4 JUL 2009, Saturday

1. Happy Independence Day!!!
2. Ban on short selling again? WTF??? Government..."Get out of my way!" They must be afraid of something...what is it, what do they see that we don't?
3. One of the factors that the lawyers at the SEC don’t understand is the importance short sellers play in cushioning collapses. A brief excerpt from Barry Ritholtz's Bailout Nation: “In September 2008, with the crisis in full flower, [SEC Chief Christopher] Cox made shorting financial stocks illegal. Apparently, he was unaware that fierce market sell-offs often end with short sellers covering their positions, locking in profits on their bearish bets. With short sellers out of the market, the downturn became even fiercer. From the market highs of October 2007, the S&P 500 and the Dow Jones Industrial Average were cut in half in 12 months. Much of the damage came after the no-shorting rule went into effect.” Don't believe it? Click the link and look at the chart. As you can see...it was a very swift 34% decline over the 5 weeks following the short sale ban and eventually led to a 47% decline from the ban into the March 2009 lows. Shorts are a shock absorber!
4. Were Bear Stearns, Lehman, Merrill Lynch, GM and Chrysler solid companies wrongfully "attacked and brought down" by the shorts? No! They were being shorted because they were badly run companies which were already bankrupt...the rest of the world just didn't know it yet. Now they do.