I’m sitting here trying to read something, but I find myself looking over at Casino Royale (the Bond flick) that my girlfriend’s watching on TV.
At one point someone mentions that certain people made huge amounts of money on Sept. 12, 2001 from the damage the attacks had done to the airline business in the US. Is this true? Sorry, I can’t give more info on what was actually said in the film. Like I said, I’m only half paying attention.
There is a persistant rumor that prior to 9-11 a large number of shares of airline stocks were “sold short”, that is, were bet upon by the seller to have the price go down. Through some statistical analysis, it was allegedly proven that the number sold was so much more than the normal amount that it was prima facie evidence of prior knowledge. Supposedly a secret Securities and Exchange Commission report details this. Googling for this will lead you to some conspiracy sites that are frankly repellent, and I’m not posting a link, but that’s where it started, and you can google from there.
According to Snopes, this is not true.
This is why I hate Snopes. If you read the article carefully, it turns out that it’s perfectly true that people made money short-selling the airlines just before 9/11, however the Feds investigated the trades and decided that they were legitimate. Whether the 9/11 Commission’s conclusion is good enough for you is another matter entirely. AFAIK, they’ve never revealed who did make the trades, or why this person thought that United and American would tank.
People make money short selling something every day. I made a passle that way last week . The issue in this, or any other case, is whether there was an unusually large amount, distributed in an unusual way, and identifiable reasons why somebody might have had actual foreknowledge.
As an airline industry insider back in 2001, I can tell that in the couple months before 9/11 it was pretty obvious the stocks were overvalued. The whole question was how long it’d take for the eventual correction to happen. Some folks sold short in July & were doubting the wisdom of their decision on 9/10. Some folks got lucky & sold short on 9/10.
I have no clue whether or not anyone had any foreknowledge of Al Qaeda’s plans. But I assert that the mere fact some people sold short the day prior does not ipso facto prove they had foreknowsledge. It appears the Feds agree with me.
But people short stocks all the time. It is not an unusual transaction. The investigation merely went to see if there was any pattern on purchases (i.e., if people knew about 9/11, and wanted to profit on it, then the number of shares shorted would be larger than normal).
Could one or two people in on the plot have shorted airline stocks? Sure. But it wasn’t enough to show up as a pattern.
I can tell you that I tried and ended up losing my ass. I invested my life’s savings up to that point (I was only 20 years old but I had a few thousand saved up from working in restaurants and such) in USAir stock and lost it all.
Me: I want to buy all the USAir stock I can afford
My broker: I don’t think that’s a good idea
Me: Oh yeah?! I think it’s a GREAT idea. It was $35 a couple weeks ago and it’s $5.12 now. It’s got nowhere to go but up!
My broker: Don’t do this.
Me: Buy the damn stock.
Shortly thereafter USAir declared bankruptcy and voided all of that stock.
Your broker is clearly at fault here. You should sue him for not advising you strongly enough not to do this.
Stranger
As for the o.p., in Casino Royale the alleged short selling is a plot point for how Le Chiffre ends up losing his shirt (or rather, the shirts of all of the terrorists and revolutionaries who trusted him with their money) because Bond stopped the destruction of the SkyFleet prototype (which is a transparent analog to the Airbus A380). Because he lost on the shorts (as his advisor/money launderer told him, “No one expects this stock to go anywhere but up,”) Le Chiffre is forced to play in the high stakes poker tournament at the eponymous casino in hopes of winning back the money that he owes, which sets in motion the plot that Bond beats him (or at least forces him to lose), forcing him to surrender himself to the Service. (This doesn’t work out quite so well in practice, owing to the duplicity of Vesper. Bond should have known better, especially with the business of her not having a “tell”, but then, it usually is a chick that gets you into trouble.) It is implied that Le Chiffre and the (fictinonal) Organization he represents had similar inside knowledge about the 9/11 attacks, and that they may have been in some way responsible for those attacks as well as the “entire network of terrorists” for whom they’re trying to figure out how they’re funded.
Stranger
Also remember that the markets were not open on Sept 12, 2001. Thus, you couldn’t buy to cover your short position after Sept. 11.
Why? This was a non solicited transaction.
That’s what I said!
Because he didn’t follow up “I don’t think this is a good idea,” and “Don’t do this,” with “Holy fucking Christ in a Jello-brand Pudding Snack, are you out of your ever-living mind? Do you realize that the entire airline industry post-deregulation is one big floating bubble, and it was just popped by a cardboard cutter? If you do this I’m going to kill you in your sleep, burn down your house, and piss on the ashes!”
That’s the Chicago way.
Stranger
Then Cisco would have said, “By golly you’re right! Let’s buy more on margin!”
Without selling short you could have purchased American Airlines stock after 9/11 after it tanked and waited 5 years for it to double. Like all investments timing is everything. If you bought it in Mar 2003 and waited 2 years it went up 21 fold.
Sep 11 2001 – $29.70
Sep 17 2001 – 18.00
Mar 12 2003 – 1.41
Nov 12? 2006 – $30.58
I had a chunk of change sitting in the bank at the time but couldn’t bring myself to buy it. Could have used it now given the pasting my last 2 companies took. It’s around $7/share today. Hmmmm.
That wouldn’t be a factor. With the markets closed, it was just as if it were a weekend; you’re not expected to do any trading.
What I came in to say (with much less actual knowledge of the intricacies of stock market maneuvers and finance and stuff). In the days after 9/11, it became apparent that the govt wasn’t going to let AA and UA disappear into the abyss and cripple US aviation. So it could be argued that a perfectly normal strategy would be to buy those stocks at some point and sell once they had begun to rebound. No pre-9/11 short-selling required.