"Yes - not only mind blowingly stupid but also possibly (probably) catastrophic in effect. Really I do now believe that this is the beginning of the end and that the end will be apocalyptic.
Short-selling is an important mechanism in an orderly and stable market. Banning it means that bull run stampedes based merely on the sentiment of the moment, as we are seeing now, are freer to thunder on unchecked.
Equally it becomes more difficult to take a contrary position on a declining stock and to judge it oversold and support it.
After this current run in the FTSE we can expect a correction and can equally expect this to run on unchecked and on over the cliff.
October is traditionally the month of market crashes. Easy to predict that October 2008 will be true to form. One can almost date it: after 9/11 I suspect we shall have 10/16 to swap reminisces over lattes where we were when the opening bells rang.
True HBOS was brought to its knees by short-sellers but that was because it deserved to be. It had lost our trust but that is the very essence of banks: fiat and nothing less and a bank that loses it deserves all it gets.
HBOS did not lose our trust because it was shorted, rather it was shorted because it had lost our trust and probably its white knight rescue was its best outcome in the circumstances.
Our love affair with the markets has become a dangerous infatuation. We know it hasn't turned out the way we wanted and yet we just won't let go because what happened wasn't really our fault honest and we really really do love the markets to the depth of our soul whatever that might be and simply want the very best for it not to mention us so lets all get back in bed together again and make it really work this time round.
Wrong and unworthy of us. In Sylvia Plath's elegant metaphor we are all masturbating a glitter and when we do finally manage to shoot our load it's going to bust our balls right round the world.
Vlads Vanyka
Penygroes 19 Septemebr 2008"
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Added 4th October 2008: Warren Buffett recent investments supporting the market were on advantageous terms that ordinary investors can't hope to receive but I do think this Daily Telegraph piece on Anthony Bolton ('the British Buffett') worth looking at.
Personally I don't think the markets have capitulated yet and there's the added problem of bankruptcies to bear in mind (US General Electric may well have to file soon with I should imagine wholly calamitous effect world-wide if they do) but indeed 'fortune favours the brave'. But do reflect that it took more than two decades for share prices to recover after the '29 crash and that nearly two decades on the Japanese stock and property markets are very far from returning to their peak values after their deflation (which incidentally for the most part wasn't a crash proper but characteried by long periods of extremely volatile price movements gradually trending down).
(Added 21 November 2008: This Wall Street Journal piece (appearing on the Yahoo financial pages) by Andy Kessler 'Ignore the Stock Market until February' gives insight into what's fueling the volatility in markets presently.)
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Added 8th October 2008: Beware commentators who say stock markets are now irrational and that panic has set in. On the contrary I think sanity has finally prevailed and reality has set in. No panic yet thus - that's all to come. So I'm sticking with VV day = 10/16. Dow breaching 5000, FTSE 2500 - that sort of thing.
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Added 10th October 2008: US General Electric reporting today. The bad news is that President Bush is due to make a statement this morning. Our only real hope would be for the White House to release a video of Britney Spears fingering herself in close-up which might still work. Fat chance. It makes you weep, it really does.
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Added 15th October 2008:
His Dark Materials
... Chaos umpire sits,
And by decision more embroils the fray
By which he reigns: next him high arbiter
Chance governs all. Into this wild abyss
The womb of Nature and perhaps her grave,
Of neither sea, nor shore, nor air, nor fire,
But all these in their pregnant causes mixed
Confus'dly, and which thus must ever fight,
Unless th'Almighty Maker them ordain
His dark materials to create more worlds,
Into this wild abyss the wary Fiend
Stood on the brink of Hell and looked a while,
Pondering his voyage; for no narrow frith
He had to cross ...MILTON: 'Paradise Lost' II 907 - 920
The Way She Does Her Hair
While from afar a Shining Princess swoops
Down to manifest her coy and quaint
Business and then soar back to who knows where.
VANYKA: 'Britney Regained' IV 310 - 312
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Added 19th October 2008: Thanks a trillion Britney - you're an angel.
But I can't promise to carry on keeping this up past 10/21: there's just so much that one man and his dakini can do, sorry.
Important notice: Paris Hilton please email urgently
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Added 20th October 2008: Tomorrow's 21/10 has already been earmarked by some bloggers as crunch day in the markets. This is because CDS contracts associated with Lehman Brothers' bankruptcy are due for settlement tomorrow. Opinions range from a relatively benign $6 billion to a catastrophic $250 billion for the scale of losses. The point is that no one knows and we may still not know after tomorrow. That kind of uncertainty is what is crippling financial markets presently.
Following is yet another incisive comment from me that didn't make its way into Edmund Conway's current piece in the DT:
"In an age of inflation-targeting, the Bank of England was supposed to control the economy by adjusting interest rates both to control inflation and growth"
Why the comma after "targeting"? The Telegraph used to be good at commas. No more and just another sign of our increasingly hopeless times.
As well the sentence quite wrong of course. In the US the central bank is supposed both to control inflation and promote growth. But the UK BoE MPC remit is simply to keep inflation *at* the target - currently 2%.
In another piece today you fly the flag on behalf of the housing market. House prices are 12% off their peak and the mortgage market has brought the banking system to collapse but we are nevertheless to believe that houses have become more "affordable" again as a result.
What nonsense!
Quite a likely scenario is that we enter a period of recession during a time of inflationary pressure - stagflation. At the end of two years house prices will have dropped 50% off their peaks and over the ensuing next decade drop some further 50% for a total loss off their peaks approaching 80%.
And they still won't be affordable because we'll all be bankrupt.
Finally, ranting on, how typical of an alternatively sexualised mare like Lord Mandelson to go after flexi-time - not an issue for the cottagers of Hampstead Heath perhaps but a very real and pressing issue for the millions of families trying to get some kind of a life for themselves with necessarily two bread-winners in the family.
Here's what we need to do Mandy:
1 Separate the domestic mortage market (I mean the homes people live in) entirely from the commercial and buy-to-let markets.
2 Tax earned income fairly again. I suggest a top rate of 90p in the pound. Equally abolish all taxes on wealth including all inheritance tax and capital gains tax.
3 Give our children back their families. In every household (including single parent households) where children are reared one adult should be able to opt out of work and instead receive a Child Carer's Credit equivalent to the national minimum wage.
This last would cost around 100 billion pounds a year and should and must be implemented immediately.
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Added 22nd October 2008: Well 10/21 came and went without the markets collapsing though some say that dollar price movements reflected banks hoarding dollars to fund their undertakings. We shan't know what the scale of the hit is until we see the accounts.
Meanwhile we should neither misunderstand nor underestimate the scale of the CDS problem. They are used by banks to sex up their sub-prime assets and not as a speculative punt (as they possibly are by some hedge-funds). The sellers of the CDSes pocket the hefty fees and then hedge their own exposure elsewhere ('netting out') and whose providers likewise pocket the cash (thanks awfully) and in turn hedge their own position and so it goes on, murkier and more opaque at each turn in the maze.
But there's no such thing as infinite regress even in the world of magic finance and someone somewhere in the maze in this game of pass the toxic waste is ultimately left standing naked and exposed haplessly clutching a wanky portkey on a one way trip to the Dark Lord. Trouble is we don't know who these are (AIG was one such, hedge funds likely the rest) and what is far worse it is still going on with, I suspect, ever increasing stakes as hedge funds embark on ever riskier strategies to stay afloat.
The rationale of these ultimate players is of course essentially fatalism - the attitude that if corporations like Ford or General Electric go belly-up then we're all sunk anyway ... right, but these corporations are essentially failing because of these very same financial strategies and that's the fatal flaw in the philosophy - trip down a ruinous path and you can expect to get ruined.
I'm a bit peeved not to have heard from Paris Hilton by now. It's very irresponsible and discouraging.
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Added 23rd October 2008: Frankly you can blame all this on Paris Hilton.
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Added 26th October 2008: All these ups and downs every day are simply killing me and what is so sad it's all so totally unnecessary. Just a few hours of a certain person's time and we could finally reach the resolution we all so long for ...
For pity's sake Paris email now
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Added 30th October 2008: Running out of vee on this one - sorry but desperate situations require desperate remedies (and besides my friends this might just work - BTW SP if you are looking in thanks so much but it's the moose thing and no offence):
Björk if you have a moment to spare could you possibly email (because it's not just polar bears we're talking here any more)
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Added 31st October 2008:
Lines occasioned by the recent altercations in the financial markets now happily corrected
Björk! as from Valhalla you and I
Like warriors strived side by side to save
The sum of things and their derivatives,
When faith in the free market's liberty
Was at a record twenty four year low
On the Nikkei and worse to come for the Dow
So they said on CNNMoney.com
We did not not flinch and went at with a will
And pulled it off! oh wow that was nasty!
Freya and Od, Aphrodite and Ares,
We name you in our song - as well as
Georgina and Russell who did their bit too
Let's be fair even if it was totally
OTT and naff, we honour you now!
(Seamus Heaney on William Wordsworth)
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