Who are the biggest short sellers in Automotive Stocks!
You will be very surprised when you analyze the negotiation all these people are doing. Until you build a composite options position that mimic the behavior and negotiations done on the behalf of the employees and car companies.
The biggest short sellers in Automotive Stocks!
Let me explain, then show you who they are: Short selling or short sellers are someone or entities that cause the company to sell stock equity position to raise cash or use cash to defend its stock position to pay out for the contract position the opposing person or entities holds.
Who are these short sellers? You will be surprised to find out!
Question:
Who or which organization cause the biggest out pouring of cash as a company is tanking?
Which organization cause more stock to be sold to raise cash or use cash to shore up the contracts positions?
If a person or entity sells out-of-money calls with no stock positions, that would be considered a shorting the stock. As the stock plunge downward the short call gains in value and the person never puts up the cash to purchase the companies stock. What negotiated contract behaves exactly like this stock shorting position?
Example #1:
Union employee buyouts and executive golden parachutes are huge short positions against a company in trouble, when a company is tanking it must cut expenses, to cut expenses the company must layoff workers. The unions and executives have negotiated very favorable exit strategies; just like the executive golden parachute the unions have one too. In auto companies like GM and Chrysler the union workers can get almost one year(s) worth of salary without working. That’s $105,000 per employee. To collect this amount of money you must make the company tank go out of business or start losing money. If you do not want to work and get paid, by doing shoddy work and work stoppage you get paid more. So if union workers collectively discovered they can all produce poor workmanship products, make a company tank, lose money and collect $105,000 in their layoff, what do you think they will do? If they struggle with the company they have to work harder and maybe less pay. If they force the company to fail, they get immediately paid a huge sum of money. This is a short position because the people, who collect on this contract, must cause the company to collapse or lose money. They do not make money if the company grows or is stagnant or slightly losing market shares. According to GM, Chrysler and Ford these exit plans have cost the company and stock holders $10 billion per month! Show me one other market short seller on the stock market that had a larger short position on automotive stocks, than the unions and executives?
So Senator Chris Dodd, when you congratulated the Union president for negotiating this abusive labor contract position, you are encouraging, poor workmanship, poor work ethics, poor business practice and poor judgment on your part protecting the general public and stock holder from abusive labor contracts. Honestly Mr. Chris Dodd, why would anyone purchase a product from a company that puts incentive for its workers to destroy a company, produce poor quality products at a higher price and punish the stock holders of the company and the general public? Please Mr. Chris Dodd, help me understand your position.
The unions have effective negotiated not one but multiple short positions on these companies. An out-of-money short call behaves exactly like this. A person or entity that does not have or own the stock and never buy the stock, takes the action to sell an out of money call to collect if the company goes down!! That’s a short seller and that is the unions and executive golden parachute!
Example #2:
The union pension plan with government protection. Every month the unions have retirees that collect on the pension plan. The union and company understand there are fewer workers in the Big 3 Automobile companies in the future, this is not a secret. The pension plan payout will have to get reduced because the number of retirees as a function of active workers is growing; less and less works have to support a larger population of retirees. What financial instrument behaves like this pension plan model negotiated by the unions and government?
The financial model that behaves like the Union Pension plan is a synthetic collar around an underlying stock, with the person managing it selling short calls every month against the stock. The stock is the pension plan and just like the Big 3 auto companies the stock is tanking. A synthetic collar is a put protection is purchased, like the government protection on the pension; it covers the down side at 65%. Then every month a short call is sold against the stock. Every month the pension has to pay the retirees it just like selling the short against the stock. A short call and a long put against a stock. It is a bear position that is protection against the down side movement of the stock. The put protection is only good for limited time because of time decay on insurance policies. So how does one get maximum payout with a synthetic collar? Exactly the same way union workers do, damage the underlying company to destroy the stock and force the put protection value upwards. How can the union get maximum value out of the pension plan at a guaranteed rate, destroy the company and get the government to step in at 65% value protection! That is an immediate payout!
The government and the Union basically have a huge short position on the Auto Companies.
Example #3:
The government want in return for it’s bail out plan preferred stock with guaranteed interest and down side protection, the stock has a face value that can be redeemed if the company tanks.
Well, what financial instrument behaves like this model? A GIGANTIC FOR SALE SIGN, THAT STATES STOCKS FOR SALE UP AND STOCKS FOR SALE DOWN, with dividend payments!!
What financial instrument looks like a gigantic "For Sale Sign" with protection of the underlying stock and guaranteed interest payments?
Again it’s a synthetic collar with an underlying stock. Effectively the government is buying the stock and giving the cash to the company. As soon as it receives the underlying stock it begins to sell short calls against the stock to collect interest and the government buys a 3-5 year leap put protection for down side insurance. To me that financial instrument looks like a huge "For Sale" sign. The government is telling me, they want to short against the company short term and collect rent or interest payment, then they want to plunge the stock downward because they have in-the-money put protection that provide them more income if the company fails!!
All these f’n bastard are telling investors to put invest in long term, buy American; then why are Unions parading in front of companies with policies that look like short sellers pushing the stock down, why are executive looking more like short sellers with down side protection, and why is the government out there holding the biggest Bankruptcy for Sale sign in front of the company. It gives me so much confidence as a retail investor with several thousand dollars to invest in a company with 4-5 million union workers, all the executive and the government picketing in front of the Automobile Companies with Bankruptcy for Sales signs!!
Dearest Mr. Chris Dodd,
Do you know how to take down the governments "For Sale" sign and look more like a long term investor to give people confidence to invest in the Automobile Companies?
Dearest Automobile Company Executive,
Do you know how to take down your "For Sale" sign and look more like an investor than someone with huge down side protection and someone who will get paid if the company fails?
Dearest Union President,
Do you know how to take your hand out of the cooky jar and look like someone looking out for the welfare of its labor union and the company instead of an idiot with a "For Sale" sign in front of the company?
Concerned Small Time Retail Investor!