ok so you can’t short, so market neutral funds aren’t feasible anymore. So a bunch of market neutral and 130/30 funds are going to cover shorts and sell longs. Net effect is likely that the market will drop, because the stronger things are being sold and weaker stuff is being bought. Seeing that, more people will sell their long positions to move into cash. Sounds like George W. Hoover to me. I now have a big pit in the middle of my stomach. It’s like being 5 miles away from the epicenter of a 100 megaton nuke. Sure, you’re far away, but it doesn’t really matter.
Okay, maybe I am speaking out of place? I was under the impression that hedge funds have been taking very large short positions on financials. Someone care to explain?
i didn’t see the report. are they talking about banning short selling for everything? or short selling in the financial sector? or naked short selling?
General short selling. I’m not sure if its just financials or on the general market.
it’s not the traditional short sellers we know, they are financial terrorists!!! cramer calls it… http://www.cnbc.com/id/15840232?video=860056933&play=1 which i agree…(i’m going nuts)
McCain castigated the SEC for letting speculators “turn our markets into a casino,” allowing naked short selling and eliminating the uptick rule to protect investors. “Speculators pounded the shares of even good companies into the ground,” McCain said. “The chairman of the SEC serves at the appointment of the President and, in my view, has betrayed the public’s trust. If I were President today, I would fire him.” Please people, I implore you, do not vote for this man, McCain. His lack of understanding about the markets and economy are so unparalleled it’s frightening. Someone who simply said “no comment” would sound smarter.
PhillyBanker Wrote: ------------------------------------------------------- > Good. Greedy pigs have been mercilessly pounding > the sh*t out of financial stocks and stoking > irrational fears. Ban shorts on financials > temporarily. Agreed man. These HF’s act in collusion and everyone knows you could’ve made a killing shorting MS and GS if they didn’t do anything about naked shorting or just simply shorting. You think Paulson didn’t kick Cox under the table today when GS dropped to $88 intraday? GS isn’t going to fail on his watch…
Guys you haven’t got an idea what you’re talking about. Seriously. These companies have loaded a bunch of assets on their balance sheet which prove to be worthless. Consequently they are shorted simply because their share price is considered to be too high. And you are blaming the guys who are shorting? Seriously…
Bleeck, they’re not worthless assets, just as long as the Fed keeps the money tap open and we can all keep bidding up the prices… Now do you really think The Man is going to let all the little people wake up one day and find out that their prosperity is built on debt and asset price inflation?
Errrrrr… yes that would be the wise thing to do. better than blaming hedge funds.
my 2p all hedge funds who sell short wud now make a run for options(buy put /sell call)…now the options trader (who sold/bought the option to/from the hedge fund)wudnt want to go long the stock thru options so he wud sell/buy the options to someone else…this wud go on until the option comes to someone who actually hold the stock…finally the person holding the stock wud sell it to neutralise his positions…i.e. the effect on the market wud be the same!!!
I start peeling positions on Sept 31… "The regulator said it was acting in concert with the U.K.'s Financial Services Authority, which announced a similar ban on Thursday, and added the move was needed “to protect the integrity and quality of the securities market and strengthen investor confidence.” The ban takes effect immediately and runs until midnight on Oct. 2. The SEC said it may extend the order if it’s necessary to protect investors, but it won’t last more than 30 days. " This is repulsive
Okay, duh, I understand the failure of LEH and takeover of Merrill was due to their exposure to subprime and Alt-A assets and the like. But why would the stock of MS getting pounded cause them to consider selling the firm? Now I know equity is not a acceptable form of collateral for most counter party exposure, but their stock price being pummeled seems to have implications for how much collateral they need to post if I am not mistaken. Which doesn’t make sense to me given that collateral guidelines are usually set by your credit rating. And Bleeck, no, Goldman has next to nil exposure to subprime, hase a relatively low leveraged loan overhang, etc etc.
Some of you must now repent, since the market has well and truly raised its middle finger at you. FTSE +8% and RBS +47% in the UK. I think there is room for pragmatism in this debate. Regulators clearly had to step in in some capacity. In the UK, HBOS (pre Lloyds) was very clearly heading south, despite having a valuable franchise. Although it is possible that short sellers were motivated by some assessment of HBOS’s exposure to the struggling UK property market, these same short-sellers would have to be from another planet to not realise that pushing the stock price lower increased (exponentially) the possibility that HBOS would collapse, unable to raise new equity. With this sort of ‘option value’ in the short investment case, the rational investor would - you must agree - scale up the size of his/her short bet. Is this in the interests of the country? Well, in some sense, perhaps, because the credit expansion of the last few years has likely generated some industry overcapacity. On the other hand, you have i) a less competitive banking market, ii) potential disintermediation (people putting their money under the mattress instead of “at risk” in the financial system), and iii) MAYBE HBOS is actually quite good at deposit-taking and lending (most of the time) and worth keeping. I have never understood why many seem to cling quite so fervently to free market dogma in the face of common sense arguments. Almost as if anything else would be unpatriotic.
Primary blame goes to the underlying problem. The actual assets on the books… selling a house to someone without a job is completely irresponsible. The only way some of these loans were “secured” was the ability to refinance with your increasing home equity value. Can’t build increases forever if no one can actually afford it. This is the actual problem… and its far from solved. That said I think there were a lot of problems with shorting. Naked-short selling is awful. If you don’t need to borrow stock to sell it you can’t form strong support lines. You reach the support but stock just sells and sells until it breaks the support. When it breaks supports technicals don’t matter - that is a collapse. Even shorting though… most stock is no longer in individuals’ names. So many analysts talk about the effect on John Public on Main St… but I doubt John Public would have lent out his shares with the same willingness as these banks and institutions…
Same thing happened when they imposed short restrictions on those 19 stocks last month. Everything rallied hard. And by the time the ban was lifted they were all lower than where they started. All this does is delay the inevitable…it’s just a big ponzi scheme at this point, trying to shift losses around. But the feds have clearly made their decision: the taxpayers of the US will be picking up most of the losses. It would hurt politicians’ approval ratings too much otherwise.
How the F are you supposed to trade options now? Skew will go through the roof!!!
Everyone is aware that we are talking about a temporary ban right? Not that I disagree that this is harmful…
You simply can’t let free markets rule on the upside and start regulating on the downside. You have to stay consistent either way. If you let markets uncontrolled when a bubble is building, some people will get rich very fast. However, if you then control markets when there is a panic, you let the people who profited from the bubble get away with it… just like it is the case now…
wegowayback Wrote: ------------------------------------------------------- > Same thing happened when they imposed short > restrictions on those 19 stocks last month. > Everything rallied hard. And by the time the ban > was lifted they were all lower than where they > started. > > All this does is delay the inevitable…it’s just > a big ponzi scheme at this point, trying to shift > losses around. But the feds have clearly made > their decision: the taxpayers of the US will be > picking up most of the losses. It would hurt > politicians’ approval ratings too much otherwise. Do you even know why they are “worthless”?