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Commentary

Stopping Short Sellers – To Benefit Who?

The UK has banned short selling of financial stocks till Jan 2009. And now, the US is considering a similar move:

The Securities and Exchange Commission prepared an aggressive assault against short-sellers, saying it would temporarily prevent investors from making bets on stock declines in an attempt to stem some of the worst stock-market slides in years, according to people briefed on the proposal.

This is going to become like Pakistan’s Market Suicide.

Why target short sellers? When stocks were going up 10%, 20% a day no body said stop people from benefiting from rising prices, no? So what kind of idiotic mechanism wants stocks to go only one way? What’s next?

“Sorry, you can’t sell your house for this price. We have to protect the market from falling prices”.

“Did you hear of that new AMD laptop? It costs Rs. 36,001, but that’s because they can’t reduce prices below the earlier one which is 36,000. And yes LCD TV prices should be lower but they can’t be.”

“Rice man, have you been buying rice? It’s at 29 rupees a kilo. They have decided prices shouldn’t go down, so I just bought 7000 kgs. My problem, Mr. Architect, is can you prop up my foundation so I can get a few tons more?”

Anything saying prices shouldn’t go down, or that people shouldn’t benefit from falling prices, is very very very stupid. Shorts are the only guys that will buy when there is no one left to buy.

(Look at China – Shorting not allowed. Markets are down 60% from Jan. Sure, could’ve happened anywhere, but the lack of shorts takes out the floor)

  • Gurinder says:

    >Interesting part will be when they allowed it back, are we looking at a total collapse then?

  • px says:

    >Everyone likes a party and regulators are never free from the oversight of the politician

    I think banning naked shorts is not a bad idea, esp if u r a regulator

    Essentially all that they are doing is buying time cause they know that this policy will have negative effects in the ling run