Convertible Bond Investors Are Natural Shorts

MSTR drop today is the result of Convertible Debt holders shorting to delta neutral. Grok— Buyers of MicroStrategy (MSTR) convertible debt often use **convertible arbitrage**, buying the debt and shorting the stock to hedge risk. The offering was announced February 18, 2025 (yesterday, as today is February 19). ### How It Works Convertible debt can be converted into MSTR shares. Hedge funds buy it and short the stock to offset stock price drops, aiming to profit from volatility and interest. ### Timing 1. **Announcement (Feb 18)**: MSTR reveals the offering. Investors analyze but don’t act yet—terms aren’t final. 2. **Pricing (Feb 18-19)**: Terms are set soon after, possibly late Feb 18 or early Feb 19. Buyers subscribe via underwriters. 3. **Shorting (Post-Pricing)**: They short MSTR stock after securing debt, likely late Feb 18 or early Feb 19, based on the bond’s delta. 4. **Settlement (T+2)**: Debt settles (e.g., Feb 20), but shorting starts earlier. ### Likely Timing - **Debt Purchase**: Committed late Feb 18 or early Feb 19, settled later. - **Shorting**: Began late Feb 18 or early Feb 19, post-pricing. ### Context X posts and financial insights note shorting pressures MSTR stock post-announcement. Hedge funds act fast to lock in arbitrage. ### Conclusion Debt buying and shorting likely started between late Feb 18 and early Feb 19, tied to pricing.

Three of Five Classes of COMEX Traders Record Short Gold Futures

http://www.gotgoldreport.com/2013/07/latest-ggr-video-on-youtube-three-of-five-classes-of-comex-traders-record-short-gold-futures.html

CPM Group's Jeff Christian on BNN on eve of gold and silver explosion: Go short

Jeff Christian of CPM was wrong on gold--again.  In fact, the clown has been wrong for a decade. Why he is on financial TV, and why anybody would listen to this pathological liar is beyond me.

http://www.gata.org/node/11741

Here's a link to the video clip:

http://watch.bnn.ca/the-close/september-2012/the-close-september-10-2012/#clip757705

Gross Says ‘No Regrets’ Over Missing Short-Term Bond Rally

Bill Gross of PIMCO says he was early--and not wrong, with his short on US Treasuries.

http://www.businessweek.com/news/2011-06-09/gross-says-no-regrets-over-missing-short-term-bond-rally.html

With $1.2 trillion under management, I think I'll give him the benefit of the doubt.

The COMEX Goes "Extend and Pretend" on JPMorgan's Paper Silver Short

http://truthingold.blogspot.com/2011/03/comex-goes-extend-and-pretend-on-jp.html

Physical Silver (PSLV) Premium To NAV Surges To Record High

http://www.zerohedge.com/article/physical-silver-pslv-premium-nav-surges-record-high

For what it's worth, Blythe Masters is the doyenne of JPMorgan's commodities trading desk.  The huge perma-short position in silver futures must feel like a noose around the neck.

Jim Rickards on the Euro bail out (part 2)

The Euro-bailout and guarantee fund will fail. There are several reasons for this. The initial problem is that governments have borrowed too much and the debt burdens are non-sustainable. How can you solve a debt problem with more debt? All that the program does is to substitute EU debt for the debt of Greece, Portugal, Spain and others. You are replacing national debt with multilateral debt but it's all still debt. And so-called money creation by the ECB is just another form of debt because Euros issued by the ECB are simply paper liabilities of the ECB itself, so-called "notes" so even the money is just debt. Any possible repayment of the debt involves deep austerity, spending cuts, layoffs, higher taxes, reduced benefits and other actions which will definitely cause a depression in Europe and perhaps 25% unemployment throughout the Euro-zone.

The alternative is to print money which will lead to hyperinflation and the collapse of the Euro. So there are no good outcomes. The G20 and the IMF will try to reliquify the system and create new money through the issuance of SDR's. At the same time, people will try to protect their wealth by buying gold. So as paper currencies collapse, the money system will become a foot race between SDR's and gold. Large hedge funds are completely unimpressed with the umbrella for the reasons noted above. They are shorting the Euro and buying gold.

There is one other flaw in the EU plan. In 1992, when George Soros attacked the Bank of England, he did so by selling Sterling and buying dollars. This forced the Bank of England to do the opposite which was to buy Sterling and sell dollars. Since the Bank of England had a finite amount of dollars to sell, Soros knew he could beat them by buying more than they had. However, he needed real money to do this and he was perhaps the only speculator in the world at that time with that much money. Today you do not need money to destroy national finances, you can do this by the creation of synthetic short positions in Euros through the use of credit default swaps (CDS) and other derivative instruments. Goldman Sachs are experts at this. And they can create CDS in potentially infinite amounts since there is no regulation and no margin requirements. In effect, Goldman could create a short position equal to ten times the amount of Euros in the guarantee fund. Goldman can create synthetic short positions faster than the ECB can print money. Therefore, the ECB's plan is doomed to fail because they cannot beat the speculators who can use CDS instead of real money.

- Jim Rickards

John Paulson: hero or villain?

http://www.nytimes.com/2010/04/17/business/17abacus.html?hp

Eager to increase his bets against subprime mortgages, the investor, John A. Paulson, canvassed firm after firm, looking for new ways to profit from home loans that he was sure would go sour.

Only a few investment banks agreed to help him. One was Deutsche Bank. The other was the mighty Goldman Sachs.

Mr. Paulson struck gold. His prescience made him billions and transformed him from a relative nobody into something of a celebrity on Wall Street and in Washington.