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The Lunatics are Running the SEC
In the classic Edgar Allen Poe story, The System of Dr Tarr and Professor Fether, a gentleman visiting an insane asylum learning about the innovative methods of treating the inmates, sees that many bizarre practices are being employed for treatment. By the end of the story, he realizes that the inmates had overpowered their keepers, and the lunatics were running the asylum. The idea is that those that are in charge that should be looking out for society's best interest are actually doing things to hurt us, hence the figure of speech.
We now have several lunatics at the helm of many of our government entities, some in Congress, some in the FED, and some in the SEC.
Yesterday, the SEC cracked down on naked shorting, which in turn has the haters of short sellers smelling blood and demanding even more. Read more in the Bloomberg.com link below, as reported by By Jesse Westbrook and David Scheer:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPokh6La9.HY&refer=home
If you aren't up for all the reading, I will summarize it for you: much of this market pain is the fault of short sellers, and rules need to be put in place to stop them.
Bear Stearns tanking? Lehman Brothers, Fannie, and Fred going under? Any institution part of the XLF gasping for air? Yep, it is the fault of short sellers. When in doubt, blame a short seller.
For those of you that detect my sarcasm, congratulations. The same people that moan about oil speculators are the same ones that do it regarding short sellers. I have commented on it repeatedly, and one of my first blogs last year mildly criticized those that wanted to blame the abolishment of the uptick rule on market problems:
http://www.investorplaceblogs.com/users/jaudio/2007/09/abolishment_of_uptick_rule_to.php
Every time a company gets hit, you can bet that a short seller will be blamed. It has been this way since short selling began, and history will continue to repeat. The problem is when those in the SEC buy into the myth, spurred on by self-serving politicians like the illustrious Senator Charles Schumer. He wants a reinstatment of the uptick rule (as if that would do any good), and so far the SEC is resisting. Yes, the lunatics are in charge.
Blaming short sellers for the market problems is the mirror image of blaming long buyers for a raging bull. I have an idea . . . let's hang Louis Navellier and Ken Kam from a yardarm for recommending a stock, and actually buying the shares! After all, it could cause the company to launch. This is lunacy, and It makes no sense, even to an insane man.
There are those in the market that engage in pump and dump ploys and those that do the opposite. There are laws in place to hammer them, one at a time on a case-by-case basis. All of this blanket blaming of market turmoil on oil speculators and short sellers makes me want to take a flamethrower to the whole place. I've got a better idea . . . let's invite Senator Schumer to a party and only invite Indymac shareholders. Make sure you bring your cameras, ladies and gentlemen.
In the SLO2, I lost over 50k selling oil short with the now defunct Macroshares DCR. No blaming here, I was just wrong. I am now dipping in my toe to a few companies long including BAC, C, and my hometown bank HBAN. Some refiners have hit the screen, and I am even getting long of the dollar with UUP. My shorts including SKF, FXP, and DUG have been good to me lately, so I have taken profits and am currently shopping for some long buys. The VIX cracked 30 yesterday, so I am looking to get in on the bear bounce we have all been waiting on.
Let's not lose our marbles in this market. Let's stop assigning blame and start being smart. Scared of the market? Stick your money in bond ETFs or go to cash and wait. Scared but sane? Keep on buying or selling the market short, wherever your research takes you. Until then, let's cross our fingers and hope the lunatics won't bring down the whole system.
---Jonathan
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Comments (1)
Noting that most of the 19 protected stocks rallied on news that naked short selling (illegal) would not be permitted, the result speaks for itself - the SEC has not been enforcing laws against manipulation. So, manipulation proceeds unencumbered.
I have nothing against short selling per se, I have been doing it myself for several years on and off.
But it is fairly clear that the present administration has done everything in its power to minimize regulatory oversight. The result has been egregious abuses which have endangered the entire financial system.
In times of crisis, real or imagined, power grabs are the norm. WIth the election coming up, it is not surprising that the same folks who turned a blind eye to various abuses which could have been prevented within the existing regulatory framework if the laws were simply enforced are now howling for more regulation, while manuvering for position to grab some power in the process.
Tom
Posted by Thomas Armistead | July 21, 2008 7:34 PM