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Several times today, starting before the market opened, I heard the sentiment expressed that "there is one thing we all can do for America, and that's buy stocks. Don't sell; you're siding with the terrorists if you do".

And my immediate response was "WHAT?!?"

I agree with the general point that over the long term, this too will pass. If your investment strategy revolves around broad-based indices that are held for the distant future with little or no attempt at market timing, then yes, you might as well hold on. Trying to time the market during a period of high volatility is a dangerous prospect that can cost you a lot. Also, now might be a good time to go hunting for bargains, stocks that are being pulled down more on current events than on the company's fortunes.

But...

The markets don't exist primarily to make me (or anyone) feel good. They exist to allow investment in corporations, as an engine of finance. In fact, the free and unfettered workings of the equity markets contribute tremendously to making our country the world power that it is.

Some companies will be badly hurt by recent events, and some may even be driven to bankruptcy. Does it make me a patriotic American if I watch the value of my holdings in those companies drop to zero? What good does that do?

If you want to be "patriotic", then give blood. Donate your time and services to organizations that will help the victims of this horrible act. But don't hold on to position that you truly believe will decline in value, solely because you want to be a "good American". If you want to give up money, do it the right way: give it directly to the Red Cross or other groups who can help people.

America isn't served by some misguided attempt to "prop up" the market for reasons unrelated to making a profit. America is best served by having the free, unconstrained capital markets that have made this country the place of choice for money from all over the world. Those markets have given us the largest economy in the world. Democracy ain't always pretty, and neither are stock markets, but in the end, they make us more powerful, not less.

Go long or go short, depending on your investment strategy, the time frame of your trades in that strategy, and your belief about future events. If you want to show your patriotism, then fly a flag and donate your time and money. The stock market isn't about "showing patriotism", it's about promoting capitalism.

And last I checked, by promoting capitalism I am being a "patriotic American".

-synchronicity
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synchronicity: I heard the sentiment expressed that "there is one thing we all can do for America, and that's buy stocks. Don't sell; you're siding with the terrorists if you do".

I think that patriotism is probably the last refuge of bubbleheads.

This reasoning is related to some of the confused ideas that accompanied the stock market bubbles of 1929 and 1999: the business is the stock, so if the stock goes down the business will be hurt, if it goes up the business will be helped; selling makes the stock go down so sellers are evil; we can keep stock prices up if we just all work together.

I think it's fine to reassure your Aunt Agatha and tell her not to sell her shares. But the people exhorting complete strangers, "Don't sell, don't sell, don't give the terrorists the satisfaction of a lower stock price," are at best mild hypocrites (because they advocate long-termism but evidently can't stand to see a dip in the quoted value of their portfolio) and at worst extreme hypocrites (because they plan to sell their own stock pronto.)
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<<Several times today, starting before the market opened, I heard the sentiment expressed that "there is one thing we all can do for America, and that's buy stocks. Don't sell; you're siding with the terrorists if you do".>>


I bought into this and did not review my portfolio. I didn't prepare to buy or sell.

I realized in mid-morning that the world had finally realized the value of a stock I bought a couple years ago. VSNX

I tried to sell half at noon and never got my price.

Damn I hate that.

Don't get down on me. If it had sold, I would have supported the economy in my new hot tub by the end of the week.
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<<I think it's fine to reassure your Aunt Agatha and tell her not to sell her shares. But the people exhorting complete strangers, "Don't sell, don't sell, don't give the terrorists the satisfaction of a lower stock price," are at best mild hypocrites (because they advocate long-termism but evidently can't stand to see a dip in the quoted value of their portfolio) and at worst extreme hypocrites (because they plan to sell their own stock pronto.)>>


I realized long ago that the airlines were making money in the best economy of my life. Great growth, strong market, low interest, low fuel, labor peace, low inflation, and low unemployment.

I don't want to own a business that is so dependent upon the planets aligning to make money.

If I had been stupid enough to own an airline stock, I would have sold today and been proud to have come to my senses before bankruptcy.
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Don't get down on me. If it had sold, I would have supported the economy in my new hot tub by the end of the week.

Damn. I sold all my stock in hot tub companies long ago after seeing Trick's port go down the drain.

Even worse, my "free" money now is all going to the "buy a house" fund, and if the Fed cuts rates any lower, I'll have to take it out of a money market fund and put it in a piggy bank.

-synchronicity
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. If it had sold, I would have supported the economy in my new hot tub by the end of the week.

I'll spring for the water! (Barely)

I too was a bit confused by this idea that a drop in our market indices means anything. I'll admit, I was tempted by the rhetoric, and considered throwing $20-$30K back in just to be patriotic. Then I realized it's just a market and what difference does it really make if the price of GE is $30 a share or $20? How does that threaten national security?

I will appreciate it if someone can educate me on this. I really don't get it.

Rick
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I think that patriotism is probably the last refuge of bubbleheads.

Maybe, but I for one had a hard time shorting the airlines (I didn't).

If you did, you're a schmuck. With a capital UCK.

Period.
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<<Maybe, but I for one had a hard time shorting the airlines (I didn't).>>


What, no up tick?
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Then I realized it's just a market and what difference does it really make if the price of GE is $30 a share or $20? How does that threaten national security?

Exactly, Trick. But more to the point, I believe, is that given the majority of people killed worked in some way with the financial markets, I reckon they would want to see people go about their normal business in the markets. Making and losing money.

Further, if one is not prepared, at least from a short-term trading aspect to buy and sell because of the emotions, then they shouldn't be in the markets. It is a job for some of us.

What I find perplexing is that by panicking and cutting interest rates, the central banks are beginning to see this as a financial crisis rather than the political and military one it was and is.

Just my 2 cents.

Bullet



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warisproduct: I for one had a hard time shorting the airlines (I didn't). If you did, you're a schmuck. With a capital UCK.

It didn't really occur to me to be honest, I spent more time wondering if they were cheap enough to buy.

But why would a short seller be a schmuck with a capital UCK? He neither picks your pocket nor breaks your leg... nor the pocket and leg of America collectively. A short seller does not inconvenience anyone except someone else who planned to sell that day. Why is one seller more patriotic than another?
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Why is one seller more patriotic than another?

No, that's not what I meant. I think there was a "gentlemen's agreement" not to short stocks. If you sold your Boeing shares, that's fine, and probably prudent but neither patriotic/un-.

Nobodies expecting you to take a bullet for them. But shorting...

I guess your argument is that the guys selling were kinda schmucky too... I don't know, it just seems like one position is profiting, while the other is avoiding loss. Anyway, it would be a crappy time to own airline.

What made you decide not to buy? general uncertainty?
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Hey guys, check this out. This is the company the shorts are keeping?

http://cnnfn.cnn.com/2001/09/18/news/osama/

;-)
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Hey guys, check this out. This is the company the shorts are keeping?

Geez, some people just get in a CEO's confidences or find a way to read confidential legal or accounting documents to determine material events in advance.

Well, if all else fails, we can always throw a bunch of people in jail for "insider trading".

-synchronicity
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Maybe, but I for one had a hard time shorting the airlines (I didn't).

If you did, you're a schmuck. With a capital UCK.


I don't see the problem. One could argue that you helped drive the price down by selling, but then again you also helped drive the price up by buying when you closed your short position.

Making money almost always involves risk. By shorting a stock, you are accepting a certain amount of risk (actually, unlimited risk) in hopes of a return. Your broker is willing to allow you to short stocks, thereby accepting risk himself (opportunity risk), also in hopes of a return. If a particular stock is deemed too risky, they won't let you short it. They won't let you buy certain stocks on margin for the same reason.

If a broker's risk-management people decide it's okay to allow shorts on certain stocks, why is it bad to accept they service they are providing? By not shorting the stock, you're not allowing them to take risk, and therefore hopefully (for them) make money. Is it bad for your broker to make money?

To be clear, just because they allow you to short stocks doesn't mean you should or even that it's a good idea. I'm saying that brokers allow you to short stocks because they believe they can make money doing so.

Looking at it another way, let's say you short 100 shares of XYZ stock at $100. That same morning, the price plummetts to $60 and you close the position. At the beginning of the day, your broker had $10,000 worth of XZY and ended the day with $6000 and collected a comission from you. If you hadn't shorted, your broker broker would have started the day with $10,000 worth of XZY and ended the day with $6000, and no comission. So who felt pain from you shorting?


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Looking at it another way, let's say you short 100 shares of XYZ stock at $100. That same morning, the price plummetts to $60 and you close the position. At the beginning of the day, your broker had $10,000 worth of XZY and ended the day with $6000 and collected a comission from you. If you hadn't shorted, your broker broker would have started the day with $10,000 worth of XZY and ended the day with $6000, and no comission. So who felt pain from you shorting?

Dude, you profit from terrorism. Is that such a difficult concept? That maybe there are better ways to make money?

That money you earn just magically appears? You're going to spend it on 'I love NY' shirts on ebay?

I don't see the problem. One could argue that you helped drive the price down by selling, but then again you also helped drive the price up by buying when you closed your short position.

Oh brother.

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<< If you hadn't shorted, your broker broker would have started the day with $10,000 worth of XZY and ended the day with $6000, and no comission. So who felt pain from you shorting? >>

Dude, you profit from terrorism. Is that such a difficult concept? That maybe there are better ways to make money?


No, you don't "profit from terrorism", but I'll leave that aside. You're right, we should BUY stocks. Heck, I'll go out and buy a thousand shares of UAL! Oh, wait, my wife already has some UAL shares. In her ESOP account. Because she works for United. Who is reportedly going to cut about 20,000 jobs. (20% of their workforce).

If I see that a company is likely to drop in price, I'm going to short it. Period. And no, that's not "un-american". That's why we have equity markets. Or would you rather we put up a comprehensive ban against Americans selling US equities? Yeah, that would be so much better. I'm sure that would really have great long term effects on the US economy.

(Sorry, I'm normally more even-tempered, but as you can guess, things are a little more tense than normal).

-synchronicity

BTW- anyone else ticked hearing the airlines crying like babies for a bailout? Maybe if we'd had a commitment to spend a decent amount of money on domestic airline security, none of this would have happened. It's not the airlines fault, it's the fault of evil fanatics, but it would have been at least a little more difficult.
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If I see that a company is likely to drop in price, I'm going to short it. Period. And no, that's not "un-american". That's why we have equity markets. Or would you rather we put up a comprehensive ban against Americans selling US equities? Yeah, that would be so much better. I'm sure that would really have great long term effects on the US economy.

Well, I'm not the only one talking about this. CNNfn and CNBC both mentioned "gentlemens agreements" to control shorting. A six year old in Iowa could make money shorting UAL, big deal. It's not smart.

As far as selling is concerned, that's not what I'm talking about. Now, you may not have a problem with shorting airlines, that's your call. Personally, I'd rather be able to look at myself in the mirror. I never mentioned anything as being "un-American." The opposite may in fact be true.

I'm just struggling with my new found morality in this period. And I'm not suggesting any enforcement or regulatory action. I'm just saying you may be a schmuck for shorting them. If you had a short before this happened, then thats perhaps another story.

BTW- anyone else ticked hearing the airlines crying like babies for a bailout? Maybe if we'd had a commitment to spend a decent amount of money on domestic airline security, none of this would have happened. It's not the airlines fault, it's the fault of evil fanatics, but it would have been at least a little more difficult.

Hindsight's 20/40. But what would you suggest? Let them fail? I'm pretty sure that airline travel is integral to our economy, and given the recent turn of events, the obstacles to entering the market are staggering.

I know they're getting about 8billion less than they asked for...
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warisproduct: Dude, you profit from terrorism. Is that such a difficult concept? That maybe there are better ways to make money?

Dude, you only profit from terrorism if you were short prior to the attack.

By Monday everybody had ample opportunity to learn about the attack and consider the ramifications. Any short sale (or other sale) that took place then had an informed seller that thought the stock was too expensive and an informed buyer that thought the stock was cheap. Who was right? Who knows. In the short term, maybe the buyer. Eyeballing the chart, it looks like if you shorted AMR at the open on Monday, as of now you've lost maybe 25% of your money.

warisproduct: A six year old in Iowa could make money shorting UAL, big deal.

Baloney. Unless this Iowan six year old is also a member of Al-Qa'edah, he doesn't get to short sell before the attacks. Look at the chart. UAL has been flat-to-slightly-up this week, no shorting profits there so far.
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[emailed and posted]

Now, you may not have a problem with shorting airlines, that's your call. Personally, I'd rather be able to look at myself in the mirror. I never mentioned anything as being "un-American." The opposite may in fact be true. I'm just struggling with my new found morality in this period. And I'm not suggesting any enforcement or regulatory action. I'm just saying you may be a schmuck for shorting them. If you had a short before this happened, then thats perhaps another story.

Well, as RJMason has mentioned, you probably would have lost $ on a short, since the airlines opened Monday gapping down a ton. But that's an aside.

My wife works for United. I've learned a lot about the company, and it's been poorly run for a while. Labor-Management relations are atrocious. UAL has ticked off the pilots, the flight attendants, the mechanics, and now it looks like they'll also piss off the ramp and other service personnel.

I'm not a sop for the unions (I get to read the union propaganda rags, and laugh at some of the "class struggle" cr*p they foist off as objective journalism), but it's easy to see that United's management has had it's collective head up its collective backside for some time. They were hemorrhaging money before the terrorist attacks, and still have the potential for labor strife with the IAM union.

(Just watch, they'll use the attacks as an excuse to label IAM as "un-American" and take a hard line in the contract negotiations that have been going on for over 18 months.)

As a "customer", I get to fly for free, and there are times they've ticked me off. If I'd plunked down $500+ for a ticket...

So, I have many reasons for thinking airlines may not be great investments. But maybe now the price is right. Only 70%+ off from 2-3 years ago

Which segues into the next bit:

<< BTW- anyone else ticked hearing the airlines crying like babies for a bailout? Maybe if we'd had a commitment to spend a decent amount of money on domestic airline security, none of this would have happened. It's not the airlines fault, it's the fault of evil fanatics, but it would have been at least a little more difficult. >>

Hindsight's 20/40. But what would you suggest? Let them fail? I'm pretty sure that airline travel is integral to our economy, and given the recent turn of events, the obstacles to entering the market are staggering.


Again, my view of United predates recent acts, but here goes. I agree that we can't just let all the airlines go broke. However, many airlines have done a less than stellar job running their businesses. Yes, the industry is cyclical, and yes, this attack was fairly unexpected and will hurt them more, but...good businesses manage risk (there's those words again) so that they can mitigate damages from unexpected events. Have the insurance companies been asking for federal bailouts yet? I haven't heard about any, but they're going to be on the hook for LOT of money. If they can manage their business well, then why can't the airlines?

Plus, some relief may be in order, but I can't see simply writing a blank check. I you bail them out, what's to stop them from making similar mistakes in the future? It's like a young spendthrift who always gets extra cash from mommy and daddy when he (or she) runs out. Why learn to save when Uncle Sam will give you a check? I thought the idea of deregulation was to SAVE the government money and increase consumer's options.

-synchronicity
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RJ: By Monday everybody had ample opportunity to learn about the attack and consider the ramifications. Any short sale (or other sale) that took place then had an informed seller that thought the stock was too expensive and an informed buyer that thought the stock was cheap. Who was right? Who knows. In the short term, maybe the buyer. Eyeballing the chart, it looks like if you shorted AMR at the open on Monday, as of now you've lost maybe 25% of your money.

Well, most firms would have allowed you to short on Monday in the interest of capitalism. Whether available shares existed, we'll have to assume they did.

All of this is disregarding after hours trading. You could have shorted and made quite a bit since both stock opened significantly higher on Tuesday. This suggests that after hours prop'ing, ahem buying
occurred. But that's another story...

AMR: Today: unchanged with a range from 21 – 18.5 (12%) last uptick at 9:40am. previous range: 20 – 16 (20).
UAL: Today down 1.2% with a range from 20 – 18 (10%) last uptick at 9:40am. Previous range: 20 – 17 (15%).

Now, it may have been risky, but it was certainly possible to make money on these stocks. Considering both stocks opened on Monday at 60% of their previous closes (really, they're eerily similar) you couldn't bet on making the real killing, but 15 – 20% ain't bad. Even if you went on the minimum round, you could have made 400 dollars.

Baloney. Unless this Iowan six year old is also a member of Al-Qa'edah, he doesn't get to short sell before the attacks. Look at the chart. UAL has been flat-to-slightly-up this week, no shorting profits there so far.

Do restrictions on short selling require you to maintain the short for at least two days? My six year old may have been dumb enough not to close his position, who knows. But it's possible, right?

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Why learn to save when Uncle Sam will give you a check? I thought the idea of deregulation was to SAVE the government money and increase consumer's options.

It may not be too outrageous to suggest that the airlines go gov't regulated from now on. I wouldn't mind that, would you? Seeing as how we're paying for them anyway...

Excellent post, btw.
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war: Now, it may have been risky, but it was certainly possible [for a short seller] to make money on these stocks.

Sure. In the case of UAL, you'd want to initiate your short around 11:30 or so on Monday morning, then cover the position minutes before the close. On Tuesday you'd wait until the peak at 1:00 to short, then again cover right before the close. On Wednesday you'd short at the open, then cover no earlier than 11:00 but definitely no later than 3:00.

But then, you're not making a profit from terrorism, you're making a profit from your Magic Eight-Ball.
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But then, you're not making a profit from terrorism, you're making a profit from your Magic Eight-Ball.

I'm not so sure. It was fairly apparent that the airlines were going to take a hit, and most people would have only done intraday shorts, given the opening at 60% off the previous. You could have anticipated an opening panic and made money. I mean, this isn't CRA at 270. You'd figure that one day was all you really wanted.

Now, it's plausible that there were many people who felt as I did and prop'd up the airlines in the interest of burning up the shorts. In that scenario, I concede that my objections are moot.

But it wouldn't surprise me if the airlines continue to take a hit. They can't prop them forever.
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Something else has occurred to me, dude.

Me: You profit from terrorism. Is that such a difficult concept? That maybe there are better ways to make money?

RJ: By Monday everybody had ample opportunity to learn about the attack and consider the ramifications. Any short sale (or other sale) that took place then had an informed seller that thought the stock was too expensive and an informed buyer that thought the stock was cheap. Who was right? Who knows. In the short term, maybe the buyer. Eyeballing the chart, it looks like if you shorted AMR at the open on Monday, as of now you've lost maybe 25% of your money.

This objection is irrelevant. My original point should have been that anyone who SEEKS to profit off the events of 9/11 is a schmuck. Whether or not you actually made money is another story. If you woke up on Monday thinking "I'm gonna short the airlines, or the insurance agencies!" then you are a schmuck.

Of that, I'm certain.



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you woke up on Monday thinking "I'm gonna short the airlines, or the insurance agencies!" then you are a schmuck.


Whatever. Make money where you can.

Moday morning was a shocker for me. I expect things to be somewhat down, but imagine my surprise when one of my more conservative investements was down about 30%, from $30 to $20. It was AAON, a maufacturer of air conditioners in Tulsa, Oklahoma. What the hell was going on? Was the CEO in NY that day?

Turns out that a company called AON Corporation, an insurance company, was located in the WTC. I have no idea how AON fared, but AAON recovered most, but not all of that loss, closing at around $28. It'll be ok, but I'm glad I didn't panic, and feel sorry for anyone who did.


vuelta
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Turns out that a company called AON Corporation, an insurance company, was located in the WTC.

They've got lots of other offices, to. One is practically across the street from me.

Forgot they had a presence in WTC.

Cr*p.

-synchronicity
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Whatever. Make money where you can.

"Byaaaaaatch"

http://www.y2khai.com/khai04.html

I bet you people are a bunch of libertarians, aren't you?

warisprofit

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I realized in mid-morning that the world had finally realized the value of a stock I bought a couple years ago. VSNX

I tried to sell half at noon and never got my price.

Damn I hate that.


Dang Scub, glad you didn't get your price. This thing is out of control. Congratulations.

Rick
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