RE: RE: RE: Combating the shorting of PM stocksYou see when you borrow shares to short , you pay margin interest on those shares that are short sold. Its not free, and the longer the shortsell stands the more it costs
What I find wrong is why does the broker get to keep the margin interest. I think most of this margin interest, if not all of it, should be transferred to the company whose shares are shorted.
(Yes, the company as it would be logistically impossible to determine exactly which individual's shares are actually shorted since the shares are held in street name . Moreover, by the company receiving the margin interest proceeds, the shareholder is rewarded indirectly as his company now has an improved cash position.)
Has the broker compensated the shareholder for the right to borrow his/hers shares to lend to someone else? Of course not. I know that when money is deposited in the bank, the bank has the right to lend it out ( most of it, as it as it must keep within its reserve requirements, of course). This right doesn't come free. It is acquired by paying the depositor interest. So why are are brokers getting a "free lunch" at our expense? I find that very upsetting.
So when you shortsell a stock that pays a divvy , the buyer of those shares will demand their dividend . So on top of the margin interest the shortseller has to pay the buyer the dividend, when it comes due.
Notwithstanding the logistics of it, Jesse's idea of miners paying dividends in metal, such as gold or silver, is brilliant. I can just see the shorts scrambling like hungry squirrels to acquire physical gold and silver, and with the physical taken off the market, prices going higher and higher. I love it. What the heck is Hecla waiting for? Though I have never owned it, I must say that I found it very disconcerting, it being mostly a silver producer, when it was reported last year on zerohedge that Hecla was on some top 20 list of the most shorted stocks on the NYSE.
It is my personal belief that naked shortselling is fraud ( selling something you dont own with the pure intent to manipulate the price down ) and the best way to stop that would be to give the perpetrators jailtime in a mexican jail.
I had in mind a Turkish jail a la Midnight Express.
P.S. Thanks, Sunwood.