Category Archives: Business

Business, Government

Hacking And Short Selling For Fun And Profit!

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Here’s an interesting video. It’s pretty boring and filled with techno mumbo jumbo, so you may not want to watch it all the way through, BUT the big takeaway is it shows a hack to remotely crash a St. Jude Medical pacemaker.

https://vimeo.com/180593205

Sheesh you MIGHT be able to kill someone by remote control. There is a BIG MAYBE that I discuss below.

Okay it took over over 3 hours to hack into the device. I suspect the time indicated was just run time to allow a brute force attack as it looked like an open loop attack (one-way from the hacking device to the pacemaker). It might have crashed the pacemaker in less than 3 hours. An attack could be executed while someone was sleeping, which would allow plenty of run time.

Now for the truth in lending part. It’s hard to tell if this is a real threat. The company that released the video is Muddy Waters LLC which makes money by taking down companies and SHORT SELLING their stock as it plummets. St. Jude Medical is in a $25 Billion acquisition deal by Abbott Laboratories which means lots of “gamblers” are betting on the stock. Stock prices generally rise during the speculation time of a big takeover. If you take a short position and the price tumbles after this inflationary jump in price, cha-ching, big buck$ are made. With a $25 Billion dollar deal, BILLION$$ can be made with a huge short position.  This sort “investment behavior” is why I ranted earlier that the SEC needs to stop short-selling-gambling. You can read my earlier rant here.

To get my political musings in, think about which presidential candidate is in bed with big Wall Street money.  Do you think she will call for trading reform?

Second truth in lending.  There may be a real concern about a hack.  The company, MedSec, published their research that the St. Jude Medical devices have security flaws.

Third truth in lending.  MedSec has a financial deal with Muddy Waters to license their research and to share in profits derived from their research.

What a convoluted arrangement of money shifting and back scratching!

This reminds me of the great junk bond days.  Ruin good companies and make money!  The gamblers just found a new way to play their game.

And we wonder why we don’t have good jobs in this country…

Business, Finance, Government

Stock Market Insanity, Part 1

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The Securities and Exchange Commission, SEC, needs to immediately get rid of “shorting” and “high frequency trading”.

Today in Part 1 I’ll go over why we need to get rid of stock shorting.

What is a short? Plain and simple, a short is a BET that a company’s stock price will go down.

Let’s take a look at how this works.  A gambler (I refuse to call them an investor) sells a stock which he doesn’t own at market price.  Let’s say $100 as an example.  If the stock goes down, let’s say to $80 in this example, he buys the shares and then gives the stock shares to the person who bought them for $100.  He makes $20 on the deal.  Winner!  Now the strange part in all this is that the short gambler never actually owns the shares that are traded.  He just makes profit on the share price drop.  How is it that he never owns the shares?  A short is done in cooperation with a brokerage house that “loans” him the shares on the initial sale (the $100 sale in our example).  The repurchase (at $80) which is done by the brokerage house is payback to cover the “loan”.  Notice the the gambler never touches the shares.  The brokerage firm (big Wall Street that Senator Sanders complains about) is supposed to have the shares which are in reality owned by their clients.  Again in an oddity of shorts the real owners of the shares never know that their shares have been sold (“loaned” for the bet) and will be restocked at some later date.  And in yet one more oddity, the shares sold may not exist at the brokerage firm when sold which is a naked short.  In a naked short the brokerage firm “bets” that the short gambler will cover the bet with “real” shares before they get called to actually deliver the shares.

Is this lunacy?  How is this investing?  This is just GAMBLING!

Okay, you’ll hear from the SEC as well as the stock gamblers, that shorts allow for market liquidity and efficiency.  Those are fancy terms that mean lots of ups and downs in share prices.  Gamblers want market swings because that’s where they make their money.  It’s not about “investing” money into well run companies.  It’s about making money on churning money.

The SEC is two-faced on their position about shorts.  They claim that in all their studies there is no relationship between shorts and market downturns.  Strangely they have a rule in place that limits downward slides when short sales contribute to a down movement of 10% or more which seems to be their threshold of pain for “no relationship”.  They also eliminated the “uptick” rule in 2007.  The uptick rule was that you could only short after and upward price movement of a stock.  What is significant about 2007?  Golly there was this meltdown of the market right after that in 2008.  The Great Recession as it’s been called.

Many analysts have concluded that shorts and margins were a couple of major factors that caused the Great Depression in 1929.  Hmmm…

The SEC has the power to stop this insanity but won’t.  And why not?  Money talks.  Follow the money.  Shorts are a mechanism to hedge your bet on market downturns. (Did I say hedge?  Hedge fund?  Any connection?)  Big traders, big brokerages, hedge funds all make money using shorts.

As I heard a stock broker at a large Wall Street firm  once say, “If it wasn’t for the fact that we wear $3000 suits, we’d all be arrested as bookies”.