thoughts on this...

Discussion in 'Trading' started by Kris, Jul 17, 2008.

  1. Kris


    What are your thoughts on this article by Barton?

    "Short selling curbs for financial stocks. Does this seem like the “old boy’s network” to anyone else? The SEC, along with Department of the Treasury and the Federal Reserve decide to curb short selling in Fannie Mae and Freddie Mac. Oh yeah, almost as an aside, they also put the same curbs on short selling the stock of 17 other financial firms like Goldman Sachs, Lehman Brother, Merrill Lynch and Morgan Stanley. Talk about the fox guarding the hen house! And worse yet, this is another severe blow for free markets.

    When a southeast Asian country outlawed short selling on their exchange, they were seen as reactionists who didn’t understand how markets work and were driving their country’s economy backward. Ditto that for the folks who want us to think that short selling is the problem. (I can assure you that not one of those astute guys and gals believe that short selling is the real issue.) We have a whole industry that made a massive error. They profited massively from their high risk strategies during the good times (remember the reports of Goldman Sachs bonuses being an AVERAGE of over $600k?). But now when we see that these highly leveraged strategies could not be unwound quickly enough when the tide turned, everyone hides behind the regulators. Limiting legitimate short selling disrupts the balance of the markets; there’s no way to legislate ever-increasing stock prices! In fact, this is a risky move; there are studies that show down moves are more severe when short selling is limited. This is because there is little way for stock prices to proceed down in an orderly fashion if there is not a two-way market. Then when enough share holders are concerned, there is a mass exodus and a disorderly drop. Time will tell if this comes back to bite the companies that seem to be getting temporary protection…"
  2. To me the common sense answer is end any naked shorting and reinstate the "uptick rule". But common sense probably gets in the way of the big boys' profits.
  3. if an/several institutions are trying to drive down a stock, and this rule makes it more difficult, then I have no problem with it.

    The concept is to try and prevent market manipulation.
  4. sprstpd


    When have actions liked this ever worked? Our stocks are going down - cry to mommy! Please don't make our stocks go down anymore - please! Pansies.

    Anybody who wants the uptick rule reinstated doesn't want a fair market for both sides. I cannot understand anyone who wants to give up the financial freedom to short on a downtick. Go join Cramer and you can all have a bitch fest about it.
  5. Kris


    I think we saw this in the market today...
  6. You're probably right. I had read a half-truth article favoring it and didn't understand the repercussions in the big picture. If it indeed unfairly gives shorts a disadvantage than I'm against it. (If Jim Cramer supports it I generally am against it.)

    But the naked shorting issue. This gives the longs the disadvantage in the short term. Every short should be backed by an actual share, correct? The rules are against it, but not everyone's getting caught.

    Like TraderZones stated, the point is to try and prevent market manipulations. But in the long run the shorts who initially really drove down a price can really drive up the prices as they try to cover.
  7. (I can assure you that not one of those astute guys and gals believe that short selling is the real issue.)


    I agree.
  8. sprstpd


    I have no problem with naked shorting being illegal and enforceable. It is just that when Cramer starts bashing naked shorting he then ALWAYS goes on to include the uptick rule in his rant. The other night he interviewed some congressman and it was clear that the congressman had no idea what the uptick rule was but it was clear he was against naked shorting. Cramer took this as proof that the uptick rule needed to be reinstated. If he separated the two issues, then he would be more credible. As it is, he just comes across sounding like a dumb-crap like he always does. Here' s a special note to Cramer (am hoping he reads ET):

    Cramer has also mentioned that he would like the uptick rule to be 10 cents. So now he is in cahoots with idiot Charles Schumer. Why don't both of them do all of us a favor and leave the markets be. I waited for a long time for that idiotic rule to be repealed and to have these dunderheads spouting crap that they don't know pisses me off.
  9. So now he is in cahoots with idiot Charles Schumer. Why don't both of them do all of us a favor and leave the markets be.

    I can understand Cramer but Schumer is on the banking committee, Schumer should advocate to bring back the free toaster with new deposits.