First off I just want to say that short sellers are not to blame for the collapse of Lehman, Fannie, Freddie, or AIG. The media is making it seem as if short sellers are of the devil and are the reason for the collapse of these companies. This is simply not true. The reason that short sellers are shorting these companies is because these companies balance sheets are horrific.
Short sellers have been around for ever. When the market was in Bull mode people were cheering in the streets as the short sellers just keep losing money and pumping liquidity into the market. Now that the market has turned everybody wants to blame the short sellers for the down turn this is ridiculous. The short sellers should not be punished for having the foresight to recognize when a company is being fiscally irresponsible.
Just think. A huge mega billionaire could have stepped up and single handedly saved any of the above mentioned companies. But that didn’t happen. Why? Because these companies are worthless. Anybody company that comes begging to the government for a bailout is probably worthless. So while the smart money stays away the government takes your money and gives it to these failing companies. Hmm does that by default make the government the dumb money?
I expect in the near future for the the government to ban US citizens from investing in foreign markets. For those that do invest oversees get ready to be penalized dearly for your foresight. Just like the short sellers.
“The Securities and Exchange Commission took the dramatic step early Friday of temporarily banning the routine practice of betting against company stocks. The ban applies to shares of financial companies.”
— Justin of Vizionkc