Friday, August 12, 2011

European Short Selling Ban

I will say this again - will not matter. We had the same thing happen in 2008. Band aid on the gushing wound. I understand that officials panic and carry out silly decisions. But experience shows us that in 2008, after a very brief reprieve, derivatives and regular selling by longs continued through the ban, and those stocks eventually fell by a lot for another 6 months, regardless. Shorts can use options, futures, ETFs, ADRs trading on other exchanges, and CDSs to express their bearish opinion on these stocks. European officials are putting a blame on traders for what is essentially their problem of ineffective fiscal governance. It is really funny what happened though. They are protecting the banks who now hold govt debt, which was used to bail these banks out in the first place. If this is not a pyramid which is going to collapse, then I do not know what is.

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