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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Moominoid who wrote (86169)	9/22/2008 8:26:18 AM
From: SouthFloridaGuy	1 Recommendation Read Replies (1) \| Respond to of 116555

The whole thing would make sense save for the fact that short-sellers have very little to do with the ultimate level of the market and by banning short-selling you have instantly created deep inefficiency in the market. One simple example is the convertibles market. The primary buyers have been hedge funds and if you can't get the equity short than you basically can't do the trade. Since debt financing is so expensive and can barely be accessed, companies have had to resort to convertible financing. A withdrawal of hedge funds from the market will create huge liquidity gaps. I suspect it will really be no different than what happened in Pakistan. Liquidity - the very thing the Communists are attempting to restore - will dry up in the market and stocks will continuously fall.