Joined Dec 1, 2015
135 Blog Posts
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Well the cute Chinese threw 20 billion at the market tonight, so far the Shanghai Comp is up only .74% and the USD/CNY only down .24%….ahhhhh doesn’t look like they are getting much bang for their buck. BTW loved that last vid, I have studied other historical bubbles, and has watched this bubble since it started to form to see what finally pops it. Bubbles take such a long time to pop.
AH rally doesn’t look promising 🙁
I read the material related to Halting of Trade written by Brigitte Yuille | October 23, 2008 and how effective it is regarding the important role short selling plays in the market but I can’t sincerely agree with the main bullet points:
“Conclusion”
“Short selling bans have been utilized from the beginning of the financial markets and throughout history to address abuses like spreading negative rumors about a company to manipulate markets. However, many bans are repealed because short sellers have a significant role in the markets. The SEC identifies their importance based on their:”
“Contribution to efficient price discovery:”
– Mitigating market bubbles
– Increasing market liquidity
– Promotion of capital formation
– Facilitating hedging and other management activities
– Limits to upward market manipulation”
A good example of the short seller’s significance involved identifying the overpriced stock at Enron. Short seller James Chanos examined the company’s accounting practices and discovered that something was amiss. Some argue his awareness helped to uncover the accounting fraud known as the “Enron scandal” which put its executives behind bars.”
“Read more: Short Selling: Making The Ban | Investopedia http://www.investopedia.com/articles/stocks/09/short-selling-ban.asp#ixzz3wNf5Ch00 ”
It should not have taken a short seller and financial businessman of Jim Chanos’ echelon to have discovered the fraud at Enron but maybe this is the only way it would work in the real world.
The economic/financial results of the other points bulleted can be obtained without the function of short selling.
My Conclusion: The occasional, necessary ban on short selling is and has recently been proved to be necessary.
I hope I haven’t misunderstood your original point.
Banning shorts has never stabilized a market on a large scale. There’s been some success using indirect approaches (TARP et al) but targeting stocks directly simply doesn’t work.
Price is a function of buyers finding sellers. Restricting either pool eliminates price discovery. Indeed, restrictions make it more rational to sell in that they signal a lack of official confidence.