March 15, 2008
On Friday, about 189 million shares of Bear Sterns were sold.
On Friday, Bear Sterns had only 118 million issued shares.
Obviously not every holder of every Bear Sterns share sold every share held.
Where did the "extra" shares come from? "Fails-to-deliver" hedging by the option market makers who sold massive numbers of put contracts, and "hedged" by selling millions of Bear Sterns shares that did not exist.
A special thank you to the SEC, which eliminated the "uptick rule" allowing shares to be sold short to further exagerate any market decline, and which doesn't require actual shares to be borrowed before they are sold short.
Here is a novel idea. Until the "credit crisis" is over, don't allow anyone to sell a single share of stock they don't actually own. A bit drastic perhaps, but so is the complete destruction of the US economy in order to guarantee trading profits to Wall Street insiders or Islamic terrorists.