“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Thursday, September 18, 2008

Short the Shorts Baby!

How sweet it is. I always loved short shorts and no one deserves an ass cracking more than the current crop of short sellers. Burn baby burn.


Global crackdown on short selling intensifies
Reuters, via The Guardian

Thursday September
By Myles Neligan

WASHINGTON/LONDON, Sept 18 (Reuters) - The UK Financial Services Authority imposed a temporary ban on short-selling financial stocks on Thursday, saying the measure was needed to prevent further instability in the financial sector.

The move came as New York began a probe into illegal short- selling of Wall Street firms and as the U.S. Securities and Exchange Commission toughened its short sale rules, in a crackdown on traders who bet stocks will fall.

Under the FSA ban, investors will be barred from taking new short positions or adding to existing ones in financial shares from midnight (2300 GMT) on Thursday Sept 18.
The ban will remain in force until Jan. 16, 2009 and will be reviewed after an initial period of 30 days, the FSA said.

The move, the strictest major-market clampdown on short- selling to date, comes hours after British bank Lloyds TSB Group Plc agreed to buy rival HBOS Plc in a rescue takeover following a dramatic fall in the HBOS share price earlier this week.

The measure underscores growing concerns that short-selling -- in which an investor sells borrowed stock in the anticipation the price will fall, allowing the stock to be bought back more cheaply -- has exacerbated sharp declines in UK banking stocks since the onset of the credit crunch.

The trading technique has also been cited as a cause of the recent fall in U.S. financial sector stocks.


FSA Chairman Callum McCarthy said short-selling posed a potential threat to banks because it could trigger confidence- sapping declines in share prices, which might in turn prompt savers to withdraw their cash.

"There is a danger in a trading system which allows financial institutions to be targeted and subject to extreme short-selling pressures, because movements in equity prices can be translated into uncertainty in the minds of those who place deposits with those institutions," he said in a speech delivered late on Thursday.
"This is a measure which reflects the present turbulence in markets. It is designed to have a calming effect -- something which the equity markets for financial firms badly need."

The outright ban on short-selling follows a requirement, introduced by the FSA in June, for all investors taking significant short positions in companies launching rights issues to declare their holdings. That restriction was imposed after persistent share price falls threatened to derail fund- raising by HBOS and fellow lender Bradford & Bingley.


On Wednesday, amid intense political pressure to curb short selling in major banks, the SEC issued rules requiring short sellers and their broker-dealers to deliver securities by the close of the business on the settlement date, three days after the sale.

The SEC is also considering requiring hedge funds and large investors to disclose short positions. Managers with more than $100 million invested in securities would be required to publicly report their daily short positions.

It was unclear whether the SEC would issue the rule on an emergency basis. Short sellers and the U.S. hedge fund community were dismayed with the potential new rule.
Well known short seller Jim Chanos said it was akin to the government suddenly requiring Coca-Cola to disclose their secret formula for free to all their competitors.
Richard Baker, president of hedge fund group the Managed Funds Association, said his members were concerned the FSA and SEC actions could hurt markets and throw them into disarray.

Baker told reporters on a call that he had relayed his concerns to SEC Chairman Christopher Cox.

Baker said there was a possibility the disclosure rule could be issued before the close of business on Thursday, or close of business for the week.
Republican presidential candidate John McCain has blamed Cox for failing to police Wall Street and said if he were president he would fire him.

Other senior lawmakers have pressed the SEC to curb short selling of Wall Street firms.
Chancellor of the Exchequer Alistair Darling welcomed the FSA's ban.
"I believe it is the right thing to do in the current market conditions and in the interests of financial stability," he said in a statement.

In addition to the ban on new short-selling, investors with an existing short position of more than 0.25 percent of a financial company's share capital must disclose their holdings every day from Sept. 23, the FSA said.

The proportion of HBOS stock on loan, seen as a reliable indicator of short-selling volumes, peaked at about 2.75 percent on Monday, compared with about 5 percent for Barclays Plc and 2.7 percent for HSBC Holdings Plc, according to figures from research firm Data Explorers.

(Additional reporting by Rachelle Younglai in Washington and Emily Chasan in New York; editing by Leslie Gevirtz and Andre Grenon)


  1. Good bye and good riddance to that loser Chris Cox.

  2. Jewish People Ought To Be Outraged

    What a bunch of crap. Hillary chickens out, or whatever the motivaion, so they say Palin, who is a big supporter, they say Palin can't go either.


  3. Republicans for regulation - odd ring to that...

  4. thing you know Repbulicans will be saying that we actually need to pay some taxes in order to cover the cost of war and bail-outs and all that stuff...

    ...we do live in strange times.

  5. Cox [Nick Schulz]

    At a time when the federal government is nationalizing big chunks of the financial services industry, it is odd that Sen. McCain would attack SEC chairman Christopher Cox and call for his head. The administration badly needs a smart, conservative, free market advocate weighing in during this crisis and Cox is that guy. There's lots of blame to go around for the mess we're in. Cox doesn't deserve it.

    09/18 07:22 PM

  6. Obama's comeback to that McCain statement was pretty good - 'In 47 days fire all his bosses instead!'

  7. I'm waiting for dear host to give the Malefactors of Great Wealth speech.

    Dreading the moment, really.

  8. Bobal: Well I don't want to be thought a creepy cross dresser, though you get to wear pants

    Jesus was a cross dresser.

  9. Sweet shorts on that honey... strategic "October Surprise" it would be a brilliant move. For what it's worth

    Apparently some discussion has already made news outlets

    Obama campaign
    On or about October 5th, Biden will excuse himself from the ticket, citing health problems, and he will be replaced by Hillary. This is timed to occur after the VP debate on 10/2.

    there have been talks all weekend about how to proceed with this info. generally, the feeling is that we should all go ahead and get it out there to as many blog sites and personal email lists as is possible. i have already seen a few short blurbs about this - the "health problem" cited in those articles was aneurysm. probably many of you have heard the same rumblings.

    however, at this point, with this inside info from the DNC, it looks like this obama strategy will be a go. therefore, it seems that the best strategy is to get out in front of this obama maneuver, spell it out in detail, and thereby expose it for the grand manipulation that it is.

    so, let's start mixing this one up and cut the obamites off at the pass - send this info out to as many people as you can - post about it on websites and blogs

  10. Cato@Liberty

    Share This Post
    Obama: Tax Cutter or Tax Hiker?

    posted by Chris Edwards

    A colleague asked me whether Obama actually supports tax cuts or tax hikes, as he had heard contradictory information in the media. The answer is that it depends on what you compare his proposed policies to–tax rules in place for 2008 or the official “baseline” of projected future revenues.

    The official baseline assumes that all recent tax cuts (income tax cuts, capital gains tax cuts, and estate tax cuts) expire at the end of 2010. It also assumes that alternative minimum tax relief is not extended, with the results that 20 million households are handed a whopping tax hike compared to how much they currently pay.

    Obama is proposing a tax increase compared to tax policy in place this year, but a tax cut compared to the official baseline. You can get the details in this analysis by the Urban/Brookings Tax Policy Center (see page 28).

    My view is that the official baseline is a silly starting point for tax comparisons. For one reason, hardly any fiscal experts think that Congress won’t extent current AMT relief.

    More importantly, the true tax “baseline” for the tens of millions of U.S. taxpaying families is how much they currently pay. If current tax cuts expire, they will have less to spend on their own priorities–such as food, housing, and gasoline–because they will have to send more cash to the government. If Obama wins the election and puts his policies into place, Americans would pay higher federal taxes than they do today.

    But more important than the additional revenue that would be collected under a President Obama are the two main features of his tax approach:

    1. Obama would increase marginal tax rates on wages, interest, dividends, capital gains, small business profits, and estates. Increasing marginal rates is the single most damaging way to raise taxes.

    2. Obama would introduce a slew of new targeted tax credits that would distort the economy, treat Americans unequally, and increase Washington’s micromanagement of the economy. Further, many of his proposed special tax breaks would be refundable, meaning that they are actually spending increases and not tax cuts.

    posted by Chris Edwards on 09.17.08 @ 1:00 pm

  11. Habu: On or about October 5th, Biden will excuse himself from the ticket, citing health problems, and he will be replaced by Hillary. This is timed to occur after the VP debate on 10/2.

    Brilliant CIA prediction, just like the Company called 9-11 and the Fall of the Berlin Wall. It won't happen now, haven't you seen the polls? The Messiah is back on his donkey.

  12. Ash: thing you know Repbulicans will be saying that we actually need to pay some taxes in order to cover the cost of war and bail-outs and all that stuff...

    You expect Nancy Pelosi and Harry Reed not to know what to do, but Mcalin's lack of a coherent message in the wake of this market meltdown is causing people to default to the ticket of the party out of power. But 1200 hours is a long time until the election, there could be a new war in Iran by then.

  13. Iran's economy: Can sanctions work? [Michael Rubin]

    It's become trendy to say that sanctions don't work on Iran, even as the Islamic Republic is forced to import up to 40% of its refined gasoline needs. I had done a small overview back in July for the Slovak publication, Euro-Atlantic Quarterly.

    Patrick Clawson chimes in with an excellent overview of "Iran's Faltering Economy," in the most recent issue of the Middle East Quarterly, which is dedicated to a focus on Iran.

    09/18 08:44 PM

  14. Ms. T wrote:

    "...there could be a new war in Iran by then."

    How would that slogan go?:

    "VOTE MCCAIN -- Willing to wage war to win the Election!"

    "Bush wages WAR, for McCain"

    "War McPain -- McPain War"

    "Bomb Bomb Bomb Iran"


    I'm cynical enough to believe they might try such an insufferably stoooopid stunt to try to swing the election.

  15. habu did call this derivative mess, well before it was fashionable.

    Just has misjudged Mr Bush, here to date.

  16. I see Obama's Orifice, the Oracle of Omaha is not doing his patriotic duty and sending his money in the form of taxes to his uncle, nor did he step up and do a Ross Perot rescue mission. No, he is doing what he is best at, sucking up the unfortunate as they slip into the mud.

    "Sept. 18 (Bloomberg) -- Billionaire investor Warren Buffett's Berkshire Hathaway Inc., which today agreed to buy Constellation Energy Group Inc., is increasing the pace of deals as debt markets freeze up and stocks fall.

    The deal to pay $4.7 billion for Constellation is Buffett's eighth acquisition announced since October, compared with six in the prior 12 months, when the largest was a $350 million purchase of an underwear and pajama company. Omaha, Nebraska-based Berkshire, which had $31.2 billion in cash on June 30, is acting as buyouts by competitors slow amid a worldwide credit crunch.

    ``This is the kind of environment that opens up more opportunities for someone like Berkshire who does still have a lot of cash,'' said Gary Ransom, an analyst with Fox-Pitt Kelton Cochran Caronia Waller. ``Opportunities to put it to work are expanding right now.''

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