first!!

anyway, my FXY (yen) and FXF (Swiss Franc) are making big moves(for currencies at least)...but the carry trade is small though, right? I read that more than a few times after the first scare.
this is going to be interesting.

I would expect the drop to be moderated by end-of-month window dressing today to until maybe Friday, but April should be a volatile and certainly interesting month for traders with earnings, inflation, oil, Iran etc. to help us along :)

ALOHA !!

SHORTING ...

Another pitfall from holding margin. Direct from ETrade Securities:

"In regards to E*TRADE loaning any of your stocks out to other customers, we do reserve the right to loan your shares out if you apply for a margin account. As long as your account is fully paid for (at 100% equity, with no margin debt), we will not loan out any stocks. If you are below 100% equity in your account, loaning your shares out will be part of having a margin account. The only ways to ensure that E*TRADE will not loan your stocks out would be to stay at 100% equity or to remove margin from the account."

They did not answer my other question in terms of how is it you get "loaned" stocks back? Say you had margin a month ago and they loan your stocks out and now you are at 100% equity with no margin debt, so what happens to those "loaned" stocks?

I will publish that once I get an answer ...

So not only is holding margin a weak hand it also helps support HB&B trades against your positions! WOW ... broker dealers really do their best to make sure you lose money! And to think you actually have to pay them for that!

ALOHA !!

Looks like a small divergence today between DOW and HUI/XAU and TSX. DOW down at least 50 points while HUI/XAU and TSX up!

This also happened on Monday for most of the day ...

One or two times does not yet make a trend! Yet it is a start ...

Hi Kaimu,

I always read with interest your posts (and much of it goes over my head due to my lack of understanding. :) )

May I ask what is the impact of the stocks loans for shorting?

Surely whatever security you own in your account is yours to sell at anytime even if they've loaned it out, because it still belongs to you. I would think that if I tried to sell a stock that they loaned out (behind the scenes w/o my knowledge), they would have to come up with the shares for the buyer of the stock, and put the proceeds back in my account one way or another.

Maybe I'm being naive. :) Just curious of the process, so I look forward to their response to you. I don't hold margin generally for more than 1-2 days.

Thanks,

-Dave

Maybe some can explain the substantial (some +25% or more) increases in the last short position report on many of the large caps.for example:
Bank America + 18%
Burlington Nrthn + 54%
First data +26%
General Electric +79% yes up 79%
Hartford Financial +45%
Proctor & Gamble + 39% and many more.

Is HB&B "borrowing" all the stock they hold in customer margin accounts to sell short. It is very easy to buy slightly out of the money put on indexes to offset the possibility they are wrong.

Big bucks to be made here! any comments?

Dave - I'll try to answer your question addressed to Kaimu, but I stand to be corrected of course..

Say you and 999 other small shareholders each own 1,000 shares of XYZ stock with a broker. If your broker loans out all this stock to HBB (i.e. HBB sells them short), the price of XYZ will undoubtedly drop due to the sudden supply in the market. Now, seeing this when you wish to sell your 1,000 shares you will realize a lower price and HBB would have covered their short at a profit - and that profit came out of your pocket!

Thanks, Kaushik.

That explains much "illogical" price movements.

-Dave

ALOHA !!

Dave ... Technically if you buy a stock using margin you really don't own it do you? Its like buying a house using a mortgage ... the bank owns it until you pay it off! All you really own is a piece of paper not a deed ...

Kaushik ... yes, but then add that the broker dealer collects a fee for loaning the stocks out. Also don't forget the commercial "loans" like Oppenheimer Funds does with JP Morgan. Its all fee based. Like attorneys ... they get paid whether you win or lose your court case!! Same with HB&B ...