It seems that short sellers are under fire in both the U.S. and the U.K. So the question is simple, did short sellers bankrupt Lehman Brothers and AIG? Maybe the question is, how much did they have to do with it?
Fear and rumors? Naked short selling? Whatever happened to fundamentals?
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it was a crisis of confidence. Banking is all about having confidence in your counterparty.
Seriously, if anyone can really give a complete answer to y lehman went down, please go kick paulson out of the office and take his job. Short selling was definitly one of the reason thou. It drives the panic that led to the lost of confidence.
banking business model is broke and no confidence can fix it, banning short selling just delays the inevitable....stand alone ivnestment banks are unsustainable since risk was underpriced for too long and our itnerest rate was too low for too long....both of which will be corrected.
I suspect it's not just naked short selling due to predicting a decline in value; with large enough and well-timed positions, short sellers can induce the "favorable" stock price slide. Re: speculation.
I can understand the sudden concern for deleterious short selling, but when your firm is leveraged to the hilt and has overexposure to risky asset classes (such as MBS)-- you deserve what you get.
It doesn't matter if you deserve it or not. The question is, would it have happened if there was no short selling?
When you get down to it, the question has to be can you manipulate the market with naked shorts in concert?
You can't argue price discovery if you are actively manipulating the price...
There is no denial that market is in panic. This is exactly the depressed Mr. Market Warren Buffet described. If you want to get rich in the long term, you need explore Mr. Market's emotion. Both Marty Whitman from Third Avenue and Templeton's Mobius think this market provide many opportunities. You can see the article here http://searchvalue.blogspot.com/.
i think what the sec was really after here in this move was tackling their inability to police the spread of rumours that were having a negative effect on prices and profiting short interests. which is necessary, but doesnt justify their action. this is akin to banning msnbc from covering politics because a few of their programs might be heavily biased and promote partisanship. the sec should be held to higher standards - i say try again.
again, at least the ban is temporary. im curious tho, does it produce inflated pricing in the meantime and whats the repercussion when the period ends? banning naked selling didnt bring stability earlier this year, i doubt this will either.
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