S.E.C. bans "short selling"...Stocks look up 500 points this morning!!

S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (Full Version)

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corysub -> S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/19/2008 5:45:57 AM)
Finally, Mr. Cox at the S.E.C. is listening to people who know something about trading and is putting a temporary ban on short selling in financial stocks. What that means is only people who own these shares and don't want to own them can sell. It eliminates specualtors but more importantly, eliminates huge pools of capital that have been driving stock prices down by selling stock they don't own..and in recent times did not even borrow to sell to a buyer as the law required. Together with the possible creation of a Resolution Trust type institution that was utilized to work out of the S&L crisis could be the beginning of lights coming on at the end of a dark tunnel.

bipolarber -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/19/2008 5:54:57 AM)
They are also announcing that there's the formatin of a new RTC-style entity to take care of the defaulting loans. Pricetag: $500 billion dollars. Take that, and divide it by the US population of taxpayers, and you get an additional debt of $3,100 PER PERSON. Wow... While I slept, I spent the equivilent of a good used car...

Sanity -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/19/2008 6:07:31 AM)
Yeah, I see this morning that my 401k is back up to where it was before the second coming of the great depression earlier this week. [sm=tired.gif]

pahunkboy -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/19/2008 8:34:55 AM)
-- Wall street. Americas casino royale

bipolarber -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/19/2008 1:57:26 PM)
Sanity, I'm so glad your 401k is in good shape... (so's mine, for that matter) but we can both look forward to the increased taxes, interest rates and inflation this sudden dump of debt is going to cause. By the time this crisis is over, I doubt the buying power of your 401k, or mine, will be what it could have been.... not by a country mile.

Real_Trouble -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/19/2008 3:39:42 PM)
quote: ORIGINAL: corysub Together with the possible creation of a Resolution Trust type institution that was utilized to work out of the S&L crisis could be the beginning of lights coming on at the end of a dark tunnel. I would suggest that if you dig a bit into the expect earnings projections for the majority of companies with major sell-side analyst coverage right now, and look at how high they are compared to our current economic conditions, that light might be an oncoming train. There's no way the "E" portion of P/E ratios holds up, and when that hits the fan and stocks in several sectors suddenly look extremely overpriced again, you are going to see another round of butchering. Short selling is frequently blamed for all kinds of things. However, it's not a causal item in and of itself, much of the time. Shorts can exacerbate price swings, but they don't cause them. For instance, Lehman didn't go under because someone shorted it (much as some people would like to say about Einhorn), Lehman went under because they were holding a truckload of illiquid paper on their books that was devaluing by the day. Of course, minus mark-to-market on things intended to be held to maturity, that might not be such a problem, but it is what it is. Either way, nothing can eliminate the fact that a lot of firms made a lot of very poor loans to very poor borrowers; there's bound to be more carnage, and the reality is that the losses are going to be pretty spectacular because it was downright stupid to do most of these things in the first place. I find it hard to blame NINJA loans on short sellers, for instance, or recombining to CDO tranches to inadvertently create highly correlated loan pools that generate major valuation swings and losses to be because someone took a naked short out on AIG. More sound and fury signifying absolutely nothing.

Politesub53 -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/20/2008 2:52:07 AM)
I know short selling has been blamed either side of the Atlantic, and steps taken to ensure it wont happen again. I have been thinking though, this doesnt halt the underlying problems that made short selling an attractive proposition. Certainly it looks like the Feds (The tax payer) have just acquired millions of dollars worth off bad debt. With both Obasma and Bush pledging to spend more troops (Up to three brigades) to Afghanistan, how will the US pay for everything. The only answer that i can see is massive tax rises, or worse, a fire sale of the companies they have just bought, which wont help confidence in the worlds financial markets. Now in both Countries we have the same situation. 1) Bad debt held by the tax payer, which doesnt bode well. 2) The Banks and other institutions being able to make vast profits, risk free, as they cannot be allowed to fail, due to the chaos this would cause. 3) Absurdly low leves of regulation, Thatcher and Reagan are responsible for some, if not all, of this. Although continued low interest rates and a lack of better regulation since have not helped. At present, neither Obamas pledge to spend more, or McCains pledge to cut taxes seem very feasible. How anyone can think taking on more debt is good for the tax payer is beyond me.

corysub -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/20/2008 4:31:20 AM)
quote: ORIGINAL: Real_Trouble quote: ORIGINAL: corysub Together with the possible creation of a Resolution Trust type institution that was utilized to work out of the S&L crisis could be the beginning of lights coming on at the end of a dark tunnel. I would suggest that if you dig a bit into the expect earnings projections for the majority of companies with major sell-side analyst coverage right now, and look at how high they are compared to our current economic conditions, that light might be an oncoming train. There's no way the "E" portion of P/E ratios holds up, and when that hits the fan and stocks in several sectors suddenly look extremely overpriced again, you are going to see another round of butchering. Short selling is frequently blamed for all kinds of things. However, it's not a causal item in and of itself, much of the time. Shorts can exacerbate price swings, but they don't cause them. For instance, Lehman didn't go under because someone shorted it (much as some people would like to say about Einhorn), Lehman went under because they were holding a truckload of illiquid paper on their books that was devaluing by the day. Of course, minus mark-to-market on things intended to be held to maturity, that might not be such a problem, but it is what it is. Either way, nothing can eliminate the fact that a lot of firms made a lot of very poor loans to very poor borrowers; there's bound to be more carnage, and the reality is that the losses are going to be pretty spectacular because it was downright stupid to do most of these things in the first place. I find it hard to blame NINJA loans on short sellers, for instance, or recombining to CDO tranches to inadvertently create highly correlated loan pools that generate major valuation swings and losses to be because someone took a naked short out on AIG. More sound and fury signifying absolutely nothing. You raise a lot of valid questions. No question the auto companies are in deep trouble alongside the real estate sector. Concerns about CDO valuations, the rise in foreclosure rates from sub-prime buyers, etc, have had a significant impact on the market in general with the averages down about 20% this year. It wasn't just the weak financials that were impacted but even companies with strong cash flows, for example, like General Electric hit significant lows in the midst of the "sound and fury". The expectation by investors was that there was a good possiblity the entire system was collapsing. It was that seem extreme fear that gripped financials during the S&L crisis, the poor market environement of the early 70's,(when Lehman was saved from bankruptcy only by an infustion of capital from...guess... The Bank of Napoli). You can go back further to the ealy 1960's when the general comments were that the market was dead for a generation! Used to be a company run by a fellow named Romney...yep, Mitt Romney's dad. EVERY participant in the American Motors initial public offering, well over a hundred major bracket and selling group participants went bankrupt or were forced to merge. Difficult times to be sure, and it took a few years to start to see any meaningful growth...but it was an opportune time for investors to accumulate positions. Are this weeks actions going to "part the seas" and give the market a clear road to the other side..of course not! But like the creation of the Resolution Trust, it's possibly the "game changing event" as Morgan Stanley noted. The market has always been a market of stocks and, your right, we all have to do our homework to try to eliminate the losers and try to find the winners in this environment. With respect to short sellers. They obviously don't make the trend in the price of a stock...fundamentals do that. However, given weak fundamentals, given negative psychology, naked shorts swim like sharks in bloody waters, beating down shares, touchiing off stop loss orders, and panicking trading desks into selling shares at prices that are being taken down. Many institutions measure their traders based on how their sales measure up against that days average volume/price average. If a real owner was working a sell order, naked shorts only push these traders to "participate"..to go along with the market at a time when bids have not even had a chance to come on the floor. No thank you...I have nothing against short selling on plus ticks...but naked shorts with no plus tick requirement is insane.

DesFIP -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/20/2008 7:13:54 AM)
It's not uncommon to put temporary measures in place during market upheavals. Similar to closing banks temporarily to stop runs during the Great Depression.

Real_Trouble -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/20/2008 7:37:43 AM)
quote: ORIGINAL: DesFIP It's not uncommon to put temporary measures in place during market upheavals. Similar to closing banks temporarily to stop runs during the Great Depression. Agreed, but likewise, did this actually stop the depression, or keep a vast multitude of banks from failing? I am against "solutions" that treat a symptom while ignoring the underlying disease. I feel all the time and energy put into chasing around short-sellers and trying to limit the practice is similar to ranting about how those dastardly steering wheel manufacturers cause so many traffic accidents, because without steering wheels, people wouldn't be able to drive into each other, right? It's a totally nonsensical argument. Even if you buy that short selling drives prices down, that just means that it would be incredibly profitable to identify companies where the fundamental value of the company exceeds the artificially low price and then buy them.

Lorr47 -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/20/2008 7:52:27 AM)
quote: ORIGINAL: corysub Finally, Mr. Cox at the S.E.C. is listening to people who know something about trading and is putting a temporary ban on short selling in financial stocks. What that means is only people who own these shares and don't want to own them can sell. It eliminates specualtors but more importantly, eliminates huge pools of capital that have been driving stock prices down by selling stock they don't own..and in recent times did not even borrow to sell to a buyer as the law required. Together with the possible creation of a Resolution Trust type institution that was utilized to work out of the S&L crisis could be the beginning of lights coming on at the end of a dark tunnel. I believe last week when asked whether short selling should be banned Greenspan replied "Oh Lord, No." His point was that the profiteers and free wheeling people on Wall Street had already distorted the system. Short selling reflects pressures in the system. If we ban short selling we also distort the system while trying to fix it and we will never know where it is at; what action is required and how it may react to intervention. He did not seem overly inclined to save the thieves, the real economy would survive if they sank. Every time Bush's people come on they are bailing out another requiring high billions and low trillions. How can the taxpayers carry it all. The only limitation on the administration is how high they can count. What number comes after a trillion.

OneMoreWaste -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/20/2008 7:59:49 AM)
quote: ORIGINAL: Real_Trouble Either way, nothing can eliminate the fact that a lot of firms made a lot of very poor loans to very poor borrowers; there's bound to be more carnage, and the reality is that the losses are going to be pretty spectacular because it was downright stupid to do most of these things in the first place. It's funny how this always comes back to the "credit crisis"... if you look at the combined market cap losses of AIG, FNMA, FDMC, WAMU, Citi, BofA, JPMorgan, WellsFargo, and one other that i forgot to write down, it's $603Billion in the past 11 months. In those same 11 months, there have 2.6 Million foreclosures. So, a paper loss of $230K per foreclosure for just those 9 companies. Pretty steep. Frankly, if it weren't for shorting, I couldn't see "playing the market" at all right now, except for commodities...

MrRodgers -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/20/2008 8:24:34 AM)
quote: ORIGINAL: Sanity Yeah, I see this morning that my 401k is back up to where it was before the second coming of the great depression earlier this week. [sm=tired.gif] Well, I am thinking this maybe unconstitutional (banning a private sale on our own terms) but that has never stopped these guys...so why now. I am wondering about the short buyer. Who in their right mine would, prior to the govt. stepping in...buy anything ? That is unless of course it is our duty to bail these guys out and it seems 'capitalism' always needs that dose of socialism...for the capitalist of course...not for the great unwashed out here. When do I get my window at the fed or treasury ? Either way it does less than if they required 50% or even 80% cash going in. It is the 10% margin that exacerbates the speculation. Leveraging a $100 stock that goes to $110 is 100% return (- debt service) on your money/debt. What a deal. That should have have been the first thing they did and would not be unconsitutional just a change in terms...not a ban. Seems ok to speculate paper-value going up but not alright to speculate...they're going down. Why am I not surprised ? Who now doesn't know that good old Uncle Sucker (Sam) is always so needed and has all these $TRILLIONS to put some air back into wall streets...house of cards which could blow over again...anytime. Imagine the work force getting up and going to work in the morning to save and invest, then getting up and going to work in the morning to do that AND make good on all our new debt...to make those original investments good again. What a deal...this thing called capitalism....the leverages, speculators and paper-traders. It will 'get' us all eventually. Ok, well the young anyway...most of the participants on this board I think are too old to take the future hit this will be. I wonder what the young think about all of this and if they are thinking at all what this means for withholding from their future paychecks.

MrRodgers -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/20/2008 8:34:30 AM)
quote: ORIGINAL: Lorr47 quote: ORIGINAL: corysub Finally, Mr. Cox at the S.E.C. is listening to people who know something about trading and is putting a temporary ban on short selling in financial stocks. What that means is only people who own these shares and don't want to own them can sell. It eliminates specualtors but more importantly, eliminates huge pools of capital that have been driving stock prices down by selling stock they don't own..and in recent times did not even borrow to sell to a buyer as the law required. Together with the possible creation of a Resolution Trust type institution that was utilized to work out of the S&L crisis could be the beginning of lights coming on at the end of a dark tunnel. I believe last week when asked whether short selling should be banned Greenspan replied "Oh Lord, No." His point was that the profiteers and free wheeling people on Wall Street had already distorted the system. Short selling reflects pressures in the system. If we ban short selling we also distort the system while trying to fix it and we will never know where it is at; what action is required and how it may react to intervention. He did not seem overly inclined to save the thieves, the real economy would survive if they sank. Every time Bush's people come on they are bailing out another requiring high billions and low trillions. How can the taxpayers carry it all. The only limitation on the administration is how high they can count. What number comes after a trillion. We both know...ALL should know that the way to stop this volitility is to remove all tax deductions for debt. Taking on debt is a 'free market' decision and not to be subsidized by the treasury. Require 80% or better yet...90% cash going into any stock, future or whatever paper upon which you wish to...speculate. Then tax short term so-called capital gains at 50%...soon this will be only a sideline and in engaged in by those that actually have the capital. If they howl at 50%...tell them to go out and get a real job and pay only 35 or 38%. Yes, in the future we are looking at a possibility of cummlative bailouts reaching a $Quadrillion, but that much money doesn't exist and to 'earn' that much could take the whole 21st century...and maybe the 22nd too.

MrRodgers -> RE: S.E.C. bans "short selling"...Stocks look up 500 points this morning!! (9/20/2008 8:49:57 AM)
quote: ORIGINAL: DesFIP It's not uncommon to put temporary measures in place during market upheavals. Similar to closing banks temporarily to stop runs during the Great Depression. Trouble is...the bank panic of 1907 and the stock market collapse of 1929 were engineered by the bankers specifically to knock the private banks out of business (over 16,000 total) so the new 'Federal' Reserve (as federal as Federal Express) banking system could monopolize banking...and it worked. This was never to be temporary...it was to eliminate the private banking (state regulated) system. A congresman named McFadden drew up articles of impeachment for the fed. reserve board. After trying twice before...third time a charm...poisoned (murdered) him at a dinner party. Does that kind of give you a real historical perspective ? Why does anyone really think that real conservatives and libertarians want to eliminate the fed and take banking back to the states and put the dollar back on gold and silver ?

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