SEC: Ban All Short Selling

Here is tonite’s theater of the absurd SEC headline: 

SEC intends to temporarily ban short selling, but it’s not clear if the commission has approved the move. Cox is briefing congressional leaders. Separately, the government is seeking congressional authority to buy distressed assets.

This is nothing short of a total panic by people who have no clue what they are doing. And to think, I mocked Russia for being a nation run by market commies.

This is the ultimate bailout attempt, which will have repercussions far far beyond our imaginations:

1) We suffer a loss of Market Integrity; The US is now a Banana Republic

2) Blatant market manipulation: this is nothing more than an attempt to force markets higher;

3) 60 days prior to a presidential election? This is a none-too-subtle attempt to influence the elections — especially coming on top of the Fannie/Freddie bailout;

4) The coming pop will create a huge air pocket, ultimately leading to us crashing much lower;

5) Expect a huge increase in volatility — upwards first, then down;

We Are A Nation of Morons, led by complete Idiots, making us complicit in our own self destruction.

Bloomberg:

Financial regulators in the U.S. and U.K., attorneys general in New York, Texas and Connecticut, and the three largest U.S. pension funds are cracking down on short sellers in the wake of the collapse of Lehman Brothers Holdings Inc. and American International Group Inc.

Hedge funds and investors who profit from share declines are being scrutinized after a crisis of confidence in the financial industry erased more than $3 trillion from stocks globally this week. Goldman Sachs Group Inc. and Morgan Stanley, the only remaining independent securities firms on Wall Street, suffered the worst-ever declines yesterday. Morgan Stanley’s chief executive officer, John Mack, said short sellers may be spreading false information and using abusive tactics to attack companies.

"You have to enforce the rules with regards to short selling,” said Mario Gabelli, who oversees about $28 billion as chairman and chief executive officer of Gamco Investors Inc. in Rye, New York.  "Shorts were running amok.”

The U.S. Securities and Exchange Commission said it may require hedge funds to disclose short-sale positions and plans to subpoena their communications, while the Financial Services Authority in the U.K. banned short selling financial shares for the rest of the year.

New York Attorney General Andrew Cuomo began an investigation into whether bears illegally drove down stock prices of financial firms. The California Public Employees’ Retirement System and the New York State Common Retirement Fund decided to stop lending shares for short sales, after a similar move by the California State Teachers’ Retirement"

Marketwatch:

"Gathering
anger over short selling of vulnerable financial stocks exploded into
the open Thursday as top market regulators and industry giants took
steps to limit the practice and begin investigation into possible
abuses.

Britain’s stock market regulator on Thursday banned
short selling in financial companies and said it might extend the ban
to other sectors. The move followed the Securities and Exchange
Commission’s curbs on the practice that went into effect Thursday
morning.

In other steps aimed squarely at the bearish
practice, the country’s largest pension fund, the California Public
Employees’ Retirement System, said it was taking steps to limit the
practice on three financial stocks and the New York attorney general
called for a wide-ranging investigation of the short selling of some
prominent financial companies, including Goldman Sachs (GS) and Morgan
Stanley (MS) . The concerted reaction followed two days of sharp
declines in global stock markets, triggered by mounting fears that the
credit crunch would spin out of control and deepen the financial
crisis. As stock declines have deepened, the role of short sellers has
come under fire."

And then there is this from Tom Brown, long and wrong all the way down:

"The
moves should help restrain the abusive short-selling practices lately
rampant in the stock market," said analyst Thomas Brown of
Bankstocks.com. "Short sellers can no longer deceive their brokers
about their intention or ability to deliver shares."

Sources:
Short-Selling Crackdown Extends to New York, London
Michael Tsang
Bloomberg, Sept. 18 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQeq1yaXSHzQ&

Regulators, industry giants seek to curb short selling
Matt Andrejczak,
MarketWatch,  5:48 p.m. EDT Sept. 18, 2008
http://tinyurl.com/banshorts-upyours