Reply to: Short selling?

[HairyArsedBloke]

“You can never change the path of a stock,” Mr. Fishman said. “If it’s going to go down, it’s going to go down.”

Profound.

Profound and often denied, misunderstood, fought, etc.

[AlfredJPruffock]

More or less - 99% tax on capital gains to discourage such trading.

Shares are investment and short term investments should be only limited to conservative non-aggressive stuff like deposits.

This would certainly decimate employment levels in financial services but why should anyone outside cry for them when almost every other industry was killed by the financial people who opted for short term gains to get their bonuses so they outsourced everything they could to other countries?

Because the poor wee fat cats have only made 190000 Billion when they wanted 2000000 Billion.

Life is so unfair.

[AlfredJPruffock]

“You can never change the path of a stock,” Mr. Fishman said. “If it’s going to go down, it’s going to go down.”

Profound.

[sasguru]

http://www.nytimes.com/2008/10/08/business/08short.html

A Debate as a Ban on Short-Selling Ends: Did It Make Any Difference?

At the stroke of midnight on Wednesday, the short-sellers will return to Wall Street.

The question is, what will they do when they get there?

Nearly three weeks ago, regulators abruptly banned short sales of financial stocks to protect companies that had come under siege in the stock market. Short-sellers, critics said, had contributed to the declines by betting against the companies’ shares.

But once the ban expires Wednesday night, shorters — viewed as villains by some and heroes to others — will be free to ply their trade again.

Few expect their return, on its own, to spark another precipitous plunge in the stock market. Financial shares have plunged 23 percent since the ban was imposed on Sept. 22, suggesting that the short-sellers might not have played such a big role in the declines.

The Securities and Exchange Commission took additional steps, which will remain in place, to hem in short-sellers, who typically borrow shares and sell them, hoping to buy them back later at lower prices and pocket the difference. The S.E.C. has shortened the length of time allowed to locate borrowed shares for short-sellers and will require investors to begin disclosing the stocks they short. That may discourage some investors from the practice.

Since the S.E.C. ban went into effect, borrowing shares has become more expensive, in part because some big pension funds and endowments have stopping lending stock altogether.

Whether the ban worked, given the market plunges that followed, is a matter of debate.

“If there had been no ban, would they have gone down even more?” said Mozaffar Khan, a professor who as studied short-selling at the Sloan School of Management at the Massachusetts Institute of Technology. “Normally the studies that we do are in normal times, and we just don’t know in a state of panic what the outcome would have been.”

The controversial ban clearly had some unintended consequences. It originally applied to 799 companies, but regulators allowed the stock exchanges to add other companies to the lists. By this week, about 190 had been added, including some that might not seem obviously linked to the banking industry, like General Electric, General Motors and CVS Caremark. The list became a source of jokes among traders, who came up with all kinds of conspiracy theories — such as companies rushing out negative earnings revisions as soon as they angled their way onto the list.

Hedge funds, which are down nearly 10 percent for the year, blame the rules for pushing them deep into the red. Many trading strategies rely on short-selling, and investors may have sold off some of their long positions in the market, driving prices down, because they were not able to hedge their bets with a corresponding short position. Convertible bonds — which are used to raise money for many banks this year — were especially battered because traders typically short a company’s stock when they invest in its preferred shares, for instance.

“It’s the kind of thing I would expect would happen in an emerging market,” said William Ackman, chief executive of Pershing Square, a hedge fund firm in New York, of the ban. “You have to think through the consequences of your decisions. It was a very big negative for the market in general.”

Nasdaq studied the changes in the market during the week before and the week after the short ban and found that the percent of selling in the market that was short-selling dropped to 16 percent, from 44 percent, for financial companies. Even nonfinancial company stocks saw less shorting. And transaction costs increased. The spread between the prices that buyers and sellers of stocks were willing to use for trades increased by 42 percent for financial stocks.

“The ban was a blunt instrument,” said Robert Greifeld, chief executive of Nasdaq OMX.

The raw number of trades in financial stocks also dropped, as many investors simply sat on the sidelines. Trading volume of Wells Fargo, for instance, fell 45 percent and trading in Bank of America fell 53 percent.

“There’s liquidity out of the marketplace,” said H. Seth Berlin, the principal at Performance Thinking & Technologies, a hedge fund consulting firm. “Did the ban really do what it was supposed to do? Probably not.”

Some investors said that bringing short-selling back to the market could actually bolster stocks. Andrew Fishman, president of Schonfeld Group, an asset manager in New York, said that some of his clients wanted to exit short positions in recent weeks, which would have meant purchasing shares, but they did not do so because they feared they would not be able to borrow the stock again to short it later on.

Mr. Fishman said short-selling has been wrongly blamed. The real problem, he said, is the weakness of financial institutions.

“You can never change the path of a stock,” Mr. Fishman said. “If it’s going to go down, it’s going to go down.”

Vikas Bajaj contributed reporting.

I not understand - there some big words and concepts there we don't cover in 36 hours of economics at Leningrad Community College, but I repeat "Short Selling Bad! Short Selling Bad!"

atw

[snaw]

http://www.nytimes.com/2008/10/08/business/08short.html

A Debate as a Ban on Short-Selling Ends: Did It Make Any Difference?

At the stroke of midnight on Wednesday, the short-sellers will return to Wall Street.

The question is, what will they do when they get there?

Nearly three weeks ago, regulators abruptly banned short sales of financial stocks to protect companies that had come under siege in the stock market. Short-sellers, critics said, had contributed to the declines by betting against the companies’ shares.

But once the ban expires Wednesday night, shorters — viewed as villains by some and heroes to others — will be free to ply their trade again.

Few expect their return, on its own, to spark another precipitous plunge in the stock market. Financial shares have plunged 23 percent since the ban was imposed on Sept. 22, suggesting that the short-sellers might not have played such a big role in the declines.

The Securities and Exchange Commission took additional steps, which will remain in place, to hem in short-sellers, who typically borrow shares and sell them, hoping to buy them back later at lower prices and pocket the difference. The S.E.C. has shortened the length of time allowed to locate borrowed shares for short-sellers and will require investors to begin disclosing the stocks they short. That may discourage some investors from the practice.

Since the S.E.C. ban went into effect, borrowing shares has become more expensive, in part because some big pension funds and endowments have stopping lending stock altogether.

Whether the ban worked, given the market plunges that followed, is a matter of debate.

“If there had been no ban, would they have gone down even more?” said Mozaffar Khan, a professor who as studied short-selling at the Sloan School of Management at the Massachusetts Institute of Technology. “Normally the studies that we do are in normal times, and we just don’t know in a state of panic what the outcome would have been.”

The controversial ban clearly had some unintended consequences. It originally applied to 799 companies, but regulators allowed the stock exchanges to add other companies to the lists. By this week, about 190 had been added, including some that might not seem obviously linked to the banking industry, like General Electric, General Motors and CVS Caremark. The list became a source of jokes among traders, who came up with all kinds of conspiracy theories — such as companies rushing out negative earnings revisions as soon as they angled their way onto the list.

Hedge funds, which are down nearly 10 percent for the year, blame the rules for pushing them deep into the red. Many trading strategies rely on short-selling, and investors may have sold off some of their long positions in the market, driving prices down, because they were not able to hedge their bets with a corresponding short position. Convertible bonds — which are used to raise money for many banks this year — were especially battered because traders typically short a company’s stock when they invest in its preferred shares, for instance.

“It’s the kind of thing I would expect would happen in an emerging market,” said William Ackman, chief executive of Pershing Square, a hedge fund firm in New York, of the ban. “You have to think through the consequences of your decisions. It was a very big negative for the market in general.”

Nasdaq studied the changes in the market during the week before and the week after the short ban and found that the percent of selling in the market that was short-selling dropped to 16 percent, from 44 percent, for financial companies. Even nonfinancial company stocks saw less shorting. And transaction costs increased. The spread between the prices that buyers and sellers of stocks were willing to use for trades increased by 42 percent for financial stocks.

“The ban was a blunt instrument,” said Robert Greifeld, chief executive of Nasdaq OMX.

The raw number of trades in financial stocks also dropped, as many investors simply sat on the sidelines. Trading volume of Wells Fargo, for instance, fell 45 percent and trading in Bank of America fell 53 percent.

“There’s liquidity out of the marketplace,” said H. Seth Berlin, the principal at Performance Thinking & Technologies, a hedge fund consulting firm. “Did the ban really do what it was supposed to do? Probably not.”

Some investors said that bringing short-selling back to the market could actually bolster stocks. Andrew Fishman, president of Schonfeld Group, an asset manager in New York, said that some of his clients wanted to exit short positions in recent weeks, which would have meant purchasing shares, but they did not do so because they feared they would not be able to borrow the stock again to short it later on.

Mr. Fishman said short-selling has been wrongly blamed. The real problem, he said, is the weakness of financial institutions.

“You can never change the path of a stock,” Mr. Fishman said. “If it’s going to go down, it’s going to go down.”

Vikas Bajaj contributed reporting.

[SantaClaus]

Are there any ETFs that work by sector?

I think there are but cant remember offhand, Brillo.

[BrilloPad]

If you really want to short the financial stocks, sell a FTSE future and buy all the non-financial constituents.

That is equivalent to selling financial stocks and I am sure hedge-funds are doing this.

Are there any ETFs that work by sector?

[HairyArsedBloke]

You don’t have the vaguest idea of what goes on in these markets.

As snaw said – you’re completely delusional.

[SantaClaus]

If you really want to short the financial stocks, sell a FTSE future and buy all the non-financial constituents.

That is equivalent to selling financial stocks and I am sure hedge-funds are doing this.

[AtW]

So let me get this straight - you'd ban the buying and selling of shares on a short term basis?

More or less - 99% tax on capital gains to discourage such trading.

Shares are investment and short term investments should be only limited to conservative non-aggressive stuff like deposits.

This would certainly decimate employment levels in financial services but why should anyone outside cry for them when almost every other industry was killed by the financial people who opted for short term gains to get their bonuses so they outsourced everything they could to other countries?

[HairyArsedBloke]

Sweet Jesus, you're completely delusional.

Aye.

[snaw]

snaw, you are confusing the right course of action that I propose with the world in which we live which is certainly ain't right.

So let me get this straight - you'd ban the buying and selling of shares on a short term basis?

And you'd do this because it's not the right course of action to do otherwise. In your opinion?

[sasguru]

Yeah, and the state bailouts how exactly fit into your self regulating market?

It's the price of imperfection. No one says capitalism is perfect - but it works most of the time and history will tell you it's cyclical. It isn't the first time government will bail out the private sector and it won't be the last. Maybe that's the true function of government.
Haven't you learned the lession of "perfect" regulations yet?

[AtW]

Sweet Jesus, you're completely delusional.

snaw, you are confusing the right course of action that I propose with the world in which we live which is certainly ain't right.

[AtW]

FT: Call to end ban on short selling
Letter to the FT: Hedge fund industry is on standby to help authorities save City of London’s status

Reuters: SEC short-sale rule stifling options trade

Reuters: Pershing Square's Ackman says short sale ban hurt

.....

Hedge funds will save the City, yeah right.

Of course those guys are unhappy - they don't get their fix and it was their only way to make money on falling markets, something they bragged about.

With the rate of money withdrawls from hedge funds I doubt there won't be many of them left before end of 2009 - especially given how commodities are now tanking and their long positions are under threat.