Friday, 19 September 2008

A market fallacy

And now some graphs that are not funny at all:

You will have read that the press has reported with delight how short-selling has been banned by regulators in the US and the UK. Everyone is happy now. As if this was so simple!
True, a few hedge funds have been burnt and the margin/collateral calls at close today will be absolutely phenomenal, which means a nice injection of cash for the investment banks by the way, what a coincidence! Talk about taking from Peter to pay Paul?

The press, the politicians, the media, the regulators, etc, are now very satisfied that short-selling has been banned. But I can tell you just now (well, it is not me really, it’s those clever chaps at the Alphaville) that this is not going to resolve the current market turbulence. Not a chance.

Today was triple witching. Today people have rolled over contracts on the assumption that government support will continue. But it can’t and it won’t. When the whole thing explodes, it is going to be a bloodbath. This is quite scary.


Anonymous said...

The entry on the Alphaville FT blog you link to has been deleted?

Rab said...

Thanks for the update, I have asked them about it. I am not sure how the number of share on loan can be measured accurately...maybe that's why they have delete it.