Short Selling - Argument in favour

Arturo Bris argues (Wall Street Journal, 29 Sept 2008) that the ban on short sales of financial shares should be lifted. We think that the argument is not convincing. The real question that would have to be asked is: what would have happened to the shares of financial companies if there would have been no short selling? The level of short interest that Bris quotes in the article is truly enormous (19.1 % of outstanding shares in March 2008!). We just cannot accept that this amount of short selling did not have a substantial influence on the level of share prices of banks and investment dealers.
That the market in shares where short selling has been banned after the Lehman collapse is now less liquid should not surprise anyone. It is only to be expected - and maybe desired - that there will be less trading when short sellers are out of the market. They are likely to be the most active market participants - some of them are reputed to have turned over their portfolio up to two times (!!) EVERY DAY.
For an interesting detailed rejoinder to Bris' argument you may wish to read a post on www.deepcapture.com. The blog also exposes the incomprehensible - not to stay stupid - attitude of the SEC with respect to abusive short selling.

Lenders still don't get it

InBev is borrowing $45 billion to finance its $52 billion acquisition of Anheuser-Busch. How can the banks justify this sort of lending given what is happening in the credit markets? One has to wonder on what planet management lives.

Third Runway at Heathrow

Every time I see the expression 'City Grandee' I must cringe as it immediately produces the image of a worthy but not very effective person that may well be past his prime. The recent newspaper ad in favour of another runway at Heathrow Airport that was sponsored by an assortment of businesses created a similar effect. Worthy but way off mark. If the price mechanism rations traffic at Heathrow there should be more than enough capacity to cater for business passengers. In the age of higher fuel costs and limits on pollution there is no need to accommodate cut-price shopping flights to New York.