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From: eba@netcom.com (EBA)
Subject: A Day Late and $75 Trillion Short?
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Date: Sat, 3 Sep 1994 21:35:07 GMT
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The following was the tail end of a discussion about DOW 4000:


: >This blow-off has been triggered by the shorts running for cover.
: >Traditionally, that's the last gasp of the bull. Now that the shorts
: >are being squeezed, nobody's left to fuel stock prices higher.
: >And don't count on Greenspan to help the bulls!!


... "Shorts running for cover" generates -buying-, not -selling-.
: "Shorts" are people who have "shorted" stock, because they think it is
: going to go down.

: "Shorting" means borrowing stock without paying for it, and then selling
: it to someone else. The person who is "short" has to eventually return
: the stock to the person from whom he/she borrowed it, which means that 
: he/she has to eventually buy it back in order to be able to return it.
: But, if the stock went down as expected, he/she pays less for the buy-
: back than he/she received for the original sale, and thus makes a profit.

********

As long as the discussion is about shorting, here's something to ponder. I
should say first that there's a "trick" question at the end, one which
none of about two dozen eggheads in international finance was able to
answer: 


1. Everyone who has borrowed in dollars on this planet is "short" dollars,
right? Like those who are short stock, those who are short dollars are
hoping to pay off their debt in cheapened currency. Inflation is their
friend. 

2. Countless trillions of dollars have been borrowed, much of it in such
obscure ways that few can comprehend that borrowing has even taken place; 
probably, we can't estimate the total amount of borrowing to within $10 or
$20 trillion -- or maybe even $50 trillion when you toss in what 
Uncle Sam's on the hook for a few years down the road. And don't forget 
all that greenback borrowing being done in the Eurodollar market, 
where the dollar sums dwarf even those of the U.S. bond market, and for 
which there is no "printing press" money to bail out the wicked or the 
unwise.


Now for the question:

Has all that borrowing created the potential for a global short squeeze on
the dollar some morning/afternoon/evening. It would necessarily be a day
when, for whatever reasons, lenders were especially anxious to have their
dollars returned, but the cash needed to do this was simply not around. 

Rick Ackerman

********

