With the Italian 10-year bond trading almost 400bps wide of German rates, stocks down 1.5%, and new doubts about the EU’s ability to respond to the spreading credit crisis, Silvio Berlusconi took to the floor of parliament to defend his country’s credit and was criticized for not keeping it lively enough:
Commenting on the speech, a strong critic of Mr Berlusconi within the government, who asked not to be identified, acknowledged it was “boring” but said the prime minister was right to point to the lack of confidence in the eurozone as the root cause of Italy’s current problems on the markets.
Because of course Berlusconi said that Italy has “solid economic fundamentals,” which should reassure everyone, and that the problem is market misinterpretation rather than budget or debt problems. But not everyone agrees that Italy’s crisis is all in the minds of short sellers and CDS buyers: Read more »
Here at Dealbreaker we love short sale bans. Nothing inspires confidence in an asset so much as a government telling you that you can’t sell it, especially when the government in question is taking time out from a busy schedule of bunga bunga parties to give a firm but loving hand to the equity markets.
So we were excited to see that, as the Italian equity and government bond markets melt down, politicians and regulators are sharpening their knives to come after the evil speculators who must be behind the drop. Italy is now requiring anyone who is net short more than 0.2% of the shares of an Italian listed company to disclose their position to regulators, with an updating requirement for changes of 0.1% or more, from now until September 9. More excitingly, there is already talk of banning naked shorts, regular shorts, sovereign CDS, etc. followed. Barry Ritholtz succinctly explains the reasoning:
In a classic act of misdirection, Italy is ordering short sellers to disclose their positions, because after all, the entire European credit crisis was caused by analysts who identified over valued stocks.
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