SEC Issues Temporary Ban Against Short Selling
The Securities and Exchange Commission on Friday launched an aggressive assault against short-sellers, saying it would temporarily prevent investors from making bets on stock declines in an attempt to stem some of the worst stock-market slides in years.
I just have one question about the sanity of this move. What are the unintended consequences? Surely there must be some. If this is truly such a great idea, then why is the ban only temporary? Better still, why was short-selling ever allowed in the first place?
The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. - Alan Greenspan, 1966
Shorting stocks is one way that owners of wealth were protecting themselves. That's no longer an option, pun intended.
There is no safe store of value. - Alan Greenspan, 1966
Panic seemed like a decent safe store of value, but that all changed in the last 48 hours. The safety was illusionary.
I'm taking a bit of damage. Money is flowing out of "safe" investments and back into the government sponsored "sure things" (Wall Street). However, I'm not complaining. As some might recall, that was actually what I was rooting for. Higher real yields hurt me in the short-term but help me much more in the long-term. As far as I'm concerned, the sidelines have never looked so good. There's not much crowding as there just aren't that many of us left here. Real returns on "safety" (through treasury inflation protected securities, TIPS) are actually looking fairly decent these days. Perhaps a miracle will occur and I-Bonds will actually be offered with a rate above 0% again soon. Sign me up.
I'm glad that I didn't panic into changing my name to Deflationary Mark. Who knew panicking would be banned? I was certainly tempted. I'm not tempted now though. The stock markets aren't all the government is managing to prop up. Look at oil. I remain Stagflationary Mark for yet another day it seems.
I do have more blog naming remorse though. Based on the never ending government reactions to our problems, "American Roulette" would have been a better choice I think. I suspect that it is similar to Russian Roulette, but the government sponsored smoking gun comes fully loaded instead.
I wonder if people are panicking that they won't be able to live beyond their means anymore.
ReplyDeleteSeriously, can our economy handle that? We'll see what she is made of. It's going to be an adjustment to say the least.
So many businesses are dependent upon the never ending expansion of unpayable credit. $8 for a latte & scone.
I foresee a bagholder clearance sale at Coach.
MAB,
ReplyDeleteI wonder if people are panicking that they won't be able to live beyond their means anymore.
Living beyond one's means is highly overrated anyway.
Oops. Did I say overrated? I meant overleveraged. My bad.
OK energy firms can enjoy profits with clear conscience, says
http://findarticles.com/p/articles/mi_qn4182/is_/ai_n15855818
As for that borrowing ability being itself a concern, Harris said Americans are not overleveraged.
Oops. I've made yet another mistake. Apparently Americans are not overleveraged.
Some people like to point at debt to income levels and state that it's at an all-time high, but it's been going up to an all-time high for the last 30 years and it hasn't caused any damage yet, he said.
Oops. Wow, I've made yet another mistake. I tend to point to debt to income levels too. Apparently I'm not supposed to. As a side note, what's that "yet" word doing there though?
Oops. The mistakes are really adding up. That article was written near the peak of the housing bubble back in 2005. This isn't 2005. This is 2008. Silly me.
Mark,
ReplyDeleteWhat this is going to become if it isn't just a flat permanent ban on shorting these stocks will be the government declaring they are going to step in and buy them if they fall to a certain level not that they haven't been already but this will come as a public announcement. The thieves in our government and the whores on Wall Street will strip all the reaming wealth from the public.
Kevin
Kevin,
ReplyDelete...they are going to step in and buy them...
The government will literally be rolling in dough soon. First, they'll have picked up all these low p/e stocks and will be reaping the rewards of a steady, sustainable, and reliable income stream that Wall Street no longer seems to want.
If you buy my sarcastic theory, Government also has a bridge to sell you.
A New Debate on Privatizing Infrastructure
http://dealbook.blogs.nytimes.com/2008/08/27/money-squeeze-prompts-new-debate-on-infrastructure-privatization/
Reeling from more exotic investments that imploded during the credit crisis, Kohlberg Kravis Roberts, the Carlyle Group, Goldman Sachs, Morgan Stanley and Credit Suisse are among the investors who have amassed an estimated $250 billion war chest — much of it raised in the last two years — to finance a tidal wave of infrastructure projects in the United States and overseas.
Government wants to do what Wall Street does. Wall Street wants to do what Government does. Everyone's going to be extremely happy. It's a marriage made in near-heaven (i.e., hell).
If you buy that everyone's going to be happy, Government's got yet another bridge to sell you. I doubt there's a limit on how many bridges they'd be willing to sell.
“Our concern is that some sources of financing see this as a quick opportunity to make money,” Stephen Abrecht, director of the Capital Stewardship Program at the Service Employees International Union, told The Times.
Wall Street embraces every opportunity to make money. Government embraces every opportunity to print money. Marriage made in near-heaven I tell you.