Are naked short sellers robbing people of their retirement nest eggs??
In its most fundamental form, naked short selling is simply stock counterfeiting. In legal short selling, a trader (usually from secretive and barely regulated hedge funds, whose investors were traditionally multi-millionaires) “borrows” shares of stock from shareholders of a company and then sells it, betting that the price will go down. The original concept was that short sellers would help to balance the market by preventing stocks from becoming overvalued. Instead, hedge funds have grown over the past decade at an exponential rate, with total assets of over $3 trillion and growth of nearly $500 billion last year alone. Hedge fund managers become instant millionaires, with the top five managers earning over one billion dollars each in 2007.
Rather than wait for stocks to fall based on fundamentals or evaluation, they found ways to actually manipulate the prices of stocks, using either loopholes that allowed them to sell shares without ever borrowing them, or simply relying on the SEC’s lax enforcement to get away with blatant violations of existing rules. Throw in a steady stream of often unsubstantiated rumors leaked to financial “journalists” who dutifully reported them as news, and a company’s stock could be either manipulated to unrealistic highs, or driven down to almost nothing. In many cases, companies were actually forced into bankruptcy, costing America jobs, tax revenue, and destroying the wealth of our country. Although manipulation of our financial system has been way of life for decades, it has reached critical mass in the past few years. It has been estimated that the manipulation of our financial market has cost America trillions of dollars.
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