements. Investor Peter Davidson, head of Pendal Group’s listed property arm, said the judgment was an “unequivocal” validation of what Rural Funds had been saying all along.

“The judgment calls into question the behaviour of Bonitas and Mr Wiechert and a clear call for review and action by ASIC into this whole affair,” he said.

“My issue as an investor is people making false assertions externally and profiting from those assertions by entering into short transactions in Australia.”

The Australian market is no stranger to predatory short sellers from overseas. Hong Kong-based Bucephalus also took aim at Rural Funds in the months after the initial report, expressing similar claims to Bonitas.

In fact, Bonitas used the second report as validation of its own claims as it threatened Rural Funds with a defamation suit in the US.

Other notable short attacks include tech darling WiseTech, which took a 20 per cent hit to its market value after US-based J Capital accused it of overstating its profits last October.


It will be interesting to see how any judgments are acted upon.
The US firm may well just thumb its nose at the judgement and do nothing.

Mick




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blacksheep
post Posted: Nov 23 2019, 07:56 PM
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Return of short-selling bans: market protection or 'war against truth'?
QUOTE
NEW YORK/LONDON/ISTANBUL (Reuters) - New moves to curb short-selling in some countries have set the stage for a renewed battle between free market advocates and authorities aiming to check investors they see as profiteers who destabilize major companies.

Turkey’s regulator banned short-selling of seven domestic banks last month after U.S. prosecutors charged state lender Halkbank (HALKB.IS) with Iranian sanctions violations.

South Korea is considering restrictions while European authorities are investigating short-sellers over alleged market manipulation - part of a nascent trend that Carson Block, founder of U.S. short-seller Muddy Waters Capital LLC, decried to Reuters as a “global war against truth.”

Meanwhile, as Brexit looms, authorities in Frankfurt, Rome and Amsterdam could temporarily curb short-selling of companies to counter price swings triggered by the European divorce, officials have told Reuters.


read more - https://www.reuters.com/article/us-global-m...h-idUSKBN1XT1L3



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The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
 


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