Jim Cramer, "Maverick", Wall Street and Short Selling

Short selling as a means of manipulation of stock markets is an old story. The old technique--now transferred to the computer gamers now ruling stock market trading in the U.S.--was to use rumors and propaganda, in combination with aggressive short selling, to drive stocks down and down. Then, sometimes, the scam would be to buy up the stocks that had been driven to unreasonable lows. Sometimes, the companies were just driven out of business (as happened this year with so many financial stocks).


Don't doubt me on the above (that historically this is a well known danger of short selling manipulators). I recently saw a repeat of an old "Maverick" episode (1960's). The plot was exactly what I explained in the first paragraph. An unscrupulous "financier" used short selling and unfounded rumors as a method of driving down the price of stock in a gold mining operation, with the intent of buying up all of the stock. Of course, in this fictional story (which, however, explains these 1000 point Dow up days on Wall Street these days, followed by the inevitable reverse oft he fictional rise) ended with the financier being stuck in a short squeeze. A short seller sells stock he does not own, in advance. But then he has to come up with the stock at some date or time. If he can't find any stock at a reasonable price (in the "Maverick" episode Maverick had bought up all of the stock), then he has to pay any price to obtain the shares. That is a typical short squeeze. I digress (only sort of).

The point here is that modern computer trading has made the risks of allowing short selling too great. We should eliminate short selling altogether, as this blog has told you. Yes, we can keep option trading (requiring an investment of money up front). Trading in "puts" and "calls" can be manipulated, but not to the extent that short selling has become one f the main tools of these modern computer gamers in the stock market.


We simply can't afford this kind of stock manipulation. It was part of the scenario that has caused this economic "crisis".


Yes, Jim Cramer (blowhard that he is, and with no consistency in what he says) made my case last night on his program, and has rather consistently trashed the modern short sellers. He wants the SEC to again institute the old "uptick" rule, where you could only sell a stock short on an incremental RISE in the stock--keeping short sellers from just continuously driving a stock into the ground. What Cramer misses is that, with modern computer trading, the "uptick" rule would probably just be a minor obstacle to these modern short selling manipulators (magnifying moves in the stock market, leading to a sick market, as this blog has documented). We need to eliminate short selling. Crmeer's logic leads to that conclusion. He just refuses to take the final step to where his logic leads.


Jim Cramer went further toward this logical conclusion. He advocated eliminating what he called "double short" ETF funds. These funds apparently get around margin rules, and manage to multiply the leverage of shot selling (without even benefiting their investors much--as detailed by Cramer last night). As stated, what Cramer is ingoring is that the logic of what he said, in light of modern computer trading, demands that we eliminate short selling altogether, and not just some forms of it.


Now we come to the intellectually dishonest Communists on Wall Street (Larry Kudlow and all of you Wall Street people who appear on CNBC: This means YOU.). Those people are willing to see socialism in the United States so long as it bails out Wall Street. Yet, raise the issue of limiting short selling and they become the most fanatic "free market" people who ever lived. In short, they are willing to see the free market eliminated in the economy at large, so long as their own "free market" is not even restricted at all.


What can you say about people this intellectually dishonest? Well, I have said it. These are the stupidest people who have ever walked the Earth. What is worse is that these people (Henry Paulson is one) are now running the country . What Wall Street wants, Wall Street has been getting. And they have been getting darn arrogant about it, as if they had not proven themselves the stupidest, and most dishonest, people who have ever walked the Earth.


Nope. "Maverick" got it right long ago. You can't defend the people now creating these sick, wild swings on Wall Street. We should eliminate short selling. The SEC did suspend it for awhile, and the world did not end. The stock market is presently sick to the point of death, and something needs to be done. This would be one measure that we can try to slow down these computer trading manipulators.