Economics

Surprise! "Emergency" Short-Sell Ban Extended

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In the ongoing emergency, the SEC has chosen to extend the ban on short-selling a long list of financial (and non-financial once like GE, GM, and Zale Jewelery) stocks until–and this is an interesting twist, via the AP–"until the third business day after enactment of the $700 billion financial bailout plan now before Congress. It will end no later than Oct. 17." Seems kind of interesting to peg the first date for a directive to end to something that, after all, might not happen at all. Or is the fix in?

New reporting requirements for short-sales that are still legal, says AP, "will continue beyond Oct. 17 as an interim rule, the SEC said, promising to seek public comment on it. The SEC, however, made a modification, allowing managers to report their short positions to the agency confidentially, rather than requiring public disclosure."

Why the short-sell ban was a bad idea in the first place, and what it all means, discussed in my article from last week.
 

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  1. Of course the fix is in! Did you EVER really think this monstrosity would not pass? It was just meeting the cumulitive prices of the necessary legislators. Once they are all bribed off it will pass. Surely you knew that?

  2. “(and non-financial once like GE, GM, and AmEx)”

    There are significant parts of GE and GM that are in the financing business – although GM has sold off a significant chunk of GMAC to a private equity fund.

    Not that I agree with the short selling ban though.

    The only thing the government should do regarding short selling is restore the uptick rule and ban naked short selling.

  3. Well, ktc2 beat me to it.

    “It’s gettin’ so a businessman can’t expect no return from a fixed fight. Now, if you can’t trust a fix, what can you trust? For a good return, you gotta go bettin’ on chance – and then you’re back with anarchy, right back in the jungle.”

  4. This is the problem with dismissing controls on pork as worrying about nickels and dimes. Pork is always used to buy votes on legislation. If stupid and/or expensive legislation wouldn’t pass but for pork, well, what is the true cost of pork?

    Mmmmm, pork.

  5. doom
    Dooom
    DOOOOM

  6. When are they just gonna decree that all stocks return to the price they were at in December 1999? Sure would help my positions in Sun, Oracle, Cisco, and others too embarassing to mention. And Pets.com is a valuable company, I tells ya!!! Socks, that are puppets, that look like animals, selling pet food…it can’t fail!!!

  7. Maybe if this ban had been enacted sooner,we wouldn’t be in this mess. Leave it to the free market anti-government fundies to invert the truth and say that what’s bad is good.

  8. We should just legislate that you can’t sell stock. Then the market would never go down!

  9. Charlie Rose had a good discussion of this whole mess. Worst case scenarios are 5 years of recession, perhaps deep recession with housing prices dropping 60% or so. This puts 20 million people in mortgages that are larger than the value of their homes.

    Estimates are that the correct intervention would reduce that 5 years to 2 or 3 years. But no one seemed to think that there was an intervention that would prevent the decline in home prices.

    My question was…if housing prices and over-valued homes are the problem, then how will any intervention that doesn’t effect that have an effect on the length of the market correction?

  10. Why not just nationalize all financial services, medicine, insurance, and heavy industry?

  11. “The only thing the government should do regarding short selling is restore the uptick rule and ban naked short selling.”

    JUST PUT YOU DAMN PANTS ON!!!
    YOU DON’T NEED THE GOVERNMENT TO DO THAT DO YOU?

  12. Pro Lib,

    Well, true enough. They are “To big to fail” afterall.

  13. I want my buggy whip!

  14. Neu,

    Agreed. How how does bank liquidity actually help people in upside down loans? Are we supposed to believe that it’s merely a problem of tight credit that keeps them from refinancing a house that has lost 40% of it value?

    As horrible as it sounds, forcing a conversion of ARMs to 40 year fixed rate loans would keep people afloat better than bailing out the people dumb enough to buy those shitty mortgage as an investment in the first place. What this would do, however…

  15. But what about my condo? Et tu SugarFree!

  16. But what about my condo?

    I’ll buy it for half what you paid. What, what am I saying? Your place is a shithole. You live like Charlie.

  17. Naga,

    Nothing for you, DUNE HATER!

    Instead of “house,” how about “residence.”

  18. Epi,

    Interesting as I am the Charlie of my group of friends. Haven’t bought it yet. Waiting for December to buy one in Navarre, FL.

    “Wildcard, bitches! Yee-Haw!”

  19. SugarFree,

    Not a dune hater. Just a really long book that I have a lot of trouble recognizing quotes from. And I need those ARM’s to keep stacking up till December.

    “No bailout for you! Come back. One year.”

  20. Not a dune hater.

    Isn’t that just what you’d expect a dune hater to say?

    Also, black-bottom saltwater pool house update: Open house this weekend. I’m thinking red dye in the toilet and then screaming that the house told me to “GET OUT” in a hoarse whisper. Convincing people it’s haunted has got to drive the price down. I need those flippers to break!

  21. Wait, so I’m the looks, NutraSweet is the brains, and you’re the wildcard?

  22. SugarFree,

    Word. A crazy ass spirit in the role of “Grudge” would be awesome. Until the spirit ripped your lower jaw off.

  23. Epi,

    If we were friends, I think you would be the wildcard. I would be the looks. Sorry but when you claim to be the looks I picture you in a with a hollowed look to your face while wearing wife beater cooking meth in your tub.

  24. Wow! That was terrible but I think you get the idea.

  25. Estimates are that the correct intervention would reduce that 5 years to 2 or 3 years.

    How on earth would they actually know that? They being the economists who came up with that figure, don’t have any idea what things will be like. If they did why weren’t they asking for this “rescue” plan 2-3 years ago?

    I love economists. I actual find most of what they have to say is fascinating. But while they are great at explaining what happened they are generally terrible at predicting what will happen.

  26. black-bottom saltwater pool house

    Wow, I wasn’t paying attention last time you mentioned this. That is holy shit fucking cool. How much do they want?

  27. If we were friends, I think you would be the wildcard

    No way, dude. I’m the looks, NutraSweet is the brains, you are definitely the wildcard, LMNOP can be the muscle, and Dagny can be the useless chick.

  28. I just used my magic eight ball(not that 8ball!) and it claims YOU are the wildcard. I refuse to be the one who gets drunk all the time and wets himself.

  29. So you don’t want to be Green Man? That’s just crazy.

  30. It’s in the neighborhood, but on a much quieter street traffic wise. They bought it in 2005 for 420K, did nothing to it and put it on the market right before the local bubble popped for 699K. They’ve come down to 580K, but we know it hasn’t bottomed out yet and we’re circling like vultures.

    Since we don’t need a house (and are only 7 years away from paying ours off) we can afford to wait. If it doesn’t pan out, ho hum. Zen real estate. No attachments or desires.

  31. No way, dude. I’m the looks, NutraSweet is the brains, you are definitely the wildcard, LMNOP can be the muscle, and Dagny can be the useless chick.

    Dagny’s not useless, she’s the exotic foreigner to appeal the overseas market.

    Codename: Snow Angel

  32. we’re circling like vultures

    Gimme the address so I can scoop you. Saltwater pool!!! How big?

  33. thanks you very much

  34. Just a small one. Looks mostly like a over-large hot tub. It has a very small backyard. Enough room for my grill and disc golf basket is fine by me.

    Hey… anyone who knows something about shady real estate deals… what does it mean when a house has its deed transferred from a person to a bank and then is sold the same day for about half the original asking price to another person? It had been on the market for over a year. (That’s all we could get from the newspaper…)

  35. and non-financial once like GE, GM, and Zale Jewelery

    To be fair, GE has a huge financial arm. (which is sucking a mighty wind). I actually surprised it wasn’t part of the orginal ban.

  36. or what Gilbert Martin said.

  37. Socks, that are puppets, that look like animals, selling pet food…it can’t fail!!!

    What’s funny is that I think that same puppet has been hocking a hard money loan company.

  38. Anything to save my GE shares! Anything!

  39. Kolohe,

    And that’s just his day job. You know he still give handjobs and cries. The hand is just a pimp, man… just a pimp. Little googly eyes all rollin’ around…

  40. What’s the square footage of the house?

  41. what does it mean when a house has its deed transferred from a person to a bank and then is sold the same day for about half the original asking price to another person?

    Sounds like a “pre-packaged” bankruptcy deal.

  42. Anything to save my GE shares!

    Shush, now; I’m waiting for it to hit seventeen, so I can buy another thousand shares, or so. That meddling bastard Buffett isn’t helping.

  43. 3174. Check your mail, I sent you the listing.

  44. P Brooks,

    I thought that, but wasn’t sure. It makes sense. They bought a 260K house on a 7600 ft lot, tore it down and built a two-and-a-half story monster that went on the market for 999K. It has set empty for almost two years. It’s three houses down from mine. Thanks for property tax ass-rape, fuckwads.

  45. Very nice, but 600 grand? Ha ha ha ha, they are nuts.

  46. Pain | October 2, 2008, 1:49pm | #
    Estimates are that the correct intervention would reduce that 5 years to 2 or 3 years.

    How on earth would they actually know that? They being the economists who came up with that figure, don’t have any idea what things will be like. If they did why weren’t they asking for this “rescue” plan 2-3 years ago?

    I love economists. I actual find most of what they have to say is fascinating. But while they are great at explaining what happened they are generally terrible at predicting what will happen.

    These were, actually, not economists but business men and business journalists.

    I agree with you on the general strengths and weaknesses of economics as a scientific(?) endeavor.

  47. what does it mean when a house has its deed transferred from a person to a bank and then is sold the same day for about half the original asking price to another person?

    Sounds like a fairly vanilla foreclosure. Typically, the bank doesn’t want to hold title to a property, so they will shop the property around before actually foreclosing. Then, when they’ve found a buyer, they take title solely for the purpose of transferring it to the buyer. I vaguely recall there are some legal/accounting advantages to doing it this way.

  48. R C Dean,

    I wanted that stupid huge house. Thanks.

  49. I was a broker for a short time in 88-90, I think the only folks who should be allowed to “short” a stock are those folks who sell “short against the box”. What that means is that an investor can only sell borrowed stock, if he owns an amount greater than, or equal to, a long position in that same stock. Short selling is a valid investment strategy for someone who owns a stock position, and wants to protect himself from a downturn in the market by selling a “borrowed equivalent amount of that stock. It is my opinion that any other use of short selling is actually devesting, not investing, and has no place in our markets. Most short sellers that I am aware of are hedge funds and speculators, both of which are not in any way helpful to a stock market.

  50. “short against the box”

    Aren’t those the guys who never get called back for another one-night stand?

  51. GE, GM, and Zale Jewelery

    These are financials. GE for GE Capital, GM for GMAC (they still own a good chunk), and jewelers are usually precious metals dealers of a sort.

  52. Zales’ basic business model is that of a finance company; the whole jewelry-store thing is just a) the hook to get you locked into their financing program and b) an occasional sweetener to the company’s overall bottom line (though it’s more likely to function as a loss-leader).

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