Barry Ritholtz expressing his thoughts on the SEC’s proposal to ban short selling.
SEC: Ban All Short Selling
Excerpt: "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."
My comment: It’s not clear whether Barry is discussing naked short selling or all short selling. On Barry’s repercussion number 1, banning all short selling appears manipulative and ill-conceived; I agree with him. Banning naked short-selling is different. A seller should have some interest (owns, borrowed) in the stock to sell it. If he doesn’t own the stock and can’t borrow shares, he should not be permitted sell "phantom" shares that don’t exist just because he wants to. – Ilene
