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Good synopsis Brian.
Another noteworthy thing is that short sellers reduce market
volatility and provide income to holders of large blocks of stock such
as mutual funds that hold retirement accounts. In other words, the
ban on short selling is having the opposite effect as intended. Not
my opinion, just the facts.
BR,
Dennis
On Oct 1, 2008, at 8:01 PM, brian_z111 wrote:
> A heads up, as Tomasz would say.... US short selling 'ban' due to
> end ... likely to be extended.
>
> An article discussing the outcomes of the ban so far:
>
> (scroll down to "Don't Blame The Short Sellers").
>
> http://finance.yahoo.com/tech-ticker
>
> It is a not a time to let the emotions run hot ... those who are
> keeping cool, calm and collected are doing well ... they are bad days
> for investors and savers but good days for value buyers and
> speculators
> (condolences to anyone who has lost money .. a 63 year old, 2 years
> retired, friend of mine, with invested retirement funds, is now
> heading
> back to work).
>
>
> FWIW an opinion on where we are now.
>
> There are three things happening simultaneously, each with different
> outcomes:
>
>
> a) The real crisis is confined to the area of Financial Management, as
> opposed to the market i.e. the way that businesses carry out financial
> transactions between themselves, their compliance with govt standards
> and the standards in force.
>
> The longer term agenda is that of the IMF Global Stability Forum (as
> discussed at last weeks unofficial meeting of G20 leaders in NewYork).
>
> http://www.fsforum.org/publications/r_0804.pdf
>
> The short term affect on the markets is minimal since that horse has
> already well and truly bolted.
>
> Projecting this crisis onto the market holds little value for traders.
>
> b) Public perceptions of the crisis are focused around the security of
> their deposits .... this is the real danger in the short term ... it
> appears to be easily contained by Govt actions to guarantee
> deposits ... presumably ave private savings are far outweighed by ave
> private debt so the total possible withdrawals are within a
> containable
> range (respective govts have deep enough pockets to insure private
> savings e.g. Ireland, France, US increasing FDIC insurance etc).
>
> c) Market volatility ... is more emotional than rational ... emotional
> outbursts tend to come quickly and swing back the other way
> quickly ...
> by nature they can't be sustained for long periods of time ..... after
> the first few extremes they tend to diminish in strength.... the
> longer
> between episodes the lesser the chance for another extreme event.
>
> The reality is that the weaker companies are passing into stronger
> hands (the market is doing its job).
>
> Currently banks can't maintain lending levels because they need cash
> reserves to cover the mini-run on the banks... this is flowing onto
> other businesses, who will in turn suffer lower sales/earnings (new
> shorting opportunities are created!).
>
> http://biz.yahoo.com/ap/081001/auto_sales.html
>
> http://biz.yahoo.com/ap/081001/economy.html
>
> This cycle, of a shortage of bank liquidity, will soon come to an end
> but it will take some time to get the machinery, in that area,
> running
> again.
>
> On top of that large financial institutions have had their portfolios
> slashed (on paper) OR are in damage control OR are in the process of
> integrating merged companies so there is not so much cash around,
> amongst the big players, to buy stock and hence support a stong bull
> rally (compare to Buffet who keeps 10Billion acquisition cash in
> reserve and has now so obviously revealed his very simple strategy of
> using it to buy high probability growing yields when the price is
> right).
>
> A side play to the whole scenario is that the Banks, that are holding
> big exposures, are playing it for all they can to maximise their own
> returns.
>
>
> As long as guarantees of bank deposits are in place, and hold, the
> crisis will pass ..... market volatility and Finacial Management
> reforms are more emotive, than substantial issues, in the short term.
>
> In the longer term it appears to be a bit of a grind for the US to
> work
> its way out of a recession.
>
>
> brian_z
>
>
>
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