Monday, October 17, 2011

Hey, Occupy Wall Street: Why Not Short Sell Wall Street And Beat Them At Their Own Game?

Why not hit Wall Street where it lives and destroy the value of the worst companies one at a time? This could easily and systematically be accomplished by people not willing to take it on the chin from corporate America's greed anymore.

This may seem far afield from a blog supposedly about a spiritually inquisitive life, but I actually think it is exactly on point for such a blog. Whether it is Jesus taking a whip through the temple in the gospels driving out those 'turning his father's house into a den of thieves' or Buddha's message of not being owned by desire, or as Gandhi so eloquently put it, "I can combine the greatest love with the greatest opposition to wrong", there is a long spiritual tradition throughout the world of standing up to greed in its many forms. And again, it would not be hard to stand up to the current cancer of American greed with a bit of organizational effort.

As I've quietly applauded the Occupy Wall Street-ers, I've also wondered when someone was going to offer a real solution to eradicate things, or at least give the out-of-balance power mongers a substantial spanking? Who brought Jesus's whip to the Occupy party?

What, nobody did? I don't know whether or not this is THE answer, but it is certainly a totally viable means of giving greedy companies a serious spanking if not taking them out altogether. And in doing so, encouraging other companies toward markedly better behavior.

Surprising as it may be, I, the least likely to day trade, have been learning just that. And specifically, I've been learning a particular form of it taught by a foul-mouthed spoiled brat who happens to really know his stuff. And historically, it's taken an obnoxious, brash personality to succeed in the Wall Street game. But isn't the point of all this Occupy Wall Street stuff that it's high time more than just obnoxious brash greedy white guys benefited or had a voice?

One of the things I've learned from this obnoxious guy is that you can short sell companies. This is actually pretty basic, it turns out. Instead of buying stock in a company, you can "borrow" shares (also known as short selling) from various brokers (the best ones I've found for this so far are Interactive Brokers, I've also heard Speed Trader is okay and once upon a time Think Or Swim had good borrows) and create what is called a short position by selling first and buying last. Normally when you buy a stock, you're betting the stock goes up. When your short sell (aka "Borrow") a stock, you're betting it will go down. So if you short sell a stock at, say, $5, you're betting it will go down. Say you got 100 shares of this $5 stock and it went down to $3. When you want to close the short/borrowed position, you do what's called "covering" your position or "buying to cover" the position. So, say we close out our 100 shares and buy to cover at that $3 point. That stock we shorted went down $2 and therefore, at 100 shares, we profited $200.

What I've learned that's even more interesting, as it applies to Wall Street, is that when someone buys a stock, that is part of what makes the price go higher. However, when the stock has a big sell-off, that drives the price/value of the stock down.

There are more variables, but that's basically it. It's just not the rocket science mystery Wall Street wants the common person to believe it is. Stocks do one of two things: they move up or they move down. Essentially.

If you want to hit Wall Street where it lives, why not beat it at its own game? Here's how it seems like it would be pretty easy to do.

Why not systematically create a list of the companies who most egregiously harm people in various ways? Take the greediest companies with the most overpaid CEOs and CFOs. Take the companies who have the most un-fair trade. Take the least green companies. Take the companies creating toxic foods or refusing to label their GMO foods or working with monsters like Monsanto. Take the companies harming children, domestically and abroad (through toxic chemicals in their products to use of child labor in poorer countries). Take companies that have run off with taxpayer money.

Take them and take them down.

It seems like it would be pretty easy to do if enough people organized and banded together to do it.

Interactive Brokers (in my experience), (although they have the crappiest customer service) has the best availability of shares to borrow to short sell a wide variety companies. You can short sell through many brokers, this is just one broker that happens to have a good number of shares to short, usually. You can go to this link and type in the stock symbol for any company and see if they have shares to short, and if so, how many:

I am not a spokesperson and in no way shape or form represent Interactive Brokers or any other company and am not paid in any way to write any of this. I just genuinely want to offer a potential solution to how to address Wall Street in a way they will actually hear.

Why am I going on and on about short selling companies, you ask? Because if the Occupy Wall Street people wanted to hit Wall Street where it lives and get their attention (and scare the living hell out of them), they could easily do this by targeting the most offensive companies, one by one, and short sell them en masse. And this would drive down the price of the company's stock. Which would cause stockholders to sell of their stock. Which drive the price down further. Which cause negative news. Which would cause sell-offs. Which could potentially cause such a major panic that the stock would tank right into the toilet, even cause some companies to close down completely.

How many MILLIONS of people in this country are fed up with the status quo? How many people would happily say that with $1? $10? More? If even 100,000 committed $10 bucks to the cause, that would be a start of $1,000,000. There are a variety of ways this could be done, but it would have to be organized. So either folks could send money to an account holder (or holders) who would, of course, be 100% transparent with the account on behalf of the Occupy Wall Street group (by posting screenshots of the account, posting on trader sites like Covestor, etc.) and would use that money to drive down the price of a stock. Or, if enough people could establish their own brokerage accounts and do it individually, that would work too. That's more complicated in that starting many brokerage accounts takes anywhere from $1,000 to $25,000 for the kind of accounts we're talking about. So a couple group accounts makes more sense.

Regardless, you could then essentially put out a 'hit' on a given company and drive down the price of the company. In the example given, use the $1,000,000 either to buy $1,000,000 worth of the stock and then dump it at crucial moment for the company thus driving down the price dramatically. Or short sell the company which will instantly drive down the price. When you buy to cover eventually (or get bought-in by the broker, which can happen), that will make the price go back up somewhat, but nowhere near to the degree as when you shorted/sold it.

Also, you could and should publicize that you're doing this as you're doing it. Leak it to a publication like Seeking Alpha. Make sure it shows up on Yahoo Finance. The reason for this is the stock market is completely psychological game. Stocks live and die by good and bad news.

Recently, Starz pulled its completely lame original programming from Netflix. Who cares, right? The three people in America that watch that drivel already subscribe to Starz on cable. No one with Netflix cares. So Netflix raised their subscription price a few dollars? You know who's REALLY making a big stink about it? The media. And in response to what started as a piece or two of bad news, Netflix went from trading around $240 a share to just about $100 a share in a very short period of time. A devastating blow to the company.

So if news came out that Occupy Wall Street successfully drives down the price of stocks that it targets, and news then comes out of a company becoming a target, not only will the short selling efforts drive the price down, the very NEWS of the impending targeting of the company would cause shareholders to sell off their stock for fear of losing their shirts. THAT is power over Wall Street.

What if you could put the greediest banks on their knees this way? What if you could let a company know that they have become a target of Occupy Wall Street and that meant something very real to their bottom line?

It COULD mean that. It would just take a little organization and pooling of a little cash.

Why not short sell Wall Street? Or buy them up and then sell them at the edge of a cliff?

Why not, in this completely peaceful but MUCH more effective way, send Wall Street the message that we the people will take greedy evil companies out at the knees if they behave badly? Let's create a REAL checks and balances system whereby companies that are out of balance, get balanced. To the tune of millions and millions of dollars.

It can be done. And it wouldn't even be that hard.

ANYONE can buy and sell stock. This would not be that hard to do. Organize a fund and/or enough people to sell of a stock together, either by short selling or buying then selling at a critical moment, and you will send companies a message they will hear: "Listen to and heed what we have to say or we will make your company worth less. Or just plain worthless. Your choice."

The people can still speak. We just have to learn how to say it in a language they will hear. This is how.

No comments:

Post a Comment