Monday, October 20, 2014 11:14:36 AM
Churning is another term making numbers that are not real to make it seam real. Your middle man is a good example of this you sell him a bill of goods, it don't move you take it back at a loss and pocket the depreciation in the retail, wholesale, manufacturing cycle.
Well it is not much different here with equities and depreciation of assets the shares them selves and the government selling and buying the shares creating a market but the company the issuer " the manufacturer " and Joe public being the retail component of the trade.
the thing is the depreciation of the trade between the clearing house and the company taking the shares back from the clearing house at a plus cost to the clearing house and a depreciated cost to the company that can claim a tax gain on the depreciation.
The government is not going to loose money on a trade but in good faith has allowed both the retail investor to recoup a tax benefit against earnings as well as the company buying back shares from the clearing house.
Note never has the company bought back shares from the public. This is important in understanding how rules are understood and why a degree in law is very helpful in understanding them but not like anyone who thinks about it can't see past there interpretation.
Now there is the argument that the government is the people and that it is still unlawful for a company to buy shares on the open market but because they represent all shareholders in there purchase including supporting liquidity to the seller then why not.
To tell you the truth I really don't know what is the truth as to whether a company is also due noted as a insider being it is an entity in itself so I would conclude they can't support liquidity in there own offering that it would have to be government it self who would have to support liquidity in a company heading to ruins.
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