Replies to post #351 on ***Galapagos Islands*** (SWALLOW)

[JXM]

Think of shorting like money lending.

If I borrow 100,000 from a bank and put it in my account, the bank can use that 100,000 to give another loan (I forget the exact ratio). Let's say $50,000 for the new loan. Then the bank can use that 50,000 to give another 25,000, then 12,500, then 7500.

that's how the money supply is expanded when the fed injects money into the system.

Now apply that to stocks.

Let's say that a stock has a float of 100,000 shares. If I short 50,000 shares, there are now 150,000 shares held by shareholders...those shares are available to be borrowed to short more. I'm not sure if there are some mechanisms to help avoid this situation, but I have seen several occasions of short interests over 100%.

Usually this happens when someone is absolutely convinced that it is going to zero. Cuz a total collapse of the company is the only way that they will ever make money. When that $21 support level breaks, I believe that will be the sign that it is going to have a dramatic fall.