July 26, 2008
If SEC allows naked short selling, it should allow NAKED LONG BUYING to create a level playing field.
A Naked short sells securities that do not exist. Effectively he creates shares out of thin air thereby increasing the float. A Naked Long Buyer should be allowed to buy stock without money i.e. out of $$s created from thin air. He guarantees the broker to pay the difference between buying and selling price with real money—but the initial purchase is effectively made with $0.0 i.e. non-existent money.
Imagine how the money-supply will increase if Naked-Long-Buying is allowed. Of course the SEC will never allow traders to trade with non-existent money because of the havocs that it will create with the nations economy. Unfortunately it is very happy to allow traders to trade non-existent shares despite the havocs it creates on the share price by increasing the total number of shares.
Mind it Naked-Long-Buying is not same as buying on margin because when buying on margin, you are still paying 100% cash – part of which is lent to you by the broker.