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Non-Tech : Bill Wexler's Trading Cabana -- Ignore unavailable to you. Want to Upgrade?

To: The Reaper who wrote (3767)	7/16/2008 10:17:15 AM
From: Dale Baker	Respond to of 6370

I believe those ETFs work mostly with index derivatives and options to construct their "short" position, not outright stock shorts.

To: The Reaper who wrote (3767)	7/16/2008 11:12:26 AM
From: RockyBalboa	Read Replies (1) \| Respond to of 6370

Sick. RKH Back in the game... with a new SKF position averaging 181. We will see how that goes.

To: The Reaper who wrote (3767)	7/16/2008 11:32:14 AM
From: Proud Deplorable	Respond to of 6370

Short Selling Limit May Have Unintended Consequences 08:06 EDT Wednesday, July 16, 2008 (This article was originally published Tuesday.) By Rob Curran Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- The Securities and Exchange Commission rule to curb " naked short selling" on the shares of Fannie Mae (FNM) and Freddie Mac (FRE) appears aimed at taking pressure off the beleaguered mortgage giants, but may have unintended consequences or even backfire. One longtime executive at a small Wall Street firm acknowledged the move to require traders to borrow shares before engaging in short sales in the stocks could be effective in the short term. Still, he warned that the emergency measures could disrupt markets for options and other securities. Investors don't seem reassured by the new rule, which was announced by SEC Chairman Christopher Cox at the Senate Banking Committee on Tuesday and which also covers investment banks like Lehman Brothers Holdings (LEH). Shares of Freddie Mac and Fannie Mae both closed down more than 25%, extending a selloff that has claimed nearly two-thirds of each company's market value in just over a week. Cox said the new restrictions are called for under an emergency order and told The Wall Street Journal it "will undertake a rulemaking to address the same issues" across the market. Short sellers have become the bete noir of the recent market turmoil, blamed in some quarters for setting off attacks on Bear Stearns, Lehman, and now Fannie and Freddie. But the reality is less clear cut. While short sellers win when share prices fall, they sometimes provide crucial support because they often buy back the shares they borrowed and cause rallies at the most dire junctures. "These guys better be careful to apply anything that interferes with free markets," said Lorenzo Di Mattia, manager of hedge fund Sibilla Global Fund. " The whole world is invested here because it's a free market. Funny they don't understand that it is because there is short selling that the market didn't crash. If there were no shorts in this market, there would be only sellers." Fannie, Freddie and Lehman have seen their stock prices plummet in recent weeks, and some people are making a lot of money on the way down. Those include buyers of options to sell the stock and outright short sellers. At least 137 million shares of Fannie Mae were loaned out to short sellers as of June 30, more than 7% of the total float. For Freddie Mac, the total was 83 million shares, or more than 12%. "Naked" short sellers are those who sell shares short before knowing where they'll borrow the stock needed to make good on the transaction. Critics say the practice allows more short selling than would otherwise be possible and can have punishing effects on a stock's price. The practice doesn't necessarily violate federal securities laws. Washington is scrambling to get a handle on economic pressures piling up on consumers in a presidential election year. Much of the political activity is underpinned by a suspicion that market manipulation, rather than legitimate concern about fundamentals, is moving prices. In addition to the steps announced Tuesday, the SEC has initiated a probe into rumor mongering supposedly sparked by short sellers. The Commodity Futures Trading Commission is looking broadly into manipulation of oil markets. "There seems to be something in the water in Washington where people think market manipulation is the reason oil prices are rising and stocks are falling," said Peter Morici, a professor at the business school at the University of Maryland. "Stocks are falling, because the global capital markets are downgrading the U.S. economy because the banks are broken." Among the unintended consequences of the short-selling rule is that it may make it more difficult for equity-options market makers to hedge their positions in the stock market. Options dealers often sell shares short, not because they are speculating, but to hedge their exposure to falling stocks when they sell puts. Making it harder for them to hedge could make it more expensive to buy options. The SEC has moved recently to remove barriers to short selling. Last July, the commission eliminated the "uptick rule," which prevented investors from short- selling a stock when its price was falling. Years of academic research showed the rule was hindering trading without protecting prices. The provision was adopted after the stock-market crash in 1929 to prevent hysterical selling in the markets. Some pundits have linked the repeal of the rule with the volatility that has reigned in stock markets since last summer. "We've seen explosive growth in shorting activity," said Todd Salamone of Schaeffer's Investment Research. "These shorts seem to get in control, and the moves are exacerbated." Some of the biggest short sellers are hedge funds and long-short mutual funds. Their strategies often involve using quantitative analysis to identify stocks that could fall and then shorting those stocks aggressively. Some market observers argue shorts have been unfairly villified by people with a vested interest in seeing stocks rise. "In the long run, this just shows again the game is rigged for the bulls," said Matt Kelmon, who runs Merriman Curhan Ford's options overwrite strategy. Fannie Mae ended the day down 27.3% at $7.07. Freddie Mac ended down 26% at $ 5.26. -By Rob Curran, Dow Jones Newswires; 201-938-5176; robert.curran@dowjones.com (Gregory Zuckerman of The Wall Street Journal and Geoffrey Rogow contributed to this article.) Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http:// www.djnewsplus.com/al?rnd=tbcz0xXX1Jauzo6mglEnJg%3D%3D. You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires 07-16-08 0806ET Copyright (c) 2008 Dow Jones & Company, Inc.