Friday, September 19, 2008

Financial Terrorism Part 3

What made no sense, was a total ban by the SEC on financials. Then I read the blurb in Slope of Hope, then I said to myself, I wonder if this happened to really pick up in or around Sept. 11.

Well Barry Ritholz, a premier blogger, respected in nearly every circle has DROPPED THE BOMB.

from his amazing blog: The Big Picture

Last night, we discussed the absurdity of banning all short sales. The details of the SEC action have been released (see below). The specifics are a "temporary halt in short selling in 799 financial institutions" until October 2nd.

I have been trying to contextualize this, and I keep coming back to what seemed like a wild theory yesterday that seems a whole lot less wild today. During the day, I had an interesting phone conversation with Joe Besecker of Emerald Asset Management. (We used to do schtick together on Power Lunch, and made for an amusing financial comedy team).

But Joe is a good money manager, a great stock picker, and a thoughtful guy. He raised an intriguing issue: None of the many hedgies he knew were pressing their bets recently. The bear raids on the banks and brokers were NOT a case of piling on by US based hedge funds. And from what he was seeing and hearing about in terms of order flow, the vast majority of the financial short selling the past week or so were being done overseas. It appears that the lion's share of shorting was coming out of overseas bourses such as London and Dubai.It may not be a coincidence that the financial short selling ban is both here and in London.

Then there is another coincidence: The huge increase in shorting of the financials occurred on the anniversary of 9/11. And on top of that, the same institutions attacked on 9/11/01 were the ones suffering in recent days.

Now Barry has to be reserved, let me say it because I'm just a working class stiff from the Boston with a $5000 IRA brokerage account: It was Al Queda. This was no coincidence. The market was headed down, quite naturally, and this is a normal and good thing but what was happening to perfectly healthy firms who go a little stupid was well-timed Financial Terrorism.

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