Blog Post

For those of you that havent noticed, I just took a big draw-down....and yes it smarts a bit!! I have been short all manner of financial institutions as so many seem to be in trouble that it is like catching fish in a barrel. That is until the rug gets pulled out from under you....OK, so Citibank reported better than expected earnings, but lets face it, they still lost a shed-load. A good few people have backed up the truck thinking they might be getting bargain (it can't drop much more etc) which is fine, this is people making a judgement call.

What annoys me is when you get something like this - http://online.wsj.com/article/SB121632843667963227.html?mod=googlenews_wsj Or the SEC deciding that there are a whole raft of financial institutions that now cannot be shorted as they are too big to fail. OK, so I am not a naked short seller, but this has lead to an awful lot of people making a dive for the exits and driving the price up suddenly forcing me to cover too.

Now I thought the idea of this stock market thingy was to allow the bad comapnies to fail so that there was the correct allocation of capital - survival of the fittest and all that? Well it seems that the SEC determined that 'fittest' means 'biggest' while the others are hung-out to dry. So you can expect those that have missed the list, but still suffering shaky balance sheets (eg Wachovia) to be subject to more shorting as they are now the targets as the likes of Lehmann and Citi are given an unfair advantage in their fight for survival. If the likes of Wachovia survive this, then don't be too suprised to see some large scale legal action ensuing. In fact I can see them just challenging right now, just to get added to the list....