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StefanoBuliani [334]
19-Sep-08
As another chapter of this financial crisis unfolds I decided to chime in again with some random and mostly unproductive thoughts.
Britain’s stock market regulator on Thursday banned short selling in financial companies and said it might extend the ban to other sectors. The move followed the Securities and Exchange Commission’s curbs on the practice that went into effect Thursday morning. [MarketWatch]
Yes indeed. Regulators are moving to temporarily ban short-selling. This sparked a heated discussion in Covestor London office this morning.
Some of us were all for it and thought this would restore confidence and give stricken institutions time to scramble for safety.
I, on the other hand, have serious doubts about the efficacy of such a move. It looks like regulators are trying to buy some more time for themselves rather than curing these ill-markets. To pick up the sinking ship analogy I’d say the captain has banned lifeboats for a short time - The ship will still sink and passengers will jump on the lifeboats as soon as they are available.
Every journalist seems to be raving about how this proves that financial markets are not, as we always thought, self-regulating. Alan Greenspan has indeed vouched this view.
I don’t agree. I think this is the perfect example of a market environment regulating itself. Which doesn’t mean that what is happening is the best possible outcome. Admittedly the market seems to be day-trading on itself. Large institution collapsing under the weight of their mistakes is probably for the best this week but certainly won’t help in the long term.
So the market is self-regulating, but needs wise watchdogs looking over it should it stray off course. This presumes some far-sightedness from the regulators, something we have not seen in the past few years.
Lehman Brothers made colossal mistakes and completely mismanaged the amount of risk it could take on. Don’t give me tearful speeches about smart bankers because if you’re stupid enough to become the biggest underwriter of mortgage backed securities on the assumption that the market will always go up you probably aren’t as smart as you think you are. Quite a mouthful.
On the other hand there’s banks out there which don’t deserve this doom.
Outstanding example of this are Goldman Sachs and Morgan Stanley. They now find themselves in trouble, or at least under pressure, despite being some of the best run institutions. Being caught in the middle of the storm is not a pleasant position and probably, if left to its own devices, the “market” would see to it that they go titsup even though they clearly don’t deserve it.
Facing two crisis at the same time, despite them being causally related, seem to denote a certain amount of synchronicity in the markets.
Now to come back to the subject matter. Why am I against the ban of short selling.
I agree with my colleagues when they say that we have to restore confidence in the markets. However, the loss of confidence we’re seeing is not just a random cycle in response to made up news but rather a reaction to structural problems affecting the system.
A ban on short selling will simply create a artificial stability without solving the underlying issues. It may buy some time but as soon as the ban is lifted we will be back to square one. Banks are treading on a knife-edge and no matter how much time you give them it won’t be enough to build strong-enough cash positions to survive another decrease in deal-flow.
Propping up a crumbling building with wooden buttresses will hold only for so long. Something has got to give.
Perhaps then the regulators are banking on the renowned slow-wittedness of the “mob” and hoping memories of this crisis will fade away in a very short period. I don’t buy into it. Bulls will be back in their time. This is a short sellers market.
Different and more radical intervention is required on their (regulators) part. Now we could talk hours about the potentially disruptive effect of over-regulating regulators. But I’ll just save that for another post.

Posted at 02:23 in External Blog | Permalink | Comments ()
08-Aug-08
I’m a very keen photographer and a while ago I decided to tackle portraits. After a few weeks looking for models and sets I was ready to go. The picture embedded here comes from my first photo-shoot. The light was dark and moody on purpose - what I didn’t consider was that my camera, despite being set [...]
Posted at 03:08 in External Blog | Permalink | Comments ()
01-Jul-08
Quick stock idea
Watchlist Idea for OLD:ES:ELE.
I haven’t updated this blog lately, and I apologize, at least to all
the poor souls out there who like to read my disconnected thoughts.
Covestor opening up to the world and a friend’s blog kept me busy.
I’m here now and ready to entertain you with some more random rumblings.
Last week’s Economist had a piece about the perilous situation of energy and electricity companies in Spain.
If you’re looking for a dog to short, this is definitely it.
Electricity prices in Spain have been reasonably low and their
growth has been somehow independent from inflation. The reason behind
this odd behaviour is that the tariffs private company can impose are
regulated by the government.
Spain has often come under attack by the European Commission for its
policies and this issue has almost always been central in all debates.
This is all fine and dandy so long as production costs and inflation
remain within forecasted patterns. Nowadays with petrol prices
rocketing ever upwards and the Euro area economy moving forward - or
rather backwards - this is not proving to be efficient.
The difference between what costs energy companies to produce the
electricity Spaniards use and what they can charge for it has now
ballooned to a whopping €14 billion ($22 billion), according to the
Spanish National Energy Commission (CNE).
The Economist was kind enough to do the math for us:
Just to stop the deficit from getting bigger would mean
raising prices by 20%, according to Unesa, the Spanish power-industry
association. To repay it will mean increasing prices still further.
Paying it back over the next 15 years would require price rises of
nearly 35%.
Unless the government moves to deregulate this industry quickly
they’ll find themselves with a ticking bomb in their hands. Considering
the usual slowness of bureaucrats I’d say this is definitely something
worth exploiting.
We can spot a definite pattern on these two charts I nicked from Yahoo! finance UK. Iberdrola and Endesa are Spain biggest energy companies (that I know of) and they have been going steadily down as oil prices took off.
Update: Since this post was published Endesa has gone own almost 2€!
Tagged Stocks: OLD:ES:ELE
Posted at 14:02 in Watchlist Ideas | Permalink | Comments ()
15-May-08
According to the BBC, and pretty much every other blog/news site I was right. Love it! You don’t think monkey boy has anything to do with this; think again! Original post here.
Posted at 00:14 in External Blog | Permalink | Comments ()
08-May-08
I sincerely hope the rumors about Microsoft trying to buy Facebook can be dismissed as the rumblings of a delusional journalist who lost the Microsoft-Yahoo! field day story.
The story is old and not worth talking about anymore, But I’m afraid I’m with Arrington on this one. Sooner or later Yahoo! will be Microsoft’s.
Let me explain.
By [...]
Original post: http://thebigdeal.wordpress.com/2008/05/08/microsoft-yahoo-and-facebook/
Posted at 00:06 in External Blog | Permalink | Comments ()
20-Apr-08
Found this while walking around China Town. Chinese medicine! Herbal male tonic can help to achieve and maintain great erection of man’s best friend. The male tonic is made of pure natural herbs, you can get the quick result with no side effects after taking.
Tagged Stocks: CHINA
Posted at 05:06 in Holding Rationales | Permalink | Comments ()
19-Apr-08
Holy shitsauce! All the candles and chanting finally worked! Full article on IGN here
Posted at 00:00 in External Blog | Permalink | Comments ()
18-Apr-08
This morning I found this joyful message greeting me when I started working and tried to ssh to a remote server: Bus Error Same thing even with verbose mode. The system log (/var/log/system.log) told me that a file containing the full dump of the error was created in my home directory. This is what it said ….(Some [...]
Posted at 00:41 in External Blog | Permalink | Comments ()
17-Apr-08
I have never seen anything so stupid. Hopefully the marketing/PR geniuses responsible for this are currently hanging from their gentleman’s vegetables on a very high pole in the middle of Microsoft campus.
Posted at 02:51 in External Blog | Permalink | Comments ()
15-Apr-08
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