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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Hawkmoon who wrote (100036)12/1/2008 12:09:59 AM
From: The Vet  Read Replies (1) of 110194
 
The logic being, if margin debt is declining, short interest is logically supposed to decline at a similar rate as available stock is reduced by reduction of margin debt. If margin debt reduced by 50%, short positions should reduce by 50%.

Not quite right IMO. As long as the stocks remain in a margin account then the broker can still offer them to shorts even if that account in free of margin.. For the number of shares available to short sellers to decline those remaining stocks would have to be moved from margin accounts to cash accounts and I doubt that many investors have actively done this.
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