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Friday, August 12, 2011

TGIF??

Eurostat: EU industrial production drops by 0.7 in June; EU27 industrial production drops by 1.2%. That's on the month.

Meanwhile, France reported a real GDP growth rate for Q2 of zero. There are implications; Sarkozy has promised to drop the French deficit much faster in light of the waves of European debt angst. He needs some growth to do that. French household spending was the primary culprit. If you go back to the French tables I posted recently, you'll see the ominous -1 there.

German Bunds benefited. Both these numbers were unexpected; the "soft patch" is more quicksand-like than policy makers have wished to believe. The Eurobond issue is a huge, flaming political nightmare sweeping across Germany right now.

Everyone's blaming the short traders. Country after country is banning short-trading. It does not seem likely to improve their debt/GDP ratios.

Comments:
With no short-sellers, the next bourse downturn is much more likely to turn into a catastrophic crash. Who else buys while the market is crashing? Hopefully Frankfurt and London don't go for this garbage.
 
There's an, er, division.

The Brits and the Germans are not getting on this train to nowhere.
 
As I understand it the short selling is stopped only for a few days and only in selected bank shares. They may want to change the rules or try to get ahead of the rumors and lies. In 2007-08 the shorts here were not borrowing bank shares before they sold short. This naked short selling, assisted by rumors and downright lies, allows the shorts to take a stock all the way down. As I recall, they stoped shorts in some U. S. bank shares for a few days during the crisis. Some were calling for better enforcement of requiring shorts to actually borrow the stock before they sold short. (Cox at the SEC was not on top of it. In fact, the SEC kinda screwed the pooch what with the naked shorting and Madoff.) Some were also calling for a reinstatement of the no shorting without an uptick rule.(Which, as I recall, was not restored.) So, maybe they are just treading the path we followed a few years back. (Not that it is a good thing.)

That said, some are saying that France may be in deep doo doo. Sarkozy would not, NOT, have rushed back from vacation unless things are really bad. We'll probably know more by Monday.
 
"Who else buys while the market is crashing?"

Neil, that would be me (and many others seeking value) -- at least when it's deemed warranted. During the May 6th flash crash I was buying, and was sad that it was over so fast because I had more stocks I wanted to buy on the cheap. (My standard caution and diligence was working against me -- I normally don't trade in real-time like that and I'm not exactly a fast trader.)


If naked shorts are OK, how about naked longs?

Presented for consideration (even though I'm not sure I agree with it myself -- maybe y'all can help me make up my mind):

Can we put the naked shorts and "naked longs" into their own market? We don't need them distorting the "real" market (neither stocks nor commodities). It's bad enough that even with them in their own market you would still get some tail wagging the dog action (like you do now with options trading influencing stock prices).

Having derivatives of stocks (wagers such as options and naked shorts/longs) directly drive the price of the stock makes about as much sense as having derivatives of an actual business (like apple's stock) directly drive the price of its products (like iPhones).


BTW, I found this revealing presentation that besides giving a bit of an overview on short sales, covers how wikipedia ended up with their current view on naked short selling, and it involves a number of different players basically conspiring and conducting fraud. (I have already seen similar things in other areas on wikipedia, such as William Connolley who did thousands of edits on climate change before finally getting banned.)
 
foo,
Thanks for the link. I found it very interesting, as it confirmed some of the things I have been thinking.

I went on to the blog, Deep capture.
http://tinyurl.com/2g82mfs

It reads like tinfoil hat conspiracy thinking, but.......what if it's true? Or even some parts are true?

If I was an Islamist jihadi, I would see this as an effective way to bring the Great Satan down. But let's say the financial maneuverings are not enough. Let's say, though, that they are generating enough profits to afford nuclear bombs and to successsfully transport them aboard ship to a city with a big harbor like, say Seattle. An A-bomb blast out in Puget Sound, midway between Seattle and Bainbridge Island could wreak immense damage. Forget how bad the physical damage would be. Think, instead, about the psychologic implications. 9/11 times 100, maybe 1000, is what it would be. Yes, it might finally get us to take off the gloves and get serious about the threat. However, our resilience at this point is not what it was even back in 2001. It might also set off calls for more appeasement or surrender.

This is worrisome.
 
My previous link, while an account of things from 2004 to 2008, was not the one I intended to post.

Here's the link to this on going blog narrative on crooked short selling:
http://tinyurl.com/3chxdbl
 
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