In June Pakistan barred short selling for a month.
Look where they are now down ower 20%
On top of that their currency is at an all time low.
This is what we have to look forward to.
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Nice to see someone uses links for reference. I'm not going to disagree with a possible drop in the market, but we have to also analyze the differences why their indexes drop 20%. I'm not into other world indeces as is hard to figure out our own. I believe the idea to place a ban on shorting financials (10 days) was to bring stability to the markets while they figured out what to do with AIG and worked out the details and consequences of the bailouts. I did expect a market crash with deep economical consequences if the goverment had decided to ignore the issues. They didn't.
What we saw on Friday was a solid response from the markets on the goverment stance. They have worked out the details and are asking Congress for $700,000 billion dollars for the bailout. So they have moved quickly to prevent what seemed inevitable...a big market crash.
Disafortunely, we've had dishonest CEO that have been lying about the financial state of their company leading the markets and goverment to think they can handle it, to later say they going under. I suppose when you lack morals and possess a titanium parachute nothing else matters.
I believe we will continue to see market volatility because of all the smoke in Wall Street, but not necessarily a crash, we just saw the market hit 2002 levels which is icing on the cake for many investors.
I would not confuse market stability with the fundamentals of any company. Market stability rules.
To be long on the company doesn't mean you have to sell but you need to have your positions hedge.
I'll say this about shorting stocks.
As a concept, I hate it. What I visualize is a f*cking broker loaning MY stock to someone else who has a goal of ruining the value of MY stock.
Screw them, keep your hands OFF my stock!
The government is going to learn an expensive lesson in the coming days. These financials that were falling like rocks will continue to fall, but at a slower pace. There's a reason that none of them finished at their highs on Friday. That push up was nothing more than short covering. No one is willing to invest into flawed business models and scary level III assets. The management of these companies should've been fired long ago, but the good old boy system on WallStreet protects them and places the bag into the hands of the tax payers. As these stocks continue to fall there will be no short profit taking to help stabilize them. I know most are not shocked that the former CEO of GS made this happen. There were other alternatives to this huge bailout and banning of short selling in financials. Hope you took profit on the huge move up if you're long.
you can stop the broker from lending your stock by placing a sell order say at a50% premium to todays price The order to stay in place until revoked. The broker cannot then lend your stock. You can then increase the price as the stock appreciates.
You should also lobby mutual funds and pension schemes to stop them lending your shares.
I agree with you that short selling is a scam.
In the UK there are report that the hedge funds have threatend Indurance companies that if they do not lend shares in their protfilio ( the pension holders protfolio) the hedge fund will sell the insurance company shares short.
Note also that many hedge funds are off shore - and are funded in part at least by money from tax scams. UBS is now co-operating with the IRS to identify US citizens who have use the offices of USB to smuggle funds abroad. Rest assured they will be caught.