Sure, it’s only (sort of) financial now, but given how brilliantly it has worked in curing fundamentals (someone forgot to tell FedEx though) and boosting the market thus far, can a wider short-selling ban be far behind? (Probably not, but we love to speculate anyhow).
Who does a short-selling ban screw with other than evil conspirators that spend their afternoons conspiring to conspire to destroy otherwise noble and financially sound firms with their names listed next to “integrity” in the thesaurus? Lots of important players that don’t have the political clout or aren’t sympathetic enough to be spared. Including:
Options Players
Any number of strategies, including:
Covered Puts (No great loss here).
Synthetic Puts
Long Call Synthetic Straddles
Short Put Synthetic Straddles (No great loss here either).
…are out the window.
Not to mention that you are just asking to pump up implied volatility on a number of instruments (both puts and calls) and generally disrupt options markets when you pour the short sentiment spill-over into puts.
But these inflated “Wall Street Types” look like bloated beneficiaries of the massive equality gap in this country. Let ‘em all suffer.
List continues after the jump.
1X0/X0 funds.
Funds that use the net cash from short positions to boost their long exposure have become quite popular. Depending on your view of the 130/30 structure (and it’s 140/40 150/50 cousins) you may or may not be shedding tears for these managers. Plus, there’s probably only around $50-$60 billion in 1X0/X0 funds right now anyhow- not nearly enough to afford expensive lobbyists. We can step on these ants easily without their pitiful cries being heard by anyone who matters.
Merger Arbitrage Funds
That’s ok, we didn’t really care about efficient pricing of stocks involved in mergers anyhow. Shareholders thereof are big boys and girls. They will be just fine.
Any Arbitrage Fund Involved in Equities
I mean, really, we don’t want people able to hedge against financial crashes. We shouldn’t need hedging anyhow since the government is going to assure that stock prices only ever go up.
Bond Fund Managers
Want to keep your investment focused on a particular segment of the balance sheet without enduring overly burdensome spill-over equity risk? Too bad. You can’t go long bonds and short equity anymore. (Perhaps this helps explain why bonds issued by financial firms didn’t enjoy Thursday and Friday’s rally quite as thoroughly as financial firm equities?)
No sweat here. We’ve been bailing out the bond guys since Bear Stearns. It is easy enough to remind them of that if they even think about whining.
Any Sophisticated Player That Buys Bonds
You can’t hedge your convertible bond purchases by shorting the stocks. But none of this is about the “sophisticated” players, so no one will care. Crush ‘em.
Convertible Bond Issuers
See above. No one understands them anyhow, so no loss.
Credit Default Swap Stability
For a country trying to get a handle on the financial system, I would think you would prefer to avoid increasing the number of OTC instruments like credit default swaps.
David Einhorn
Sure, he is right more often than wrong, sure he stands for truth, financial justice and the American way, but he reminds everyone of that guy in high school who was always blowing the curve by acing all the tests. No sympathy from the frat-boy connected finance folk here either. (We are huge fans though, David).
Jim Chanos
Who?
Funny, considering the size of some of those stocks, shouldn’t any firm not on the list consider a reverse merger with a firm on the list. If this list becomes permanent, don’t you have a fiduciary obligations to let your shareholders only go long.
I hate it but if I worked at a firm on the list I would be happy.
Chanos already managed to get the WSJ to give him half a page of the opinion section to bitch and moan… although I agree with him
Anyone knows why Berkshire Hathaway is getting pounded? It’s already down 11 per cent this morning.
Einhorn is down on the year. or was fairly recently. anyone who can be that right and still lose money doesn’t deserve to participate in the market.
all these options strategies obviously have prices at which they make sense. The problem isn’t even the IV, if the market makers just jacked up the IV that would be acceptable its the fucking bid/ask that’s a killer. They can’t refuse to make a market so they just make a market at prices so disadvantageous that no one will trade the names. Complete clusterfuck.
SIMPLE SOLUTION–
We simply need to ramp up our Futures on Stocks capacity. Then, if you didn’t like the economic prospects of a company, you can short futures. No locates, no borrowing, no nonsense. Someone call the CME (quickly) and have them start listing these beauties.
Sincerely,
The boy who saved capitalism
Where is Batman, he can save capitalism. He is Bruce Wayne after all…
if i remember correctly??? econ 101: artificially high prices create a surplus, so look out below, actually shorting the futures is a good way to play the short side for those who can handle big swings and gov’t rule changes etc etc etc pk of http://www.InvestmentsCo.com
Too Long and Boring, didn’t read.
EP Sucks.
@8- dude, you’re the same person who wont shut the fuck up about EP. it’s pretty bizarre actually. if you hate her so much, and LOVEEEE carney, just go to his new site starting tomorrow, and stop coming here. or would that leave your life devoid and meaningless, without something to whine like a little bitch about?
@4
Why don’t you get to participate in the market just because you’re down? That’s just stupid and unfair. The people, companies, hedge funds, etc. who are down are victims of success. As victims, they deserve a bailout from the successful to ease their victimization until they can negotiate a merger and hook up to the taxpayer teet.
“Posted by guest, Sep 22, 2008 10:58AM
Too Long and Boring, didn’t read.
EP Sucks.”
I was going to keep quiet, but enough is enough. This particular IP has commented some 25 times in the last two days, 22 of which have been in one way or another about how when why and/or who I suck. That’s easily one per hour while the markets are open.
You don’t like me. We get it.
Honestly, I think you will find once you free yourself of the burden that is your pressing obsessive compulsion to announce your likes and/or dislikes hourly, that life can be pretty interesting. Even if you’ve been out of work for over a year.
Try it. Seriously.
Who are Jim Chanos and David Einhorn? Why not quote Vince Offer and Billy Mays?
Warren is an arb, a large insurer, a CDS player, a commodity speculator, a large holder of corporate debt, assorted bank and financial stocks like such beauties as AXP.But he’s really just a regular guy who likes his porn and Dairy Queen sundaes.
WTF is up with CNBC? Not one of these floating heads has mentioned that Paulson is pulling a zero accountability grab for power.
Lots of Kool Aid getting passed around though. Every tool senator or money manager talks about the plan like it is fucking War and Peace.
EP:
Ah, but why doesn’t he like you? That’s what I am curious about.
AB
@3 WFC and AXP make up 20% of his holdings
what’s wrong with AXP, exposure to bottle service receivables not passing the impairment test?
17 I know yr kidding. Ever see who has Amex cards? Basically everyone and anyone. That idea of their clients being above the fray and elite is long over.
The short-ban does not affect value oriented shorts (DE, DL, JC) except in two situations: a) our borrow gets recalled, and b) our investors get worried by the mark-to-market, and decide to redeem. Incidentally, the ban is designed to coincide with the end of the quarter. Fun for all the financial bottom callers (Pzena, Marty).
The stock prices themselves depend on buyers and sellers of the stock. The rally is due to the semi-legal shorts covering (or being covered by their brokers). The LEH brokerage issue and MS/GS prime scare adds to short-term demand. Over the next few months however, you have to find buyers at these prices in order for existing shorts not to benefit. Unlikely situation.
As you point out, the flippers are the most severely impacted, as are SAC/Citadel’s CDS/squeeze operations.
The mark-to-Paulson plan for practically all assets is significantly more scare-worthy.
They’ve already announced black holes for:
1) Conforming mortgages. The GSEs have no wrapping limits, and the Treasury has no upper limit to how much GSE debt they can buy.
2) Equities and repo-able assets. The lending facility promises to take anything banks will accept as collateral.
Which leaves us with the rest of the untouchables.
$700b – $1.5t to purchase paper that’re regularly being rejected by the pools of distressed debt raised throughout ’07. This would recapitalize the banks, and ruin the short thesis on most of the financial players. A treasury short is the immediate potential hedge, or perhaps an intrade bet on the next war.
Charming.
@11 … Could you confirm which markets you are referring to that have been open since 4pm on Friday? Shop Rite? Stop & Shop??
There were some 200+ posts after Carney’s farewell on Friday, and quite a few of them took issue with your writing. There were many people involved in the discussion.
You are going to need a much thicker skin for this gig to work and perhaps your time would be better spent on your writing than debating your merits on the comment boards.
Let your writing speak for itself.
Alienating and antagonizing DB posters is only going to drive people away from the site and in turn, your advertisers. Remember, they pay the bills …
@ 20
Seriously, take your right hand…bring your fingers in to your palm, now fold your thumb over. Tada a fist.
Now take that fist, and power bomb your own anus.
I’m a huge EP fan, verging on slobbering fanboy status, but I have to wonder,first with the huge movie project, and now the ingenue Editor In Chief at DB thing, are you now unemployed, or has the PE dealflow slowed to a trickle at the office?
Not that I’m complaining, keep up the great work.
why make it complicated. delta hedging at it’s most basic. sell the put, sell the underlying. buy the call, sell the underlying?
@20 — Do the unemployment offices now have free Wi-Fi? How are you posting?
@22– ep is not the e-i-c, despite reports to the contrary.
you know’s short?
you know who’s short?
you know who’s short?
@3…THE ONLY ONE LEFT NOT ON THE SHORT LIST, HA HA…
are Johnny Mack and Loyd Blankfein still allowed to sell their shares of MS and GS?
NASDAQ issuer Diamond Hill Investment Group, Inc. (DHIL) has voluntarily opted-out of NASDAQ’s list of Covered Securities under the SEC’s Emergency Order, effective today, September 22, 2008. Diamond Hill Investment Group, Inc. will not be subject to the restrictions of the Emergency Order.