With the "No Short" rule in place, the 68 stocks in the S&P 1500 Bank group went down an average of 11.56% yesterday. At the same time, 88% of the stocks in the group did less than their average 30-day volumes yesterday, while nearly 25% did less than half! With the shorts now out of the market temporarily, it looks like volume is drying up, buyers have retreated (why buy now when we know the shorts will be back?), and only the sellers are left. Below we highlight the 20 worst performing S&P 1500 Bank stocks yesterday.
The SEC needs to reinstate the uptick rule that has worked for 70 years. Period.
Many in the media do not understand how the markets work. As a result, they bash this $700 billion package, but it is absolutely necessary.
The reason Paulson has asked for such unprecedented power is to have a $700 billion bazooka against the short sellers.
Hedge funds (like Scion Capital LLC and Paulson & Co.) have shorted billions and billion of securities backed by subprime home loans mortgage paper. If they know that Paulson has unlimited powers, they will rush to cover (otherwise they will not blink).
In short, Paulson and Bernanke want to engineer the largest in history mortgage related paper short squeeze; hence, they need this $700 billion bazooka.
Posted by: Marek | September 23, 2008 at 09:32 AM