Came across this via Barry Ritholtz’s blog. Apparently didn’t see the feature in NYT over the weekend. So here’s an excerpt:
Now short-sellers, the market skeptics who correctly called last year’s downturn, are coming under even more unwanted scrutiny, this time from federal regulators. The Securities and Exchange Commission appears poised to reverse itself and reinstate rules that would make shorting stocks — that is, betting their prices will decline — somewhat more difficult.
And here’s what Barry has to say about it (including a chart of when the short-selling ban began and what happened afterwards):
Short sellers are the messengers, and they tell the story of fraud, over-valuation, and irrational exuberance. They also act as a good counter balance to the Street’s inherent cheerleading. Short seller Jim Chanos explains why the SEC should not further restrain Short Selling in some recent commentary.
An exceprt from his book Bailout Nation:
“In September 2008, with the crisis in full ﬂower, [SEC Chief Christopher] Cox made shorting ﬁnancial stocks illegal. Apparently, he was unaware that ﬁerce market sell-offs often end with short sellers covering their positions, locking in proﬁts on their bearish bets. With short sellers out of the market, the downturn became even ﬁercer. From the market highs of October 2007, the S&P 500 and the Dow Jones Industrial Average were cut in half in 12 months. Much of the damage came after the no-shorting rule went into effect.”
Read the NYT article HERE.
See Ritholtz’s blog entry HERE.