Apologies for another posting on short selling, but it has become a bit of a preoccupation for the media, regardless of whether they understand it or not. These are just a few things I've picked up on in the last few days.
* The publicly-traded hedge fund manager MAN Group has asked to be added to the FSA's list of financial sector companies whose stock can't be sold short. You can dish it out but you can't take it, eh guys? You'd think they'd know how to cope with hard times anyway -- MAN's predecesssor company, ED & F Man, was founded in the eighteenth century as a commodities trading house. They've seen a few crises come and go in that time.
* Hedgies on both sides of the Atlantic are crying foul over the short selling ban, and they've got an advocate on the editorial pages of the Times. Oliver Kamm, one of the paper's leader writers, is an ex-hedgie himself, and he broke cover this week to explain why short selling is a good thing.
I have to say, some of his arguments were a bit short of compelling. Kamm claims that short selling draws market attention to badly-run companies, and thus allows capital to be moved into more productive uses. This "whistleblowing" argument in favour of short selling makes me pretty queasy. It seems as if the short sellers are claiming to be like the kid at school who constantly gets his classmates into trouble by ratting them out to the teacher. Nobody likes that kid, and nobody much likes the short sellers either. In any case, I can't see much current evidence that short selling is abetting the efficient allocation of capital. Lending has dried up regardless of how productive the use for the funds might be.
Kamm also said that more short selling might have prevented Northern Rock's unstable business model from falling apart to the point where the bank needed a massive public sector bailout. Hang on though: there were no restrictions on short selling when the Rock was getting into trouble, so the only lesson I can draw from this example is that short selling doesn't work in the way that Kamm claims it does.
* Lastly, a nod to good old Anatole Kaletsky, who has written two intemperate rants this week blaming the whole mess on Hank Paulson! What an imbecile! (Kaletsky, not Paulson, though I guess the jury's still out on poor old Hank). Suppose a guy goes out and gets drunk, then crashes his car into a lamp-post on the way home. If he then dies in the ambulance on the way to hospital, I guess Kaletsky will want to charge the paramedics with murder.
By the way, I have sent so many comments on Kaletsky's drivel to the Times website that they seem to have set their mail filter to prevent my comments from ever seeing the light of day. Bit of a badge of honour, that.
No comments:
Post a Comment