Can't Short These Subprime Lenders

Shhh! Don't tell anyone, but I've had a small trading account for about 8 years now. I use it as a way to make more speculative stock market bets. It is purely money that I can afford to lose, and I have considered it part of my financial education. (I opened it when I was 20 years old, but my first few stock trades were in my teenage years via my father's account). I make a clear distinction between that account and the accounts I use for investing.

Anyway, I decided I would try to short a subprime lender or two in this account today because I think there is more pain coming in this sector. However, when I tried to do so in Ameritrade, it told me that there was "no stock available to short" for the particular companies I tried.

Shorting is a way to bet on a stock going down, for those of you who are unfamiliar with it. It can be very dangerous, but I had some limits in mind in case the stocks bounced (hardly likely).

I guess shortable stock runs scarce when these companies implode. One of the companies I was going for in the morning was Accredited Home Lenders (LEND), it ended up dropping another 20-30% after I tried shorting it, telling me it would have been a good bet for a one-day gain.

Some of the stories I read today mentioned that around 13% of subprime loans were delinquent, or had payments 30 days past due. Some others mentioned the possibility of government aid to people who were missing payments on subprime loans. This made me extremely angry.

People who bit off more than they could chew in terms of mortgage payments do not deserve to be bailed out. They deserve to have the second homes, investment condos and other properties they bought hoping to flip (bidding up prices and pricing people such as me out of the market when they did it) taken from them. Foreclose on the homes that have mortgage payments people can't make. These homes will be sold to people who can make the payments, most likely at more reasonable prices, and the market will return to equilibrium where people who have saved and can afford houses will be the ones who own them, not people who are financially unqualified.

I have said it before and I'll say it again- I hope subprime foreclosures wipe out the real estate speculators and lead to a large correction in home prices in 2007.