Yesterday a Fool called Celtic 1888 posted on our Questions and Answers tool and asked:

'I have just recently made a loss of over £10.000 in stocks and shares isas in the last two months should I cash in now before I loose any more capital.'

I expect lots of Fools are in the same boat. Should you cut your losses or hang on in there for years to come? Sadly, there's no simple answer. It depends on so many factors.

Anyway, I thought the question sparked an interesting selection of answers (one of them admittedly by me) and I wanted to highlight the thread for a wider audience of Fools. Have a read...

We've written a lot about credit default swaps (CDS) in recent months. These swaps are essentially insurance policies on a company's corporate bonds. So if the market thinks there's a good chance that a company will go bust, it's going to be expensive to buy a CDS for that company's debt.

In the days before the Icelandic banks such as Kaupthing went bust, their CDSes were trading at something like 3000 basis points. In other words, the market thought there was a 30% chance that Kaupthing would go bust. In normal times, most CDSes trade for less than 200 basis points or 2%.

So what's this got to do with shorting?

According to this article in the 'New Yorker', some clever shorters were using the CDS market to drive down share prices.

Here's how it worked:

You're shorting shares in XYZ Bank. To create uncertainty about the bank's prospects, you buy CDSes for the bank. Share traders see XYZ's CDSes get more expensive and worry that some people know XYZ is about to go bust. So the share traders sell their shares in XYZ and the bank's share price falls. Then the shorters exit with a nice profit.

So, according to the New Yorker, the shorters have used a relatively small market (CDS) to make an impact on a much larger market - the stock market.

I don't know how prevalent this practice was and whether it played a significant part in banks' falling share prices. But it's certainly an interesting theory, and an interesting article.

Are shorters the root of all evil?

Absolutely not. Shorters provide extra liquidity to the stock market and help improve the efficiency of the market. I've shorted shares myself and I'm not ashamed of that. (I didn't make much money, but that's another story....)

And I'm not suggesting that share shorters were the primary cause of the banking crisis. Far from it. For that, we must blame weak regulation, mortgage securitisation, Wall Street's propensity to take on too much risk, too much use of derivatives leading to too much leverage, poor monetary policy, too much personal and government debt, and several other factors too.

But it's still an interesting article.

*I came across the 'New Yorker' article via Andrew Sullivan's excellent 'Daily Dish' blog.

Edited at 2008-11-09 15:02:10 Edited at 2008-11-09 15:03:07

This article from 'The Onion' is funny.

Here's my favourite bit: 'According to a CNN exit poll, 42 percent of voters said that the nation's financial woes had finally become frightening enough to eclipse such concerns as gay marriage, while 30 percent said that the relentless body count in Iraq was at last harrowing enough to outweigh long ideological debates over abortion.

In addition, 28 percent of voters were reportedly too busy paying off medial bills, desperately trying not to lose their homes, or watching their futures disappear to dismiss Obama any longer.'
Edited at 2008-11-05 13:18:57

The Fool has always been very sceptical about the value of share price charts. When I joined TMF as a writer in 2005, I would freqently be teased by David Kuo if he caught me looking at a chart on our Bloomberg screen.

So I was interested to read an article in today's FT by one of the UK's most successful investors, Anthony Bolton.

Bolton writes: 'when I look at a stock, almost always the place I start is the price chart, normally a three or five-year chart.'

He wants to know whether he is 'early in hearing the story' or whether many other investors have already spotted the company's plus points.

Don't get me wrong, Bolton is primarily a fundamentals investor, but he uses charts to improve his decision-making process. Especially for larger companies. The article is well worth reading.

I'm not going to let Dr Kuo tease me ever again....

Some residents of Atlanta have queued for 8 to 10 hours so that they can vote early before Tuesday's election. And it looks like a big chunk of these early voters were African Americans. Can't be good for McCain.

Long queues do seem to be a feature of US elections. I remember long queues in Ohio on election day in 2004 - especially in student areas where support for Kerry was high. Draw your own conclusions....

As far as I'm aware, the Obama campaign has largely held off from direct attacks on Sarah Palin. That's now changed. See this ad which I first saw on Andrew Sullivan's blog.

The Christian Science Monitor is abandoning daily publication in print and will largely focus on online from now on in the US. The paper has a fairly high profile in the US so this is a bigger deal than you might think.

Of course, I'm the editor of a purely online publication, so I guess I should be pleased about this development.

But I'm not.

It's partly a sentimental thing. I love the experience of reading news and commentary in print and it saddens me that the trend is going against that.

More importantly, fear that the switch to online is not in the public interest.

The core of journalism should be finding out stories about the powerful, often stories that don't show our rulers in a good light, and revealing them to the general public.

Developing those kinds of stories requires signifcant resources and few pure online publications have the cash to do that. And I suspect that the likes of 'The Guardian' won't be able to generate as much revenue from online in 20 years' time as they do from print now. So I fear the big newspapers won't have the resources to do investigative stories in the way they do now.

The online world is great for opinions, sassy debate, and bits of juicy gossip, but I don't think it's so hot on finding stuff out. And I'm not sure that will change.

So please carry on reading newspapers!

I hope to write another blog post in which I'll look at whether newspaper companies, such as Johnston Press, are now so cheap, they're worth buying.

Edited at 2008-10-29 18:49:55

A story in today's 'Sunday Times' makes it clear that building up substantial credit card debt that you can't pay off can be a dangerous game That's because the banks and credit card companies can use charging orders to reposess your home.

We've written about charging orders before at The Fool, but today's article shows that the use of charging orders is becoming much more widespread. Apparently one person has received a charging order - and could lose his/her home -for credit card debt of just £1000.

Now is not a good time to be in debt. Try and reduce your debts as fast as you can. And don't forget a 0% credit card can help you pay down your debt more quickly. Don't waste your money on interest payments, throw it at your debt instead!

Obama's victory in the presidential election looks almost certain. But it's still interesting to read an article arguing that McCain might have a chance....

So Colin Powell, George Bush's former Secretary of State, has endorsed Barack Obama on a US TV show.

It's an eloquent endorsement and it might persuade a few undecided voters to go with Obama. Powell comes across as someone who would have been a fine president himself. And he seems to have a sense of fun too.

But there's one big problem. Powell was Secretary of State when the US invaded Iraq in 2003. It's widely thought that Powell had his doubts but he went along with the project. Truly great men stand up for what they believe, they don't go with the flow.

I suspect that most historians will be pretty negative about Powell thanks to his lack of backbone. That's certainly my view.

But he seems like a good guy all the same....