• 18 Sep 2008 at 8:53 PM

SEC: Welcome To Pakistan

The WSJ is reporting that the SEC plans to temporarily ban short-selling, if Chris Cox– who apparently did not get yesterday’s note– doesn’t get his face ripped off first.
Interestingly enough, we’ve been told that earlier this week, Steve Cohen had instructed his Tonton Macoutes to stay on the sidelines re: making money off the banks. So this cannot make him happy. Only Steve Cohen tells Steve Cohen he can’t short stocks. Sleep with one eye open, Christopher, and maybe see if Blankfein and Mack will return the favor you’ve bestowed on them by providing some sort of safe house.
P.S. According to Bloomberg, Cox and Co. are meeting right now to come up with more ass-backward rules. So what I’m thinking here is someone find out where, and we’ll throw a grenade through the window. Einhorn pulls the pin.

252 comments (hidden to protect delicate sensibilities)
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Comments (252)

  1. Posted by guest | September 18, 2008 at 8:57 PM

    nice

  2. Posted by guest | September 18, 2008 at 9:00 PM

    These dunces have really lost it this time. Fist the death star sized SIV to end all SIV’s and now this?
    Wake me when some windows are broken or tires are slashed.

  3. Posted by guest | September 18, 2008 at 9:01 PM

    Seriously?

  4. Posted by guest | September 18, 2008 at 9:02 PM

    #2…RTC is a fucked idea. And Congress will pass it, maybe.
    So are SAC, Citadel, Chanos, etc…going to pay Iran to start a war now to end this?
    Is Cramer going to be appointed new SEC Chmn?

  5. Posted by guest | September 18, 2008 at 9:02 PM

    Korea Development Bank had proposed to buy a stake in Lehman Brothers Holdings Inc. for $6.40 a share, valuing its offer at about 6 trillion won ($5.3 billion), Chief Executive Officer Min Euoo Sung said.
    Lehman, which filed for bankruptcy this week, wanted to sell its shares at $17.50, Min told lawmakers today in Seoul.
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aUCpzDST65xE&refer=home
    -$$$

  6. Posted by guest | September 18, 2008 at 9:04 PM

    holy (pause) fucking (pause) moly.
    it’s over fellas.
    we killed the banks.
    now we’ll kill the hedge funds.
    worst move ever.
    bess, may as well shut it down tomorrow.
    you can write on my yoga blog any time.
    -retail

  7. Posted by guest | September 18, 2008 at 9:04 PM

    #5….fuck. On what fucking planet was LEH worth 17.5 when it was circling the drain?

  8. Posted by guest | September 18, 2008 at 9:06 PM

    WSJ is also reporting this:
    http://online.wsj.com/article/SB122177442732653979.html
    “A Treasury spokeswoman said: “Treasury Secretary Paulson joined Federal Reserve Chairman Bernanke in a meeting with House and Senate Republicans and Democrats to discuss current market conditions. They began a discussion with them on a comprehensive approach to address the illiquid assets on bank balance sheets that are at the underlying source of the current stresses in our financial institutions and financial markets. They are exploring all options, legislative and administrative, and expect to work through the weekend with Congressional leaders to finalize a way forward.”

  9. Posted by guest | September 18, 2008 at 9:11 PM

    When is Beard going to start dropping Benjamins out of a chopper…because that is next.
    I’m there man.
    As Spicoli would say…we’re just bogus too man.

  10. Posted by guest | September 18, 2008 at 9:12 PM

    @5 god i hate dick fuld.

  11. Posted by guest | September 18, 2008 at 9:12 PM

    This is fucking insane. This is the end of free market capitalism. Do these fuckers even know what the fuck they’r doing?

  12. Posted by guest | September 18, 2008 at 9:14 PM

    We have officially become Pakistan.

  13. Posted by guest | September 18, 2008 at 9:21 PM

    Even better, bloomberg reported that Cocks and crew are meeting tonight to come up with EVEN MORE plans to boost the market. As if banning all shorts and transferring all toxic waste loans to the taxpayers was not enough.

  14. Posted by guest | September 18, 2008 at 9:25 PM

    Stay on top of these ass clowns, BL. Apparently none of them have gotten the memo. John Mack went full retard today.

  15. Posted by Lowly Assistant | September 18, 2008 at 9:26 PM

    I’m sure CCox will find lil’ LB’s Mike Seaver-esque garage comfortable and spacious. And I’m pretty sure this shit is on repeat, bangin’ the BOSE.
    http://www.youtube.com/watch?v=OEsTy6NdYqA

  16. Posted by guest | September 18, 2008 at 9:27 PM

    9/18/08 the day Mack lost it.
    Fuld = Turd
    Long live free capitalism!

  17. Posted by guest | September 18, 2008 at 9:28 PM

    RFC won’t work here. Government doesn’t own the assets; they need to buy them up.
    Who wants to admit what that slime is actually worth? I can’t see more than .30/$1 being paid for any of the shit.

  18. Posted by guest | September 18, 2008 at 9:31 PM

    The biggest scam of all time is these A-hole bankers, echoed nonstop by Paulson and Bernanke, claiming it’s a liquidity problem. Call a turd a turd.

  19. Posted by guest | September 18, 2008 at 9:32 PM

    @12 Exactly my thoughts, freeze the prices where they are hahahah
    @14 You’re NEVER supposed to go Full Retard

  20. Posted by KevinB | September 18, 2008 at 9:32 PM

    @9 – So all this volatility we’re seeing is just “some tasty waves”? Where’s my cool buzz and pizza, dammit!

  21. Posted by Lowly Assistant | September 18, 2008 at 9:33 PM

    Pardone. More appropriate for Christopher’s sabbatical.
    http://www.youtube.com/watch?v=Li-85uaLhZg&feature=related

  22. Posted by guest | September 18, 2008 at 9:35 PM

    Fire this bitch. She writes the most incomprehensible posts, even by blogging / tabloid standards.

  23. Posted by guest | September 18, 2008 at 9:37 PM

    Bess, normally I think you guys do a fantastic job but this wasn’t one. Even if SEC were to ban short selling, it in fact does not mean, as you claimed – Stocks can only go up. The stock price in a long only strategy is still guided by the fundamental supply and demand at a particular price. Short selling is nothing more than selling a share that you don’t own hoping/praying) that prices will go down, at which point you can buy the share at the lower price to cover your short and make a profit. Even with shorts banned, you can achieve this functionality in the market by buying Put Options at the present stock price strike if you think the stock’s overvalued (so if price falls you pocket the same profit by having the right to sell at the higher strike price minus the option premium). However buying a Put won’t artificially increase the market supply of a stock therefore drive prices down. In a market under the grasp of panic, what’s the problem with that? Now, I don’t think you actually not understand this (or do you not?), but putting up a post like this only generates hype and distorts the real picture in a market already taken over by rumors.

  24. Posted by guest | September 18, 2008 at 9:37 PM

    @5 the “good bank/bad bank” thing was why that never happened. I still have never figured out why I ever even heard the phrase.
    So they pay $6.40 and get the good bank. Who pays for the bad bank?
    Dick Fuld effd up but way before this month.

  25. Posted by guest | September 18, 2008 at 9:39 PM

    I don’t get it. If they ban short selling, how the fuck do the risk arb boys do their job?
    Fuck??? This is so fucking stupid?

  26. Posted by guest | September 18, 2008 at 9:40 PM

    @ 22 and 23: Kill yourselves.

  27. Posted by guest | September 18, 2008 at 9:40 PM

    This has to be the most fucked up day ever for free markets.
    I am a Lehman employee (a low level one at that, and soon to be unemployed) who just yesterday arguing with my colleagues that letting Lehman go bankrupt was the correct decision as the debt and equity holders who had mispriced risk needed to pay for their errors.
    However, looks like Lehman turned out to be the only fool in this whole game. And I am sure that the Merrill shareholders are not feeling too good either, but at least they are better off. Had Lehman built up a balance sheet north of a trillion dollars and shoved 15% of its assets into level 3, I am guessing they would have been deemed “too big and risky to fail” and bailed out using taxpayer money.
    The feds here and in UK – the only places where some semblance of free markets at least existed till now – have given in and decided that they dont want the market. Banning short selling and the government buying out assets? What the fuck do they want? Why dont they just take over the entire market and set prices for everthing, like no bank stock can fall below $50!!
    This is so so so fucked up. The good part is that I will at least be in some position to actually influence something as and when the next financial crisis rolls in. I will make certain that I have totally loaded up on risk by then. Cox where is the fuckng downside??

  28. Posted by guest | September 18, 2008 at 9:41 PM

    From Chuck Schumer (D-Wall Street):
    “Schumer urged forming an agency to inject funds into financial companies in exchange for equity stakes and pledges to rewrite mortgages and make them more affordable. His remarks indicate momentum is building for some wider plan after the Fed and Treasury’s takeovers of Fannie Mae, Freddie Mac and American International Group Inc. this month.
    Schumer advocated a Great Depression-era Reconstruction Finance Corp. model, different from the Resolution Trust Corp.- type plan others have floated. Another RTC, which was a 1990s agency that sold devalued assets in the Savings and Loan Crisis, would “simply transfer excessive risk to the U.S. government without addressing the plight of homeowners,” he said.”
    Great plan, comrade.

  29. Posted by guest | September 18, 2008 at 9:41 PM

    @23, get a fucking life and a sarcasm meter.
    Any coincidence Quadruple Witching day is tomorrow??

  30. Posted by guest | September 18, 2008 at 9:42 PM

    @22– a few hundred thousand people would disagree with you. and reveal yourself as a douche with an axe to grind by calling her a “bitch.”

  31. Posted by guest | September 18, 2008 at 9:43 PM

    BL: I am conjuring up much more gruesome fantasies for those POS than just a grenade.

  32. Posted by guest | September 18, 2008 at 9:44 PM

    @23
    Right….. and how do you solve the risk arb problem?

  33. Posted by guest | September 18, 2008 at 9:45 PM

    What would this mean for the ProShares UltraShort ETFs. Would they be banned as well?
    This is so dumb.

  34. Posted by guest | September 18, 2008 at 9:49 PM

    BL: I am conjuring up much more gruesome fantasies for those POS than just a grenade.

  35. Posted by guest | September 18, 2008 at 9:50 PM

    @6 So right.
    I heard this 25 year old kid today talk on his cell phone about he was so happy about the schumer announcement and he just bought everything financial when he saw.
    The thing is, everyday millions of these shares are being “traded” but the question no one is asking is who is buying/trading all these shares. It isn’t just about the ABS problem at this point. The gig is up.
    Take an umbrella to work tomorrow.

  36. Posted by guest | September 18, 2008 at 9:51 PM

    #23,
    If you can’t get facetiousness, don’t read DB.

  37. Posted by guest | September 18, 2008 at 9:52 PM

    How the fuck would an option market maker hedge his PUT writes? How the fuck would a convertible arb shop carry on?
    This is so fucking stupid!!! The options market can’t function without short selling.

  38. Posted by guest | September 18, 2008 at 9:52 PM

    33: From what I can tell those ETFs hold index swaps, so I don’t think they actually short individual stocks. However this artificially created bull market is going to swamp the ultrashorts.

  39. Posted by pdtrading | September 18, 2008 at 9:52 PM

    OK, seriously, who’s the ding dong who proffered the response that stocks, in fact, will not always go up.
    For the love of God, can’t we at least have sarcasm anymore?
    I mean, at least until that’s banned as well.
    P.S. I am now drinking heavily. Someone please wake me up when it’s 2012.

  40. Posted by guest | September 18, 2008 at 9:53 PM

    This is so fucked up. I guess the line in the sand only applies to Lehman and everyone else gets bailed out by these ass backwards shorting rules.
    Dick Fuld = Total Dbag

  41. Posted by pdtrading | September 18, 2008 at 9:53 PM

    OK, seriously, who’s the ding dong who proffered the response that stocks, in fact, will not always go up?
    For the love of God, can’t we at least have sarcasm anymore?
    I mean, at least until the SEC classifies it as “rumor mongering” and “being really, really mean” and bans it from all market-related blogs.
    P.S. I am now drinking heavily. Someone please wake me up when it’s 2012.

  42. Posted by guest | September 18, 2008 at 9:57 PM

    The real criminals that should be hunted down are the bank CEOs who made announcements that everything was OK and then raised billions in capital the next day.

  43. Posted by guest | September 18, 2008 at 9:57 PM

    i dont get how anyone will ever be able to buy an option under this scenario… and without options which are sometimes used for risk management (what is that again?) just going to lead to good old fashion selling?

  44. Posted by guest | September 18, 2008 at 10:00 PM

    Anyone else have thoughts on Ultrashort Proshares ETFs? Are OTC derivatives the only game in town now?

  45. Posted by Finnegan | September 18, 2008 at 10:00 PM

    @22: Bess is an excellent writer, with good use of humor.

  46. Posted by guest | September 18, 2008 at 10:00 PM

    Ok with this move, the republictards (go obama!) have effectively shifted the killing of banks to the killing of arbitrage hedge funds and options houses. brilliant. go america.

  47. Posted by guest | September 18, 2008 at 10:01 PM

    Viva la revolucion! Viva Fidel y Che! This is a ridiculous communist joke… both the short-selling and the government plan. So Schumer is saying that the government is going to get equity in basically every financial institution? Am I hearing this right? If I don’t have the freedom to sell short and bet whichever side I choose, I don’t think I want to participate in the market period. How much fun would roulette be if you could only bet on black. Hmm…. I wonder if these ideas are meant to stabilize the markets in the short-term so a certain guy who doesn’t understand a darn thing about the economy has a chance to win.

  48. Posted by guest | September 18, 2008 at 10:03 PM

    If hedgies are forced to cover, this could conceivably lead to some blowups, putting even more pressure on the i banks that finance them.

  49. Posted by guest | September 18, 2008 at 10:03 PM

    @41 you might wake up in a pool of sweat and shit, after a nightmare about Option ARM resets

  50. Posted by guest | September 18, 2008 at 10:03 PM

    Banning short selling will have the effect of a massive short covering rally caused by a dry up in volumes by mid next week.
    Professional option traders will stop trading as they cannot properly hedge their postions, as will all risk arb trading, debenture trading, pref trading, quant. trading , derivative trading, ETF trading (ETF’s are supported by an underlying basket of stocks that are actually balanced daily) Traders of all financial products will not trade if they cannot hedge their positions.
    So at a time when all financial insituitons are desperately looking for revenue, trading revenue (direct and indirect) will start to dry up.
    Also we are just starting to see massive mutual fund redemptions and these actions by the SEC will cause a second wave of hedge fund redemptions. So massive liquidation will become massive liquidation squared.
    So for Cox and Company enjoy the week.
    The USA has just legatimized the response of Russia and Pakistain to halt the downward spiral of their respective stock markets!!

  51. Posted by guest | September 18, 2008 at 10:03 PM

    #23
    How do you think the person that sold you the put hedges their bet? Market makers don’t take directional positions.
    This is just going to dry up liquidity and increase volatility. Exactly what the SEC does not want.

  52. Posted by guest | September 18, 2008 at 10:12 PM

    The Pakistanis are truly trailblazers. They had the foresight and the audacity to do this before any of the Fed and Treasury officials even had the balls to start talking about it.
    We’re fucked! Financial armageddon is upon us.
    I am waiting to see what plans the HF guys can come up with to circumvent these ridiculous bans of short-selling.
    This Giant SIV (a negative-carry one at that) Paulson and Bernanke are thing won’t work. There is a tsunami of this toxic waste coming their way. The previous Giant SIV idea died because banks wanted higher valuations for their toxic junk from the Fed and the $80-100billion SIV was only a tiny fraction of the stuff out there.
    Also, some bankers complained the original idea was too transparent and would have killed their banks and any “market” that was left for these things if the world found out the kind of crap the banks have on their books.
    Funny how no one has mentioned about the $70billion rescue fund anymore…………………….is it still in the pipeline or has it died a silent death? Didn’t MS have to borrowing most of the $7billion they ponied up?

  53. Posted by guest | September 18, 2008 at 10:13 PM

    i work at a hedge fund that buys subprime and cdo on the cheap… what are we going to invest in if it all just gets sold to the new RTC. there is tons of money looking to buy subprime, alta, etc the problem is the owners arent selling bc “its only a paper loss and we are holding it to maturity” … i guess the miracle they are hoping for has come true
    the market is bidding subprime right now…. what is the govt’s price? if the market has been bidding $30 does what price does the new RTC pay… par? who runs the RTC’s buying effort… blackrock?
    who gets to sell their subprime, etc to the RTC? all banks, all troubled banks?

  54. Posted by arthurcutten | September 18, 2008 at 10:17 PM

    Tonton Macoutes. LOL Is John Carney Baby Doc?
    Bess you are too funny.
    I think capitalism died this week. Not sure yet about the constitution.
    So let’s pour some cheap whiskey and listen to some jazz oldies, because we’re sliding into the night
    http://jessescrossroadscafe.blogspot.com/

  55. Posted by guest | September 18, 2008 at 10:18 PM

    48 – Conceivably? +-
    I’ve been staying neutral this week precisely because of (a) AIG risk and (b) government risk. You can’t model politics and I’m pretty sure no one could model AIG – and the 11th hour “salvation” of that FuckedCompany.
    You run with the Washington dinosaurs, you’ll get trampled and eaten.
    I personally don’t believe this RFC/RTC/Bad Bank will actually succeed, but that doesn’t mean that it and the emergency short rules won’t slaughter everyone who was short with no net i.e. idiot day traders, and pop low-rent “hedge” funds like popcorn.

  56. Posted by guest | September 18, 2008 at 10:19 PM

    53: Only banks headed up by ex-Goldman guys will get to use the new RTC.

  57. Posted by guest | September 18, 2008 at 10:21 PM

    DealBreaker needs to merge w/ DealBook to survive. Use MAYO to merge!
    ShamWAW!!!

  58. Posted by guest | September 18, 2008 at 10:21 PM

    @50 hit it. bye bye derivatives markets on equities. can’t wait to see the fallout.
    alcohol, tobacco, and firearms. i’m going long.

  59. Posted by diablo | September 18, 2008 at 10:22 PM

    May as well close the markets tomorrow and reopen after the elections. No more worries about the volatility and the bad publicity of this meltdown. Oh, you mentioned options expirations – so who are the fraudters now?

  60. Posted by guest | September 18, 2008 at 10:24 PM

    Why is Fuld such a pussy? Enron goes tits-up, Skilling and Lay at least stood out in front and proclaimed to the world, “We are the stooges who blew up the Company!” Fuld on the other hand, despite his reputation as a Green Beret Licensed Badass, is a scared little rat hiding in his office. Probably chats with PeeWee Herman, Roman Polanski, and Mitch Williams (Phillies pitcher) each day so they can commiserate on the epic bonehead reputation-destroying idiocy of the last 72 hours of their respective relevance. But Fuld is still the biggest wimp of them all…….

  61. Posted by guest | September 18, 2008 at 10:26 PM

    Let’s hope they also ban buying and holding in bull markets too…so the little guy has a chance against the big institutional guys.

  62. Posted by guest | September 18, 2008 at 10:27 PM

    This market scares me. Losing jobs for 6 months in a row, the Dow almost back under 10k and oil at $100.
    I am voting John McSame, so he can change the Washington where he has been for 25 yrs. Because even though he has been there for 25 yrs and votes w/ Bush 95% of the time and “doesn’t know much abt the economy” I am SURE HE IS THE MAN TO LEAD! He and Sarah Baracuda will make Fannie and Freddie “smaller” & “less expensive to tax payers” and they will “drill baby drill” and everything will be ok! Yay!!!
    Nothing I want more than someone who took 6 yrs to get a 4 yr degree leading the country!

  63. Posted by guest | September 18, 2008 at 10:28 PM

    OK go ahead and kill me for asking, but would it be OK to just ban NEKKED short selling? and let shorts who can borrow continue? There was something wrong-seeming about naked shorting.

  64. Posted by guest | September 18, 2008 at 10:29 PM

    Because a veto to an earmark is going to SAVE OUR BUDGET! Where is my veto pen? I need to veto the bridge to nowhere bc that matters sooooo much when Fannie is on our balance sheet!
    Drill Baby Drill!

  65. Posted by guest | September 18, 2008 at 10:29 PM

    @63– DUH. the retardation here is that they’re banning ALL shorts.

  66. Posted by pdtrading | September 18, 2008 at 10:31 PM

    49-I’m already awake. And in a pool of sweat and shit. At least by 2012 the Republic of Americastan will have universal (i.e. nonexistent and totally crappy) healthcare.
    Viva la Revolucion!

  67. Posted by guest | September 18, 2008 at 10:31 PM

    62: I’ll vote for Obama if he has the sack to come out against Bernanke/Paulson on this.

  68. Posted by guest | September 18, 2008 at 10:32 PM

    @22– that was really uncalled for (not to mention wrong). you can leave now.

  69. Posted by guest | September 18, 2008 at 10:33 PM

    @65 I guess I didn’t think they could be that ridiculous. That idea is even stupider than my question! Why go to such an extreme? I just don’t get it…
    And thanks for the DUH too.

  70. Posted by guest | September 18, 2008 at 10:34 PM

    Fuld (verb): to cower sheepishly while confused or scared.
    Example: The natives fulded when the solar eclipse occurred.

  71. Posted by guest | September 18, 2008 at 10:35 PM

    Next plan on the drawing board is to open up the Strategic Government Cheese Reserve. This will fight food price inflation.

  72. Posted by guest | September 18, 2008 at 10:35 PM

    It just goes to show where the loyalty of these men firmly lies. WALL STREET
    Giving them the keys to the Federal Reserve was never a good idea.

  73. Posted by guest | September 18, 2008 at 10:36 PM

    @70 Best of the Day
    This might make it into the next edition of the OED

  74. Posted by guest | September 18, 2008 at 10:37 PM

    I’m fulding over the state of this country

  75. Posted by guest | September 18, 2008 at 10:37 PM

    #67, don’t vote for the Harvard Law Review guy. Vote for the U of Iowa, 6 yr Bachelor’s person.
    She can see Russia from her yard and knows abt the economy bc Alaska has oil.
    She was Mayor of Wassilla and has executive experience…but she can’t run HP as well as Fiorina did!
    She wants Fannie to be smaller and McSame wants to regulate!
    Party over here!

  76. Posted by guest | September 18, 2008 at 10:39 PM

    and she can cook mooseburgers
    she’s a pit bull with lipstick, that’ll scare the shit out of putin

  77. Posted by guest | September 18, 2008 at 10:40 PM

    I’m sitting at my desk right now and totally fulding.

  78. Posted by guest | September 18, 2008 at 10:41 PM

    @ 75 and 76: go back to daily kooks. We are trying to commiserate over the state of our markets. Don’t make me bust out Rev. Wright, Rezko, and madrases on your sorry ass again.

  79. Posted by guest | September 18, 2008 at 10:42 PM

    70 i love you, you are making me smile again. thank you, thank you, thank you!
    you too 74 and 77

  80. Posted by guest | September 18, 2008 at 10:42 PM

    @23: Who the fuck are you gonna buy a put option from if the market maker can’t hedge by going short? D-bag.

  81. Posted by guest | September 18, 2008 at 10:43 PM

    @78 I’ll give you Rev Wright but when you’re a kid, you go to school where your parents send you. I’m pretty sure OB was not happing going to school in a bathrobe and a beanie.

  82. Posted by guest | September 18, 2008 at 10:44 PM

    @60,,,,Mitch Williams throws a sinker ball doesnt he?

  83. Posted by guest | September 18, 2008 at 10:45 PM

    @ 78
    And I will talk abt Keating 5 and the fact that McSame confuses Spain w/ Latin America!
    I am going to sleep well tonight knowing the Bush will bailout everyone tomorrow and McSame will regulate when he gets elected.
    Sweeeeeeet!

  84. Posted by guest | September 18, 2008 at 10:47 PM

    @ 78, don’t worry abt the markets. Phil Graham says it’s all mental bitchesssss!
    lol.

  85. Posted by guest | September 18, 2008 at 10:48 PM

    The Oblahma shills make me yearn for the days of mayo, too long didn’t read, merge with…, and sham wow. Please come back, all is forgiven!

  86. Posted by guest | September 18, 2008 at 10:48 PM

    @75: Bush also graduated from Harvard. You can’t have it both ways, pinko.

  87. Posted by guest | September 18, 2008 at 10:50 PM

    Fuck!!! It must be the goldmanders at work again.
    When they came for and trapped Goldman Sachs, and were moving in for the kill, Paulson takes out the nuclear bazooka to save the “masters-of-the-universe”
    Someone grab their sachs and rip it off.

  88. Posted by NotAGuest IFuckingLiveHere | September 18, 2008 at 10:50 PM

    I have heard it said that those who survive this market will be the ones who can stay liquid longer than the market can stay irrational STOP It seems to me that a rational market is one that working efficiently STOP Therefore by putting a barrier to market efficiency in the form of banning short sales can only result in an irrational market for a longer period of time STOP Am I missing something that our comrades at the SEC are seeing FULL STOP

  89. Posted by guest | September 18, 2008 at 10:51 PM

    Here is some good news – CNBC is saying that the RTC II proposal is going to be capitalized with $500 billion. It will buy private-label and government backed mortgages.
    Wasn’t this a $3.5 trillion sector? Sounds like $0.15 on the dollar is this is true.
    Futures still rallying….
    RTC II Plan should be announced by Sunday.
    Short selling ban should be announced tomorrow.

  90. Posted by guest | September 18, 2008 at 10:51 PM

    Why don’t we just admit it. Whichever one of them it ends up being, we’re screwed. Hard.
    Bloomberg ’08

  91. Posted by guest | September 18, 2008 at 10:53 PM

    51 You talking listed options? OTC custom strategies yes – example, an executive has tons of companys stock and asks his private banker to protect6 his position by selling him a long dated put. The bank will create a custom put strategy for him and hedge itself with a short sale. But listed options are different. No?

  92. Posted by guest | September 18, 2008 at 10:55 PM

    88: It was all kosher until Goldman wound up in the cross hairs (No way Mack’s screaming little bitch maneuver affected jack). Draw your own conclusions.

  93. Posted by guest | September 18, 2008 at 10:55 PM

    Damn it feels good to not be a banker!

  94. Posted by guest | September 18, 2008 at 10:57 PM

    @62, 75, 83 – Thank you. Now go back to the kids table. The grown ups are talking.

  95. Posted by guest | September 18, 2008 at 10:59 PM

    Could these dumb moves actually cause longs to sell off in a huge wave as they lose faith in the system?
    Then what would Cox-head do?

  96. Posted by guest | September 18, 2008 at 11:01 PM

    What about the short ETFs?

  97. Posted by guest | September 18, 2008 at 11:03 PM

    86 Its not just U of Idaho. Its someone who, like Bush, is totally lacking in a world view. See David Brooks’ column on tuesday. Totally gets it. You need to be curious to be a leader. Not just be someone who prays.

  98. Posted by guest | September 18, 2008 at 11:03 PM

    @ 95: More likely foreign buyers who have been propping up our economy with their asset purchases will run for the exits. Who will want to buy Treasuries after this? I think the USD is even more effed than it was before.

  99. Posted by guest | September 18, 2008 at 11:04 PM

    Blue Horshoe loves Teldar Paper,.I guess your FAther isnnt on the Board of Directors of that Company, is he Bud?

  100. Posted by guest | September 18, 2008 at 11:04 PM

    #95,
    Cox would then do the logical thing and stop people from selling.
    Cox will shut the markets. You can’t lose faith in a market that is shut can you? Or can’t you?

  101. Posted by guest | September 18, 2008 at 11:06 PM

    97: “Gets it” = someone who agrees with you. Take a hike ass clown.

  102. Posted by guest | September 18, 2008 at 11:06 PM

    @95: Wouldn’t be surprised. Who wants to invest in a market where the rules change overnight?

  103. Posted by guest | September 18, 2008 at 11:10 PM

    Dear Mr Paulson/Mr Bernanke,
    I am honestly baffled by your indecision. Just last week, taxpayers were not going to pay for moral hazard problem caused by the greedy Wall Street, so you let Lehman fail. Just a day later, you nationalized AIG after Goldman Sachs and JPMorgan understandably decided they were not interested in doing the job for you. If AIG is too big to fail, surely those two firms will be willing to make sacrifices in this prisoners’ dilemma game, as the consequences of AIG failing would mean their death and destruction instead of a few dollars on their earnings.
    I suspect that AIG was a political pressure from the foreigners, since you’re afraid of China (FNM/FRE was a bailout for the Asian central banks and you need them to finance your deficits, whereas AIG was a bailout for the Chinese people so that the Chinese Communist Party won’t have problems associated with social unrests as people lose their savings). But that’s another story that I can only speculate.
    Didn’t you think through the consequences of letting Lehman fail, in that the amount of derivatives outstanding alone will cause chaos in the market, leading to big worries on counterparty risks? Today Credit Suisse refused to take Morgan Stanley’s name, and Deutsche Bank announced they wouldn’t do credit default swap that increased risk. Morgan Stanley wouldn’t have lasted the weekend. Where’s the global savings glut now, Mr Bernanke?
    Honestly, trying to solve moral hazard problem at this point is of no use, the root has been planted years ago, with cheap money and easy mortgage lending practice. Those were the moral hazard days, today the bankers are not lending any money trust me on that.
    But today was the last straw. What changed within the week for you to panic? Is it because Morgan Stanley’s 5 year CDS is trading upfront (which never happened to Lehman even the weekend preceding the bankruptcy)? Is it because Mr Paulson’s dearest Goldman Sachs is in line to be the next smallest, hence the next target of the market? Is the notion of non-bailout only applies to the smallest one, hence being a bigger (and potentially greedier) crook is better than smaller one? I am honestly baffled why you are worried when more than one fail when you know this is the consequence of your inaction last week given the financial world’s interconnectedness.
    For full disclosure, I am a Lehman Brothers employee. I accepted my job loss earlier on Monday. But as the news streamed in throughout this week, I get more and more agitated. Today I am extremely upset. I feel hard done that I am losing my job and as a taxpayer, paying for the bailout of other banks. I don’t know what will make it right – I surely don’t want financial armageddon (I do intend to get another job), and I don’t think you can turn back the clock to a week earlier and act on Lehman, but I sure hope both of you will suffer the consequences of your incompetence as much as I do.
    Yours regrettably,
    (Soon to be ex-) Lehman Brothers employee

  104. Posted by guest | September 18, 2008 at 11:12 PM

    98
    Agreed. This may finally break the dollar to deep lows, but it will probably not happen until after the misinformed, short term glee dies down.

  105. Posted by guest | September 18, 2008 at 11:12 PM

    I wonder if the meeting convened by Paulson and Bernanke was productive at all.
    They should have invited Ken Griffin, George Soros, Steve Cohen, Jim Simon, Peter Briger, and Tim Barakett along too if they were really trying to reach out.
    I would have paid good money to get a seat in that room.

  106. Posted by guest | September 18, 2008 at 11:12 PM

    96 ETFs in general are bundles of securities, with a price equal to the aggregate of the underlying holdings. You can settle a trade either in cash or by taking or delivering the underlying securities. Arbs watch this which keeps the price in check. If the underlyings, for example, were trading for more than the ETF they would buy units of the fund and then ask for and simultaneouly sell the underlying securities. The demand for fund units would cause the price to get back to breakeven. So a short ETF is a bundle of short positions.

  107. Posted by guest | September 18, 2008 at 11:14 PM

    @ 103: My condolences. LEH absolutely got the shaft in this entire scheme.

  108. Posted by guest | September 18, 2008 at 11:14 PM

    105
    Instead, they invited Mickey, Donald and Goofy.

  109. Posted by guest | September 18, 2008 at 11:18 PM

    The big long funds will be hurt as well. No more seclending income.

  110. Posted by guest | September 18, 2008 at 11:18 PM

    Welcome to Pakistan??? Pakistan is a country full of corruption and ppl that blow bombs in the name of their god…
    No, we’re nowhere near Pakistan, even if we stop the terrorists from shorting.

  111. Posted by guest | September 18, 2008 at 11:22 PM

    @ 106: I think you’re wrong. The ETFs I hold seem to own swaps, which I believe are OTC.

  112. Posted by guest | September 18, 2008 at 11:23 PM

    @111: Right, and who’s gonna take the other side of those swaps if they can’t hedge with short positions?

  113. Posted by NotAGuest IFuckingLiveHere | September 18, 2008 at 11:25 PM

    @110 it was a reference to the rules Pakistan imposed on their markets a few months (weeks?) ago

  114. Posted by guest | September 18, 2008 at 11:27 PM

    @110: “If you short sell you hate America.” Get real. Go back to watching Fox News, loser.

  115. Posted by guest | September 18, 2008 at 11:27 PM

    @ 110: we’ve got homegrown bombers too, it’s just now we have the financial market to match.
    Paulson: “Hmm, wouldn’t everything be dandy if we could just remove these damn illiquid loans from the balance sheets?”

  116. Posted by guest | September 18, 2008 at 11:31 PM

    @112: Not disagreeing with you. Just saying that holding swaps is different than holding a bundle of individual short positions. This BS is certainly going to derail the ETF business.

  117. Posted by guest | September 18, 2008 at 11:34 PM

    #109
    Everyone is gonna get hurt. That’s why gov’t intervention is never a good idea and must only be an absolute last resort.
    Securities lending will be much more restricted now and probably barred for banking and financial stocks.
    I wonder how many years it will take for the confidence to return after this shit storm. Paulson and Cox will resign before the end of the year so they won’t have to take the blame.

  118. Posted by guest | September 18, 2008 at 11:37 PM

    we must be missing something here.. paulson’s no idiot, are we sure it’s ALL shorting that’s banned, not just shorting that’s not tied to a hedge or a long-short position? i’m pretty sure paulson understands the consequences of banning shorts better than all of us here, so there must be something more to this…

  119. Posted by guest | September 18, 2008 at 11:38 PM

    Bold prediction: markets tank tomorrow as HFs sell their longs into the brief glee festival that continues from this afternoon.

  120. Posted by guest | September 18, 2008 at 11:40 PM

    @119
    What about all the shorts that have to cover IF the rumors are true?

  121. Posted by guest | September 18, 2008 at 11:41 PM

    #118
    Paulson might put in place a system to distinguish between “hedgers” and “speculators” like they do on some commodity exchanges.
    To add to that, Paulson and Cox will have the regulatory power to compel hedge funds and speculators to disclose their short holdings.
    I think these two measures together will work.

  122. Posted by guest | September 18, 2008 at 11:45 PM

    @121 thanks, gotcha..

  123. Posted by guest | September 18, 2008 at 11:45 PM

    I’m long groceries, guns, and gold, and short everything else.

  124. Posted by guest | September 18, 2008 at 11:47 PM

    @118
    Are you fucking nuts? When you mess with Goldman Sachs, he got ape mode.

  125. Posted by guest | September 18, 2008 at 11:48 PM

    i dont agree with morgan’s stock being low after they beat estimates. i agree with banning shorts if that’s what we need.
    you can all hate on my comment but you’re nothing but greedy bitches and we all know what happened to the greedy chaps at lehman =)

  126. Posted by tduncaneu | September 18, 2008 at 11:49 PM

    Now Bloomberg says that the SEC ban would only apply to brokerage firms. Appears WSJ F## Up the story. Still not approved by commission in any case.

  127. Posted by guest | September 18, 2008 at 11:51 PM

    @53 interesting points, that aren’t really being discussed by anybody

  128. Posted by guest | September 18, 2008 at 11:52 PM

    @125
    MS earnings were as of Aug 31. So reporting great earnings ain’t worth much when HFs are pulling business and your balance sheet is deteriorating.

  129. Posted by guest | September 18, 2008 at 11:53 PM

    #124
    No sensible hedge funds ever take on Goldman.
    All traders will tell you that maybe Goldman is on the other side of a trade. But it’s the dollar that matters.
    #126
    But there are only two(three) big brokerages left – GS, MS, LEH. I’m not counting the smaller players.

  130. Posted by guest | September 18, 2008 at 11:56 PM

    @121: How do you differentiate between a hedger and a speculator? In commodity markets it’s easy: the hedgers are the ones who actually produce or consume the commodity and the speculators are everyone else.
    Things aren’t so clear cut with equities. Now everyone has to fully disclose their portfolio strategy? Who evaluates a strategy to determine whether it’s a hedge or speculation? Is a pairs trade a hedge or speculation? What if a trade that started out as a hedge becomes a speculation by unwinding half of it? Etc, etc.

  131. Posted by guest | September 18, 2008 at 11:56 PM

    dealbreaker readers are some of the most smartest ppl in the markets.

  132. Posted by guest | September 18, 2008 at 11:57 PM

    Anyone who has ever bought/sold drugs (or taken Econ 101) knows that banning a certain type of transaction does not keep it from happening. It only creates black markets
    By the way, if anyone is interesting in making a market with me, email derivmarketmaker at gmail.com

  133. Posted by guest | September 18, 2008 at 11:58 PM

    #129, you mean MER, not LEH…….

  134. Posted by guest | September 19, 2008 at 12:00 AM

    You pathetic clowns have all the answers:
    Don’t restrict the shorts, don’t stop short selling, shorts are good for balance in the markets, shorts point out weaknesses, shorts provide efficiency, etc, etc, etc.
    Where were you clowns with ideas about how to avert a global meltdown? Did any of you come up with answers other than “blame the govt”?
    Now you say the new RTC is a bad idea too.
    Know what? You fucks have no answers. No solutions. You idiots apparently don’t really have a clue.
    Others will resolve the crisis, not you. You seem to be the only ones who don’t agree with cutting off the shorts and with establishing the new RTC. The markets all over the world seem to like the ideas, though.
    WTF do you and that asshole Cohen know that the rest of the f’n world doesn’t?
    You created the f’n “cutting-edge, structured investment products” that caused the mess, and you won’t solve it. You don’t know how. Others will, but I sure hope that you suffer mightily from the f’n fallout that comes down on you.
    BTW, Bess, you almost always sound sensible, logical meaningful, and humorous in your write-ups. On this one, you’ve attempted to take a very complicated, difficult and dangerous situation and reduce it to a promotional piece for that grotesque, unsightly, slovenly, slothful, and bulbous pig who goes by the name, Steve Cohen.
    I don’t think you were cool on this one at all.
    The Guy from Delaware

  135. Posted by guest | September 19, 2008 at 12:01 AM

    # 60 much to the collective surprise of everyone, Mitch Williams did in fact own up. He has a radio show in Philly and takes the heat weekly. Can’t see Fuld doing that.
    # 70 Brilliant
    Me? Fulding with a moderately priced red wine. Blackrock won’t be hiring much, but maybe Blackwater….

  136. Posted by guest | September 19, 2008 at 12:02 AM

    @134. Well said
    Bring JC back!!!

  137. Posted by guest | September 19, 2008 at 12:05 AM

    @idiot from delaware– yes, the point of this piece was so totally to promote steve cohen. go back to DE, you fucking moron.

  138. Posted by guest | September 19, 2008 at 12:05 AM

    @ 125 you just don’t get it.
    After frannie and freddie were bailed out it became clear that the shorts were right. Freddie has lied about the capital it had on hand (tthey had a lot less than they had reported). In addition both freedie and frannie and decided that they would not recognize past due loans as liabilities until they were past due for 2 YEARS (it has previously been 90 days).
    AIG did not realize how bad things were – they said they needed 20 billion (that was last saturday) as it turned out they needed 4x that amount.
    LEH was a shit show.
    They had a ego manic for a CEO who turned down a $17.50 bid for the company 3 weeks ago.
    The thing these Companies had in common was their CEO’s spent a ton of time blaming short sellers for the down tick in their stock prices. IMO their time might have been better spent trying to fix their shit show companies.
    Short sellers are merely politically acceptable scapegoats.

  139. Posted by guest | September 19, 2008 at 12:05 AM

    TGFD– get the fucking out of here you retarded hick pig. You don’t shit about this stuff, stop trying to play with the big boys.

  140. Posted by guest | September 19, 2008 at 12:06 AM

    Where am I? No short selling? The invisible hand of government should not squeeze the markets balls. You’re all fucked. – Adam Smith

  141. Posted by John Carney | September 19, 2008 at 12:06 AM

    I officially quit. Free market commentary over. Now we’re a socialist state. All assets go up always. Good night and good luck.

  142. Posted by guest | September 19, 2008 at 12:08 AM

    #130
    121 Here
    I think the market makers (they will have to make judgement calls), the brokerages themselves (one would think the broekrages won’t facilitate trades that short their own stocks), and the big long funds will be the classified as the hedgers. It will be an imperfect system. But if Hank says it’s good, then who are we to argue?
    While everyone else will be deemed speculators.
    As to who will evaluate a strategy to determine whether they are a hedge or specualtion………..GOLDMAN!
    Seriously, I don’t know.

  143. Posted by guest | September 19, 2008 at 12:09 AM

    TGFD = manbearpig!

  144. Posted by guest | September 19, 2008 at 12:12 AM

    delaware stinks

  145. Posted by guest | September 19, 2008 at 12:13 AM

    uh, the way this resolves is through a clearing of the market. sorry you weren’t hedged, but markets need to go down, (bad companies fail, better ones succeed), so they can go back up again.
    the prob with gov’t interference is it just makes the process longer, deeper, harder and more painful, which is fine for me and bess, but awful for the economy.
    the answer is a fucking shake-out, market crash, which will happen anyway. only now it will be worse
    buy some puts. maybe yell less.
    -retail

  146. Posted by guest | September 19, 2008 at 12:14 AM

    You guys be nice.
    TGFD does bring a different prespective on things. Just because he is not a finance type doesn’t mean he has nothing to offer.
    You guys should be a little more inclusive and hear the views of others.
    Yes, I drank the Cool-Aid.

  147. Posted by guest | September 19, 2008 at 12:15 AM

    You guys be nice.
    TGFD does bring a different prespective on things. Just because he is not a finance type doesn’t mean he has nothing to offer.
    You guys should be a little more inclusive and hear the views of others.
    Yes, I drank the Cool-Aid.

  148. Posted by guest | September 19, 2008 at 12:15 AM

    gotta read people, gotta read! they’re only considering banning short sales of securities of the brokerages – on the heels of UK banning short selling of financial stocks today… sheeesh…

  149. Posted by guest | September 19, 2008 at 12:17 AM

    learning from others:
    The Employment Effects of Mergers in a Declining Industry: The Case of South African Gold Mining
    Alberto Behar and James Hodge

  150. Posted by guest | September 19, 2008 at 12:17 AM

    @146 Its “Kool-Aid” you elitist liberal fuck!

  151. Posted by guest | September 19, 2008 at 12:20 AM

    BigBoy@#139…
    Big Boys? Hahaha! More like fucking sissyboys, don’t you think? I’ve been reading for months about all the f’n tears you cunts have been shedding over the losses of your gravy jobs.
    You know what? I don’t have to know all the details about your “stuff”. What I do know is that your “stuff” stinks like shit, and it has stunk up the whole fucking planet.
    Most of the “playing” I do here is just that. Fucking with you dipshits.
    I also have a sense of right and wrong, good and bad. Something most of you clowns have no clue about. You have proven that thououghly over the past week.
    Idiot@#137…STFU.
    The Guy from Delaware

  152. Posted by guest | September 19, 2008 at 12:20 AM

    @139
    “stop trying to play with the big boys” Are you fucking serious? You think a bunch of fucking dumb fucks from Yahoo finance are big boys?
    You must think the Rubik’s Cube is a goddamn time machine.
    Shut the fuck up go back to finance.yahoo.com.fuckyou

  153. Posted by guest | September 19, 2008 at 12:21 AM

    TGFD – Go fuck yourself and revel yourself in the company of your kind at Yahoo or some rightie forums.

  154. Posted by guest | September 19, 2008 at 12:26 AM

    I don’t see what the big deal is about TGFD. At the very least you could answer his question- if what Bald/Beard have planned is not what should be done, what is your idea?

  155. Posted by guest | September 19, 2008 at 12:26 AM

    @151 this has nothing to do with a sense of right or wrong, good or bad.. except for the guys way at the top… the vast majority of employees had v little to do with this mess, it’s not their job to do risk management…
    it’s not like wall st is full of pricks, it’s just got regular people, young and old, some creeps, some hardworking, whatever…
    and you shouldn’t celebrate wall st’s misery because if the financial system dries up the global economy will come to a screeching halt.. gotta have a little perspective here…
    ok, fine, i’ll stop preaching now…

  156. Posted by guest | September 19, 2008 at 12:28 AM

    Finkle is Einhorn. Finkle is a MAN!

  157. Posted by guest | September 19, 2008 at 12:29 AM

    @154: Very simple. It’s called capitalism. Winners win, losers lose, and nobody gets bailed out at the expense of innocent third parties.

  158. Posted by guest | September 19, 2008 at 12:29 AM

    fuck, too much jack, EINHORN is a MAN!
    what a week.

  159. Posted by guest | September 19, 2008 at 12:30 AM

    @154 i’ve been wondering why they don’t directly address the root of it: housing prices and mortgages directly, it would help people keep their homes and help the values of the assets these guys have on their balance sheets.. kinda seems unfair to sidestep the little guy and go straight to the rescue of the banks.

  160. Posted by guest | September 19, 2008 at 12:31 AM

    I’m not saying we all need to hold hands and sing “We Are The World”.
    But at the very least, listen to what others like TGFD has to say.
    You all young’uns think you are all mini masters of the universe. But the day will come when you will have to vie with Hector the cleaner and Ramos the photocopier for jobs.

  161. Posted by guest | September 19, 2008 at 12:32 AM

    @24 you dumb fuck, what you don’t realize is that they aren’t making these rules so that people will actually stop shorting the stocks
    they’re making these rules as a signal to people to stop this shit because if they don’t they’ll be put in jail

  162. Posted by guest | September 19, 2008 at 12:33 AM

    oops… i meant @23, heh.

  163. Posted by guest | September 19, 2008 at 12:34 AM

    The wiki article on Paulson is fascinating:
    “Paulson has personally built close relations with China during his career. In July 2008 it was reported by The Daily Telegraph that: “Treasury Secretary Hank Paulson has intimate relations with the Chinese elite, dating from his days at Goldman Sachs when he visited the country over 70 times.”[11]”
    “Paulson has quickly distinguished himself from his two predecessors in the Bush administration by formally identifying the wide gap between the richest and poorest Americans as an issue on his list of the country’s four major long-term economic issues to be addressed, highlighting the issue in one of his first public appearances as Secretary of Treasury.[15]”
    http://en.wikipedia.org/wiki/Henry_Paulson

  164. Posted by guest | September 19, 2008 at 12:34 AM

    People who bought homes that were more than they could afford should just eat it. Its called risk. Everyone wants everything guaranteed and handed to them on a silver platter now.

  165. Posted by guest | September 19, 2008 at 12:34 AM

    #159, you try putting a floor on the stock market when average P/E still stands at 15 times.
    Same with the housing market, prices still have some ways to fall and Uncle Sam (the Bush administration anyway) has neither the cash nor the resolve to bail out stuggling homeowners.
    But you do have the right idea that the housing and mortgage markets are the root of the problem.

  166. Posted by guest | September 19, 2008 at 12:36 AM

    @38 – 33: From what I can tell those ETFs hold index swaps, so I don’t think they actually short individual stocks. However this artificially created bull market is going to swamp the ultrashorts.
    hey retard, how do you think the bank that wrote the swap is gonna hedge the exposure?

  167. Posted by guest | September 19, 2008 at 12:37 AM

    51, 80 – you could hedge your Put with a structured note that pays the inverse of the performance of the financial stock you sold the Put for. Not as easy as a short, but the world doesn’t come to an end. At any rate, I wouldn’t worry too much about options and risk arb trades if your prime brokerages cannot survive to clear those trades. If all US Broker Dealers are all gone (not temporarily, but permanently), who gets those business? The world doesn’t stop, the business will be taken up by rest of the Asian and European banks, and in the long run, it’s a net loss for the country.

  168. Posted by guest | September 19, 2008 at 12:41 AM

    @164 forget you
    @165 why is it ok to put a floor on the securitized assets (if the govt goes thru with their massive bailout plan) but not ok to put a floor on the underlying assets?

  169. Posted by guest | September 19, 2008 at 12:42 AM

    Capitalist@#157…
    You are just the kind of simpleton I was talking about in my earlier two posts,#134 & #151: Simplistic, naive, myopic and stupid.
    The Guy from Delaware

  170. Posted by guest | September 19, 2008 at 12:45 AM

    Correct me if I’m wrong, but isn’t this a time to be reassuring market participants of the integrity of the system, as opposed to calling it into question by making these insane rule changes mid-way through the game?
    So if demand spikes for put options as a means to get short and market makers balk at supplying them without a way to hedge them, are premiums and implied vols gonna go through the roof? Is the VIX gonna blow out even while the market rallies? I hope credit spreads stay wide and the VIX reaches new highs, as an indicator of what is really going on out there behind the facade of this stock market rally.
    I guess that’s what we had coming though when the Fed decided to go long equities in exchange for $60 billion at the discount window.

  171. Posted by guest | September 19, 2008 at 12:46 AM

    good point 170 – in fact, the stock market is pretty irrelevant, it’s the cds market that’s key

  172. Posted by cheesedog | September 19, 2008 at 12:46 AM

    A lot of anger tonight. So tiresome. If any of you jerkoffs are going to write something with more F-bombs than knowledge, take your anger to Redtube.com and rub one out. Seriously. The world will be a better place.
    We all come here for genuinely insightful or funny shit. Be one or the other. Or go jerk it. I am good either way. Come to think of it, I am done here. Redtube…….here I come.

  173. Posted by guest | September 19, 2008 at 12:50 AM

    #168
    No one said it’s okay for the Fed and the Treasury to put a floor on the securitized assets. Just read the preceding entries and you know we are all up in arms.
    You have to understand the securitized junk are held by firms that will cause a seizure in the banking system if they go down (ie systemic risk). Also, foreigners hold heaps of these crap and the reputation of Uncle Sam will go down in flames if he welshes on these debts.
    Hence the pressing need to put a floor under these securitized assets.

  174. Posted by guest | September 19, 2008 at 12:53 AM

    can’t you get around needing a lender by using variance swaps?

  175. Posted by guest | September 19, 2008 at 12:53 AM

    @172 – I agree, people come here for either insightful or funny shit. The source of anger is this post is trying be insightful in a rather funny way. We are becoming Pakistan, get it get it, cause our govt is trying save our financial markets. The issues are all too real, either we recover from this mess with the financial system as intact as possible, or the time as the financial leader of the world has come to an end for our country. There is nothing in between.

  176. Posted by guest | September 19, 2008 at 12:58 AM

    @173 “Hence the pressing need to put a floor under these securitized assets.”
    i don’t disagree at all, but that doesn’t answer my question! you can ALSO put a floor on the securitized assets by stabilizing the underlying housing market directly! (and in the process, also help the US consumer) – i am simply pointing out that by focusing on the securities and sidestepping the housing market, the govt is bailing out wall st but leaving homeowners in the dark

  177. Posted by guest | September 19, 2008 at 1:03 AM

    @ETF Conversation:
    Short/double short ETFs — These things were designed to give smaller and less sophisicated market participants (retail) the ability to implement more “advanced” strategies without having to deal with the hassles (having money) of setting up a margin account. It’s correct, the short/doubleshort ETFs are not actually shorting stocks. But what that means is that while its already a beta short(not helpful for anyone trying to add alpha on the the short side), it’s also not even very good at delivering the short/double-short performance of the securities it claims to (huge tracking error vs. actual short/double short performance of the basket of securities it claims to return).
    Also, while its possible that you could still short an ETF — I’m obviously not surewhat the rules even are at this point — since it’s not a stock (mostly 40-act funds, or in some cases grantor trusts like GLD, or even two UITs in the case of the SPY), these things are really really fucking hard to find if you want to short them. There is huge demand to borrow them but just not enough floating around. Guess how they get around that, by the way: naked shorting! Many ETFs have a running historical short interest of well over 100% (couple over 1000%), but it’s basically overlooked since the borrower can always just create more ETFs to return if not possible to buy in the market. Wonder if that’s out now too…
    The point of all this is that ETFs are not going to solve this problem.

  178. Posted by guest | September 19, 2008 at 1:09 AM

    @175– the comments here may not be funny, but the post certainly was.

  179. Posted by guest | September 19, 2008 at 1:11 AM

    Insightful@#175…
    You’re right. “All too real”. “Save our system”. “nothing in between.”
    I wonder if most of the clowns here comprehend what you so skilfully summarized.
    I’m thinking they’d rather just ‘keep on ballin’ till the electric goes off. One last “pig to short” before the cafeteria closes for good.
    Well, tomorrow is another day. Done for tonite. Good evening, all. Enjoyed chatting with you. No hard feelings on my part.
    The Guy from Delaware
    p.s. TGFD has left the building.

  180. Posted by guest | September 19, 2008 at 1:14 AM

    179 TGFD probably couldn’t hack it as a banker and got canned 30 years ago. Hence the bitterness towards everything street-related.

  181. Posted by guest | September 19, 2008 at 1:17 AM

    @176: What about all of the renters who were priced out of the market? When’s their bailout?

  182. Posted by guest | September 19, 2008 at 1:19 AM

    Why the fuck can’t you just do a variance swap to get around the lending rule?

  183. Posted by guest | September 19, 2008 at 1:19 AM

    The idea of creating an agency that would buy up bad debt was borrowed from an idea that actually worked during the Great Depression. On the other hand, no one quite knows how this new agency would work because no one knows quite how all these derivatives work, nor how much bad debt is still out there.
    There seems to be a little split in Congress about committing half a trillion (current estimate, but no one really knows) to this new enterprise. At first, it seemed as though Congress would act quickly. But then it became apparent that nothing would be done until the end of next week, at the earliest. Pelosi’s brilliant comment: “We’re still committed to adjourning on the 26th.” I’m glad she’s committed to something.
    As time goes by, the political split is bound to widen.
    As to banning short selling altogether, Chris Cox still hasn’t acted. No surprise there: Chris Cox hasn’t acted in years. What happened to the supposed investigation into the role of short selling in the Bear demise? Subpoenas were supposed to fly, and people were supposed to get real scared.
    Naked short selling is already illegal, but the SEC does little to enforce its current regulations.
    Once again, I’ll point out that the SEC is underfunded, understaffed, and barely creaking along at the end of a hostile administration. Rapid, fierce securities law enforcement is sort of a hopeless pipedream right now.
    The Republicans had to do SOMETHING about the perception that short selling was bankrupting viable firms. Alan Schwartz, Jamie Dimon, Dick Fuld, and now John Mack (a contributor and advisor to McCain)have been publicly calling for curbs on short selling.
    Lloyd Blankfein didn’t bother to publicly call for help against the short sellers; all he had to do was pick up the phone.
    That’s a pretty big batting line-up on a single issue. On the other side: short-sellers, the guys who are thought to be making fortunes while everyone else’s pockets are emptying out.
    But the supposed ban is neither issued nor final. I think it’s being floated as a trial balloon — and the folks in charge are secretly hoping for a loud enough outcry to drop the whole matter because they may know enough to suspect that it will only make matters worse.
    When tomorrow dawns and there still haven’t been any decisions made in Washington, I expect another day of terror on Wall Street. If not tomorrow, next week.
    By the way, has anyone else noticed that Bernanke’s beard has turned white?
    As a final note, I’ve said it before and I’ll say it again: TGFD, stfu. Blameless people are losing their jobs.

  184. Posted by guest | September 19, 2008 at 1:20 AM

    @177 Who said anything about solving the problem? Point is that ETFs don’t rely directly on shorting, but rather indirectly through the swap counterparty that has to hedge the swap sold. Your understanding of ETFs is all over the map. Are you trying to say people short ETFs? The highest volume ones have both short and long versions (as well as double directional), so your discussion about “hard to find if you want to short them” is ridiculous. No offense.

  185. Posted by guest | September 19, 2008 at 1:34 AM

    184- yes, i was talking about2 different things.
    1.) double short/short etfs (proshares) – yes you are right, they use swaps, i was saying that the performance of those really only approximates the actual performance that one would get by shorting the actual stocks. In other words, not a terrific hedge.
    2.) yes people do short etfs like they would any stock (if you are questioning that, then you should do some homework). yes, some are easy to find for shorting, but many (there are over 600) have much smaller volume and are incredibly hard find. Incidentally, these are the etfs that are most interesting for hedge funds to short — this isn’t something that I’m just pulling out of thin air.

  186. Posted by guest | September 19, 2008 at 1:42 AM

    if the bad bank idea from the great depression “worked”, then why are we in a crisis today?

  187. Posted by guest | September 19, 2008 at 1:44 AM

    Too long, didn’t read.

  188. Posted by guest | September 19, 2008 at 1:57 AM

    @182, isn’t a variance swap hedged with a strip of call and put options?
    If you can’t hedge the put options with the underlying how can you hedge the variance swap?

  189. Posted by guest | September 19, 2008 at 2:03 AM

    @159 is totally right. None of this will be resolved until the housing market starts up again. Why bail out banks when you can bail out individuals?
    Put a price floor on houses, swap out all these ridiculous mortgages with fixed rate ones, and sit back and wait.

  190. Posted by guest | September 19, 2008 at 2:04 AM

    #186
    The “Bad Bank” idea from the Great Depression didn’t work.
    It was World War II and the ensuing reconstruction activities that pulled the world from the economic mire it was in.
    Also, nobody remembered the lessons from the Great Depression years. Everyone thought we are better prepared this time around.
    Oooops………………we fucked up.

  191. Posted by guest | September 19, 2008 at 2:16 AM

    Where’s Ron Paul when we need him?

  192. Posted by guest | September 19, 2008 at 2:53 AM

    Shorting stocks is so 2001. Trading CDSs is so much easier and you get the same result.

  193. Posted by guest | September 19, 2008 at 3:00 AM

    @192
    What’s the market for CDS like at the moment? Is counterparty risk a real issue or not?

  194. Posted by guest | September 19, 2008 at 3:13 AM

    @188
    a short sell transaction is implicitly a variance swap between the share lender the short seller and the share purchaser. The short seller just needs to write an atm call and buy an atm put. to replicate the return. and he can hedge his delta by buying or selling shares. am i missing something?

  195. Posted by guest | September 19, 2008 at 3:49 AM

    #190
    Don’t worry, if McCain wins in November we’ll have World War III to pull us out of this one in no time.

  196. Posted by guest | September 19, 2008 at 4:03 AM

    @194: You’ve successfully described a synthetic short. Who is he going to buy the put from? Who is he going to sell the call to? A market maker who can’t hedge by going short the underlying? Don’t think so.

  197. Posted by guest | September 19, 2008 at 4:20 AM

    It’s official. Applies to 799 financial stocks through Oct 2.
    http://www.sec.gov/news/press/2008/2008-211.htm

  198. Posted by guest | September 19, 2008 at 4:43 AM

    Pakistan Paulson has done it!
    All 799 financial stocks…………
    Yippee

  199. Posted by guest | September 19, 2008 at 4:43 AM

    @196
    I’ve also successfully described why delta hedging is retarded. If the short seller can use a synthetic short to put on his position. Then the market maker can also use a synthetic short to hedge the call he buys from the short seller and a “synthetic long” to hedge the put and so you see we have variance swap here and no one actually need buy or sell any of the underlying to hedge their delta and they can still be market neutral. Should the prices begin too diverge one can always exercise the in the money options and circumvent the options market makers all together.
    How the market makers stay in business is beyond me, except that they fuck people on the bid ask spread, otherwise the market makers would get arbitraged into oblivion with their inferior and mostly idiotic delta hedging techniques.

  200. Posted by guest | September 19, 2008 at 4:50 AM

    TGFD – you’ll obviously ignore this as it is the genuine free market answer – but what the government ought to have done is nothing. Not a thing. That would be a ‘free’ market, see?
    If short selling is a monster, it’s one that will eventually eat itself. Shorts rely on being able to borrow stock and lever it. Both require market-makers. *IF* we accept that short selling destroys banks (which it doesn’t, but anyway) then short selling will eventually destroy itself.
    Wharfer

  201. Posted by guest | September 19, 2008 at 4:53 AM

    @167: And who, pray tell, is going to hedge the structured note?
    @188: in what world is a short sell the same as a variance swap.

  202. Posted by guest | September 19, 2008 at 5:12 AM

    @201
    a short sell transaction is implicitly a variance swap between the share lender the short seller and the share purchaser. The short seller just needs to write an atm call and buy an atm put. to replicate the return. and he can hedge his delta by buying or selling shares. or better yet with a bear call spread.

  203. Posted by guest | September 19, 2008 at 5:15 AM

    @70 – bravo!

  204. Posted by guest | September 19, 2008 at 5:25 AM

    I’ve destroyed billions $ in shareholder wealth and put taxpayers on the hook and all I got was this lousy t-shirt.
    -T-shirt vendor

  205. Posted by michange | September 19, 2008 at 5:26 AM

    @Bess : Welcome United National-Socialist States of America :
    http://lacrisepourlesnuls.blogspot.com/2008/09/lincendie-du-reichstag-amricain.html

  206. Posted by guest | September 19, 2008 at 5:26 AM

    @ 202
    short sell transaction: delta -1, vega 0.
    (put_100 – call_100): delta -1, vega 0.
    in what way are either of these in any way similar to a variance swap, which certainly ain’t going to be vega null.

  207. Posted by guest | September 19, 2008 at 5:56 AM

    shorts are stinky poopyheads

  208. Posted by guest | September 19, 2008 at 5:59 AM

    You can’t say that the only thing that “worked” during the Depression was the onslaught of World War II.
    That’s oversimplifying a lot of history that still affects us today. We got the FHA, the FDIC, reform at the Federal Reserve, the FCC, and the FAA from the creative team that backed up Roosevelt. All of them need further reform 70 – 80 years later, but hey, it’s been 70 – 80 years and life is vastly different now.
    As to Cox, so he got his emergency rule done. I kind of like the old-fashioned way of doing a rule — publishing a text, allowing public comment, revising the text in light of comment, promulgation. There was time to do some of this between last March and now. Cox proceeds in fits and starts, and of course has to prove that he is big and bad like Bernanke and Paulson, capable of working over week-ends and ruling his agency like a fiefdom.
    In reality, Cox has anxiety attacks over alternate side parking regulations. When to move his car, where to move his car, all of these decisions bring the scary world in!

  209. Posted by guest | September 19, 2008 at 6:00 AM

    You can’t say that the only thing that “worked” during the Depression was the onslaught of World War II.
    That’s oversimplifying a lot of history that still affects us today. We got the FHA, the FDIC, reform at the Federal Reserve, the FCC, and the FAA from the creative team that backed up Roosevelt. All of them need further reform 70 – 80 years later, but hey, it’s been 70 – 80 years and life is vastly different now.
    As to Cox, so he got his emergency rule done. I kind of like the old-fashioned way of doing a rule — publishing a text, allowing public comment, revising the text in light of comment, promulgation. There was time to do some of this between last March and now. Cox proceeds in fits and starts, and of course has to prove that he is big and bad like Bernanke and Paulson, capable of working over week-ends and ruling his agency like a fiefdom.
    In reality, Cox has anxiety attacks over alternate side parking regulations. When to move his car, where to move his car, all of these decisions bring the scary world in!

  210. Posted by Seaman Bodine | September 19, 2008 at 6:55 AM

    why LEH, why not MER, why ban short selling, why not let FRE fail etc…the reality is this: if you let it come down the wire, you deserve the fate dictated to you by the dummies making the rules.
    To not lose the game based on a bad call, make sure you’re winning by more than a point.
    By definition, the rule makers are dopes; otherwise they’d be making more money. At least on this site, I’d have to believe most folks buy into that thinking. We’re here because ballers and their bosses underwrote / packaged dog shit. Accept your fate.

  211. Posted by guest | September 19, 2008 at 7:07 AM

    Yeah this Fuck Pualson wouldn’t last day in a real corporation. He’s just some government bureaucrat who has no idea how his solutions effect the real world. I wish greenspan would sit him down and show him how the supply and demand curves fit together, this fucker’s never heard of a dead weight loss, and he is one.

  212. Posted by guest | September 19, 2008 at 7:32 AM

    @206
    how do you figure a short sale has no vega when you’re using leverage? By your same analysis a stock couldn’t be used to replicate the return of a call option because the stock has vega zero. Since there is no put call parity (put_100 – call_100): delta -1, vega 0. doesn’t hold anyway. so you need a ratio of puts to calls to get (put_100 – call_100): delta -1, vega 0. and the change in the ratio of the those puts to calls from one exercise date to another, is, say it with me now, a variance swap.

  213. Posted by guest | September 19, 2008 at 8:31 AM

    @211 = retard
    We’re lucky we have Paulson, this isn’t a good situation, and hes the best choice among govt people….Greenspan = too slow

  214. Posted by guest | September 19, 2008 at 8:50 AM

    for the over curious reader, literally titled “more than you ever wanted to know about variance swaps”
    http://www.ederman.com/new/docs/gs-volatility_swaps.pdf

  215. Posted by guest | September 19, 2008 at 8:56 AM

    @212, see my previous link to Derman’s paper.
    What you are missing and what makes a variance swap so innovative is that it is delta neutral, i.e. delta = 0.

  216. Posted by guest | September 19, 2008 at 9:06 AM

    @211 — Seriously? You do know Paulson was at GS for 30 years and ended up as CEO, right? Say what you will about the guy, and there’s plenty to say, but calling him a government bureaucrat is just stupid. Or maybe you were kidding.

  217. Posted by guest | September 19, 2008 at 9:19 AM

    @215: ES up 65–you don’t think you have delta’s if ur long/short variance?

  218. Posted by guest | September 19, 2008 at 9:20 AM

    @215: ES up 65–you don’t think you have delta’s if ur long/short variance?

  219. Posted by guest | September 19, 2008 at 9:20 AM

    @215: ES up 65–you don’t think you have delta’s if ur long/short variance?

  220. Posted by guest | September 19, 2008 at 9:37 AM

    Goddamn, 211 is stupid. Always nice when someone outs themselves as a mouthbreather who is snooping on an “insider” board.
    Paulson was the head of Goldman Sachs, you dumb shit.

  221. Posted by guest | September 19, 2008 at 9:46 AM

    SKF is halted… down 20% right now

  222. Posted by guest | September 19, 2008 at 9:52 AM

    I’m pretty sure 211 was being sarcastic…but it is hard to tell

  223. Posted by BlackSwan06 | September 19, 2008 at 10:30 AM

    @211 Honestly, usually I’m reasonably polite, but you have just revealed yourself as having gone FULL RETARD (if not F*CKTARD) if you’re stupid enough to call Secretary Paulson a government bureaucrat who wouldn’t last at a “real corporation.”
    Here’s a hint. Try Wikipedia. Maybe the Fisher-Price version since your cognitive skills seem to be lacking… I’d hate to think what this mess would look like or how it would be articulated to the press if someone who DIDN’T have his skills were Secretary…

  224. Posted by guest | September 19, 2008 at 11:39 AM

    Buy gold. It is the one true savior in a world of inflated fiat currency. Buy gold.

  225. Posted by guest | September 20, 2008 at 4:43 PM

    Can somebody please call Al Gore and ask hime what we should do?

  226. Posted by guest | September 25, 2008 at 6:24 PM

    Put the grenade in Einhorns shorts and throw him through the window.
    (More birds with one stone)

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