9/18/2008

Kill Shorty

It’s not just ‘Get Shorty’ anymore.

The Big Picture quotes the ‘breaking news’ from WSJ Online:

Here is tonite’s theater of the absurd SEC headline:

SEC intends to temporarily ban short selling, but it’s not clear if the commission has approved the move. Cox is briefing congressional leaders. Separately, the government is seeking congressional authority to buy distressed assets.

This is nothing short of a total panic by people who have no clue what they are doing. And to think, I mocked Russia for being a nation run by market commies.

This is the ultimate bailout attempt, which will have repercussions far far beyond our imaginations:

  1. We suffer a loss of Market Integrity; The US is now a Banana Republic

  2. Blatant market manipulation: this is nothing more than an attempt to force markets higher;

  3. 60 days prior to a presidential election? This is a none-too-subtle attempt to influence the elections — especially coming on top of the Fannie/Freddie bailout;

  4. The coming pop will create a huge air pocket, ultimately leading to us crashing much lower;

  5. Expect a huge increase in volatility — upwards first, then down;

We Are A Nation of Morons, led by complete Idiots, making us complicit in our own self destruction.

Here is the free preview of the subscriber-only article:

The Securities and Exchange Commission took its most aggressive assault against bearish stock bets by stating its intention to issue a temporary ban on short-selling.

SEC Chairman Christopher Cox briefed Congress late Thursday of the agency’s intention to take the extraordinary step of interfering with the market’s regular functioning. Short-selling is a trading strategy of selling borrowed stock in hopes it falls and can be repurchased at a lower price.

It’s unclear if the SEC’s intention has been approved …

It may be time for a worldwide boycott of the stock markets…

The further they go down this path, the further they go toward creating the very thing they’re trying to prevent, which is a stock market crash.

Update:   Barry added the list to his post, so I added it to the quote above.

Posted: 7:31 pm

17 Comments »

  1. Losers. That’ll solve the problem–and when they don’t have short sellers to blame anymore, then what??? They can’t produce short covering rallies–so who are they going to sell stocks to???

    They are goobering this up but good.

    Comment by Maria — 9/18/2008 @ 7:38 pm

  2. Reading some of the news reports over on Barry’s site–sounds to me like the CEOs of financial companies got on the phone and started pulling strings–Hey calpher guy–don’t lend out our company stock to short sellers. See what you can do. Hey SEC, you’ve gotta protect us, man. Don’t let them sell our stuff short!

    What a bunch of balony. Those companies have no problem shorting anything THEY want. Didn’t GS go short real estate and home builders? So are they responsible for the collapse of the housing market??? Hmmm????

    This is all a bunch of cronies getting their buddies to backstop them. They can force the shorts to cover, but who in their right mind would want to own a stock like that? Next time it goes down those CEOs might call their buddies and pull a Russia. “Guys this isn’t going well. Let’s just halt all trading in our stocks for 60 days. We’ll just hold the investors money. They’ll be grateful. After all, it can’t go down if it doesn’t trade.”

    Comment by Maria — 9/18/2008 @ 8:01 pm

  3. I will join you on that boycott. I don’t even want to trade right now after hearing this garbage. We aren’t socialists, we’re communists now.

    Comment by Mac — 9/18/2008 @ 8:03 pm

  4. Wonder if they propose to shut down the options market too. While it will be difficult to buy puts since folks wont be able to hedge their sales of puts, another alternative is to sell naked calls. In fact that is my preferred method of shorting since the interest (carrying cost) is built into the premium. I dont know of any broker that will pay you the interest on the proceeds from a short sale anymore. Selling the option effectively gets you the interest.

    Comment by Bruce From Flagstaff — 9/18/2008 @ 8:09 pm

  5. Mac - it only makes sense. A commenter from Canada on Calculated Risk said, “Absolutely unbelievable. My money’s out of the US tomorrow. Just unbelievable.”

    Can you blame him? If the game is that rigged, why play?

    Bruce - the same would apply to the futures market, wouldn’t it?

    As I said, ‘regulators’ the world over seem to be doing just about everything in their power to MAKE SURE that we see stock markets crash. Do you think the Russian market is going to hold up after being shut down for two days? Yeah, right.

    I thought we might be headed for some sort of crash yesterday. Now I’m sure we are, if they go through with this. It’s just a matter of when.

    Comment by BMB — 9/18/2008 @ 8:14 pm

  6. BMB, yes with respect to the futures market. The difference being that you can do options on individual stocks as well as indexes.

    Comment by Bruce From Flagstaff — 9/18/2008 @ 8:18 pm

  7. Another interesting comment from Calculated Risk:

    Will it work again???
    Interesting chronology:

    There had been much talk about eliminating short selling. The NYSE now requested lists of all holders of borrowed stock (short sellers). The rush to cover to stay off the list and to realize profits assisted in ending the decline.

    The discount rate was reduced again, to 4 1/2%. Congress rushed a tax cut.

    The gyrations quieted. The stock market rallied in quiet trading for the rest of November 1929.

    And another:

    Here’s a comment from another trader I respect:
    I’m panicking because it eliminates the floor from the market.

    When folks legitimately short, they are guaranteed buyers–at a time when no regular buyers are going to find the nerve to do so.

    Sheer idiocy.

    And yes, I believe it will cause a real, true and lasting crash. If they do it.

    Like I said…

    Others are wondering what bad news is about to hit that the gov’t is trying to get out in front of - with this possibility from the SEC and reports that this new-era-RTC thing is going to get rush treatment from Congress…

    This is in preparation for the really bad news that’s coming; they must see something pretty nasty to panic like this. And it will keep GS from going the way of Bear, Lehman, Merrill, etc.

    You can call me crazy, but it’s clear there’s a plan being executed. And I do not like it. It’s very likely there is some REAL BAD NEWS about to come down, and they don’t want anyone short.

    They are not stupid.

    Comment by BMB — 9/18/2008 @ 8:27 pm

  8. For those who think this might help matters, I offer exhibit A: the Shanghai Composite, where short selling isn’t allowed.

    Nothing to buffer the fall…

    Comment by BMB — 9/18/2008 @ 9:05 pm

  9. Here are two more articles/posts I was reading that relate to this. The US regulators are following the FSA’s lead on this anti-short hysteria (once again).

    http://pensionpulse.blogspot.com/2008/09/operation-aig-all-in-goddammit.html

    http://www.minyanville.com/articles/capitalism-shorts-britain-UK-djia-goldman/index/a/19054/from/yahoo

    Comment by David — 9/18/2008 @ 10:30 pm

  10. So, who is doing the naked shorting? That is the part of this that interests me. People have been asking the hedgies and others with the answer coming back, “Not me.”

    I’ll wait until I see how much of the naked shorting is resolved by failure to deliver before I tell you what I think.

    Comment by Fred — 9/19/2008 @ 12:41 am

  11. OK, Barry and his better sources just told you what I think:

    http://bigpicture.typepad.com/comments/2008/09/terror-attack-o.html#comments

    Comment by Fred — 9/19/2008 @ 6:40 am

  12. Are you buying the ‘financial terrorism’ theory Fred?

    As I’ve said before, I don’t have any problem with finally getting the naked short selling under control - the problem has been ignored for far too long. But banning short sales altogether is a whole ‘nother story. How long before they ban ’selling’ completely?

    Comment by BMB — 9/19/2008 @ 7:01 am

  13. Bunch of cronies calling in favors and whining. They are getting protection that isn’t deserved. The financials got into this mess, short sellers (legal ones) have a right to bet on the downside to make money off the mistakes of the financials. This protective step is going to burn them in the long run. Pop today, down soon.

    Comment by Maria — 9/19/2008 @ 7:32 am

  14. This is getting down right scary. There is going to be a big air pocket under this manipulated rally. AND… Don’t forget how well the test case for this worked. When the 19 financial stocks were ‘protected’ from short sellers, they rallied for a week and a half. And then what happened?

    As volatile as the precious metals are… I feel safer there than in equities.

    Comment by EDN — 9/19/2008 @ 10:14 am

  15. There’s no safe place to turn. That’s a big part of the problem. No one even wanted to be in money markets. The water is so murky there’s no way to tell the baby from the bathwater.

    Comment by Maria — 9/19/2008 @ 10:36 am

  16. So SKF can’t even trade (it hasn’t traded for the last hour or so according to my ticker.) How fair is that? The people trading that were trading a trend (or trying to) not shorting without shares…

    I tell you, you change the rules in the middle of the game, there is going to be a cost. Huge air pocket indeed.

    UPDATE: SKF is trading again.

    Comment by Maria — 9/19/2008 @ 10:38 am

  17. Here’s the ProShares announcement on SKF and SEF.

    Comment by BMB — 9/19/2008 @ 11:35 am

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