Stop Short Selling Now!

I came across yet another blogger demanding a ban on short selling.  I suppose it's inevitable when you see the markets crashing towards a Dow 6,000 level. And you see more government money going into AIG and then are astounded by Eton Park's profit from their HSBC short position of somewhere between £140 and £160 mm.

However, in an attempt to get US retail investors riled up he uses Apple as his example and alleges that poor unwitting retail punters' shares are being used by dastardly short sellers to drive down the price of the stock.  I spend a lot of time responding to blogs like this.  (OK, maybe I have too much time on my hands)

I pointed out that AAPL short interest peaked (from a  reporting point of view) on Oct 31 with 28 mm shares sold short.  The closing price that day was $107.59.  As of the most recent reporting date Feb 13, only 19 mm shares were short.  The price closed that day at $99.16.  Short sellers were net buyers of 9 mm shares during that period and yet the price still declined.  That tells me it is long investors selling more than new long investors were interested in buying.  It doesn't say that short sellers were driving it down and the fact that it is less than one day's average trading volume means that it has minimal impact overall in any case. 

I also noted that more high profile stocks like Citi, Bank of America and JPM all had short interest less than one day's trading volume.  I think companies and investors should spend less time trying to deflect blame on to short sellers and instead focus on sorting out their fundamentals.  As of the time I am writing this blog, my comment still hasn't been published.  The hit rate for my comments is about 50%, so we'll see how confident the writer is in his argument.  Changing the perception on short selling, one blog at a time!

Head for the hills - or at least the fields!

If you are employed in the financial industry, and are based in London or New York, you have probably had a pretty tough time.  If you are a little down about it, DON’T watch the video this morning from CNBC Asia which features Jim Rogers.  Jim suggests that Wall Street and its brethren around the financial world are headed for a difficult decade and tells us that farming is the future.

Jim’s suggestion that NY will suffer badly is backed by CDS spreads on NY City as covered by this article from Tyler Burden at Zero Hedge.

In the Press

Finally, I had an article published yesterday in the current issue of Securities Industry News entitled “Crisis Puts SecLending Risk Practices to the Test”.  I like the magazine, and Chris Kentouris, Senior International Editor, is possibly the nicest journalist in the business.