Wall Street Shenanigans Part 2

Things are getting pretty ugly behind the scenes in the USA, and please understand it will affect us up here eventually.

The markets seem to be waiting for the details of that $700 billion handout, which I'm sure will pop the markets up for a while. But is it the solution or just a band aid?

Short-selling ban:

Understandably every company whose stock trades publicly would like to get themselves added to the SEC's list of stocks that cannot be sold short. The list, which began with 699 clearly financial stocks, has now grown to 950, with stocks like GE, GM and IBM now on the list.

The decision was made in a panic, apparently without much thought given to unintended consequences. The rules already had to be changed significantly. After midnight on Monday, the SEC reversed itself to say that market-makers can sell stocks short after all, in bona fide market-making and hedging activities, including in leveraged derivatives contracts. The SEC explained that such short-selling is "necessary to provide liquidity to markets." That's just what hedge funds and money- managers were trying to explain to them in their complaints within hours of the original rules being imposed.

But hedge funds are left with a major problem. Most hedge funds are long/short funds. They use algorithmic models to keep their portfolios market-neutral to offset random market swings. If they are skillful in their stock and sector picks they make money whether the market goes up or down. But if they can't put on the short positions they can't put on their long positions either. - Sy Harding

As soon as that ban is lifted all these companies that were artifically held up will likely take a hit and Wall Street insiders will pocket more coin.

Hang on for a wide ride.

Enough of this, next post it's back to photos.