Are Short Sellers to Blame for the Financial Crisis?
I have heard this question asked repeatedly... I find it an insult to ones intelligence to even state this.. There has to be a scape goat... Did the short sellers make the banks give loans to speculators that were not going to live in the houses.. Did the short sellers make the banks give loans to homeowners who neither had a job or credit? Did the short sellers make the banks give companies loan to buy other companies at over valued multiples with the hope of these overvalued companies to the next guy...
It is one thing to spread false rumours ... which all know is wrong... but what is wrong about doing deep due diligence on a company...determining that their fundamentals are not in order...and taking a short position..? It is the same analysis one would do when buy stock in a company...
Short sellers borrow stock and sell it, essentially betting that the price of their target company will fall before they have to replace the borrowed shares. Now these investors are considered vultures, rumor mongers, cheats and criminals. Most have done nothing wrong but expose one of the largest frauds in our lifetime.
Bear Sterns and Lehman died because they were undercapitalized and made terrible leverage bets. Merrill's own mismanagement was the cause of it's demise. AIG is imploding due to it's credit swaps and unregulated derivatives.
The Securities and Exchange Commission halted short selling of financial companies and Futures on the Standard & Poor's 500 Index surged 2.9 percent following the announcement. U.S. equities staged the biggest rally in six years yesterday after the SEC stiffened other regulations aimed at curbing manipulative trading. The SEC said today that it will halt short selling of U.S. banks, insurance companies and securities firms through Oct. 2, while the Financial Services Authority in the U.K. banned short sales of financial shares for the rest of the year. How is this a free market???
Are markets only suppose to go...and when they fall... smart investors are not allowed to benefit.. Are we suppose to just lose money...and have the Govt bail us out???
Jim Chanos a great investor who first raised questions about Enron stated so perfectly
``We seem to have capitalism on the upside and socialism on the downside,''
That's a pretty heady brew for country that holds itself out as a free market paragon.''
Nothing changes ...short sellers were also victimized in 1929
Andrew Abraham
www. Myinvestorsplace.com
capitalinvestor1836.blogspot.com
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