This is why I hate government most of the time.
According
to Reuters, The U.S. Securities and Exchange Commission issued an
emergency order on Tuesday placing restrictions on the short selling of
shares of certain major financial firms.
Here are 19 stocks where no naked short selling is allowed from July 21 through July 29 (though they may extend it to 30 days):
* BNP Paribas Securities Corp
* Bank of America Corp
* Barclays PLC
* Citigroup Inc
* Credit Suisse Group
* Daiwa Securities Group Inc
* Deutsche Bank Group AG
* Allianz SE
* Goldman Sachs Group Inc
* Royal Bank ADS
* HSBC Holdings Plc ADS
* JPMorgan Chase & Co
* Lehman Brothers Holdings Inc
* Merrill Lynch & Co Inc
* Mizuho Financial Group Inc
* Morgan Stanley
* UBS AG
* Freddie Mac
* Fannie Mae
Gee, I thought JP Morgan had blow-out earnings today … but apparently they’re so weak you can’t short-sell them. And yet Washington Mutual, which is swirling in a sea of failure rumors, is not on the list. I
have no position on whether those rumors are true or false – it’s just
that that if any stock is going to need protection from speculators,
it’s WM. So is the government protecting weak stocks … or is it something else?
Have you ever seen anything so cockamamie? Either allow short-selling for all stocks or don’t, but picking out 19 stocks for special treatment is ludicrous. And
while I appreciate they are trying to give the market time to find its
footing, changing the rules like this could backfire and just put off
the day of reckoning, making it worse. Let’s see what happens after July 29 (or after August 20 if they extend it)
As
has been pointed out elsewhere, China had short sale restrictions on
and it did not stop the Shanghai index from falling over 50%.
Insolvency cannot be cured by short sale restrictions and some or even
many of those companies may be insolvent.
The SEC’s list of 19, of course, is heroin for conspiracy junkies. But what if the conspiracy theorists are right? Check out this comment I picked up from Mish Shedlock’s blog, where savvyinvestor writes…
I
would like you all to consider a market manipulation scenario which is
becoming increasingly credible when you consider the moves in equities
and commodities over the past 2-3 days. Let us suppose that Paulson
went to his buddies at Goldman Sachs and worked out a deal: "We will
give you the regulatory framework you need to make a killing; in turn,
you bail out the financials."
So here's how it works. "Naked
short selling" will not be allowed starting monday - why not today?
Because they need several days to get the mother of all pump-n-dumps in
place. To raise money, GS first dumps all its commodities longs. It
dives into the targeted financials and begins accumulating massive
numbers of shares.
Come Monday, you can short the stocks if you
like - but you have to borrow the share first. And where are you going
to borrow the share if Goldman Sachs' hedge funds have a lion’s share
of the float? With no possibility of short selling, and a huge number
of shares tied up so that buyers are competing for a much smaller share
pool, the financials' shares skyrocket, getting back the last years'
losses in a couple of weeks. Then GS dumps its shares, for profits in
the hundreds of billions, Fannie raises its capital, and the crisis has
been averted without spending a single taxpayer dime - but at the cost
of swindling millions of investors who don't have the inside knowledge
of how this scam is being worked or what the timing is.
XX Sean’s note -- That theory may not be correct, but it sure is interesting. Meanwhile …
As faith in bank bailouts dims, losses set to deepen
The
nightmare scenario for U.S. economic authorities is here: confidence in
their ability to rescue the country from a housing-led financial panic
is now at its lowest level since the crisis began.
XX Sean’s note – and what about the U.S. dollar? Well, there are some pretty interesting developments there, too. The Financial Times reports that …
Sovereign funds cut exposure to weak dollar
Some
of the world’s largest sovereign wealth funds are seeking to scale back
their exposure to the US dollar in a sign of global concern about the
currency.
One
big sovereign fund in the Gulf has cut its dollar-denominated holdings
from more than 80 per cent a year ago to less than 60 per cent, while
China’s State Administration of Foreign Exchange (SAFE) has been
looking to strike deals with private equity firms in Europe as a part
of a strategy to reduce its dollar holdings.
In Other News
ENERGY
Oil Falls for Third Day as Slower Global Economic Growth Curbs Fuel Demand Crude
oil fell for third day, the longest losing streak for a month, on
speculation slower global economic growth is curbing fuel consumption.
Xx Sean’s note – still, the support I talked about yesterday seems to be holding, so far anyway.
Summary of Weekly Petroleum Data for the Week Ending July 11, 2008
U.S.
commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) increased by 3.0 million barrels from the previous
week. At 296.9 million barrels, U.S. crude oil inventories are near the
lower boundary of the average range for this time of year. Total motor
gasoline inventories increased by 2.4 million barrels last week, and
are in the upper half of the average range. Both finished gasoline
inventories and gasoline blending components inventories increased last
week. Distillate fuel inventories increased by 3.2 million barrels, and
are in the upper half of the average range for this time of year.
Propane/propylene inventories increased by 1.0 million barrels last
week but remain below the lower limit of the average range. Total
commercial petroleum inventories increased by 7.5 million barrels last
week, and are near the bottom of the average range for this time of
year.
XX Sean’s note – so, higher prices at the pump are definitely having a deeper effect on consumption. Top of Form
And here's what they were expecting:
Analysts surveyed by Platts expect that U.S. crude stockpiles decreased
by 3 million barrels last week. They also expect a decline of 1.1
million barrels in gasoline inventories and a buildup of 1.7 million
barrels in distillates.
Crude Awakening
If
this document is accurate, it means that Simmons was right on the
money. What's worse, the details are even more discouraging: as the
chart on the right shows, what little production increase the Saudis
can sustain is all in medium and heavy crudes. Production of light
crude, preferred by most refineries, actually decreases by 200,000
barrels per day between now and 2013.
CLIMATE CHANGE
Ice shelf near collapse
Scientists
are warning that an Antarctic ice shelf the size of Northern Ireland is
on the verge of disintegration, even though it is the middle of winter.
The shelf, near the base of the Antarctic Peninsula, had not been
expected to collapse until the early 2020s.
Xx
-- Sean's note: In other news, the outlook for storms in the tropics
(hurricane weather) is weakening. It looks like we can rest a little
for the next few days after an extremely active July 16th......the
Florida disturbance dissipated, 94L's window of opportunity may have
closed, and the SW Caribbean area will go inland. Hooray for us!
CHINA China's Economic Growth Cools to 10.1%, Adding Pressure to Slow Yuan Gains
China's
economy grew at the slowest pace since 2005 in the second quarter,
prompting speculation the government will slow the yuan's gains to
protect export jobs.
China's First-Half Vehicle Sales Growth Slows to 19%
XX Sean’s note – US car makers would kill for 19% growth. And
this is an interesting line in the news item: “vehicles are becoming
affordable to more people in China because of the country's 10 percent
economic growth rate and price cuts triggered by rising competition.
The proportion of people owning vehicles in China is also only equal to
that seen in the U.S. in 1925 and in the U.K. in 1950.”
Private cars to be on Beijing streets on alternate days
Car
owners in Beijing will have to remember the last digit of their licence
plates and the day of the week before taking their vehicles out on the
streets from Sunday as traffic management gets into top gear for the
Olympics next month. According to an odd-even number traffic control
plan devised by the local authorities, private vehicles will be allowed
on the streets on alternate days. If a car with an odd numbered licence
plate is allowed to ply Sunday, those with even numbers will get the
opportunity the next day.
XX Sean’s note – this may weigh on global oil demand and prices going forward. I thought Beijing would wait until the games started to begin their “license plate bingo” but apparently they’re starting early. They’ve closed down over 100 polluting factories, too.
CANADA
May Factory Sales Gain More Than Five Times Forecast on Energy, Metals Canadian
factory shipments rose 2.7 percent in May, the biggest one-month gain
since March 2007 and more than five times as much as anticipated, as
sales of petroleum and coal products surged.
US ECONOMY
U.S. Consumer Prices Climb Most Since 1991; Homebuilder Confidence Slumps
U.S.
consumer prices surged 5 percent in the past year, the biggest jump
since 1991, just as households struggled with falling home values and
the credit crunch. Spiraling expenses for food
and fuel spurred the increase in June, the Labor Department said today
in Washington. The cost of living rose 1.1 percent from May, more than
forecast and the second-largest rise since 1982.
`Misery Index' in U.S. Advances to 15-Year High as Inflation Accelerates
Misery hasn't had this much company in more than 15 years. The
jump in consumer prices reported today by the Labor Department means
the so-called Misery Index, the sum of the unemployment and inflation
rates, is the highest since President Bill Clinton took office in
January 1993. The measure, created by Arthur Okun, an economics adviser
to President Lyndon Johnson, rose to 10.5 in June from 9.7 in the prior
month.
Congress
about the worsening recession Monday, demanding the government provide
Americans with a new irresponsible and largely illusory economic bubble
in which to invest.
Anyone who read 
