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Bad ideas and sacrificial lambs


 

Following in the misguided footsteps of market regulators in Britain, the U.S. SEC is instituting a “temporary ban” on short selling in the U.S. markets.  In a week of depressing, frightening bad ideas, mindless grandstanding, and scapegoating, this may stand out as the worst example of panicked non-thinking.

The last major country to institute a “temporary ban” on short selling was that bastion of free enterprise and forward thinking, Malaysia, which banned short selling during the Asian currency crisis in 1998. They got around to lifting the ban seven years later.

Chris Cox caved to political pressure and threats, lobbed by dim wit politicians who truly don’t understand the way the stock market works. Short sellers aren’t the problem, and never were. But every horror show has to have a villain. Free markets, it seems, are really only good in theory.


 

Bad ideas and sacrificial lambs

  1. So much for ‘free’ markets!

  2. No wonder parts of the world seem overly hesitant to have America export (impose?) this brand of freedom and capitalism. Do as we say not as we do!

  3. Alan Greenspan in his recent interview with George Stephanopoulos argued that short sellers performed a valuable function in the market and should not be suspended. They help the market to clarify prices and the market cannot stabilize until prices have been clarified. We will see if he was right….

  4. Maybe if the markets go up to much, we should ban purchasing of share.

  5. The post is somewhat misleading. The ban only applies to financial institutions which have been ravaged by short-sellers. The more comprehensive ban announced Wednesday applies to “naked” short selling only. You can still short Nortel, for example, as many are (and should be) doing.

  6. 799 financial stocks, to be precise.

  7. I don’t think people know how hard it is to actually short a stock. You have to source the borrow before you short and you’re subject to buy-ins and other administrative nightmares.

    They should have not allowed ANY trading (both long and short) in financials if they wanted to the give banking/financial sector some relief. Now they’ve likely severely hurt a few hundred quantitative hedge funds, frooze up several ETF (especially the short biased ones), and have done serious damage to the options market.

    Dumb, dumb, dumb

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