Off Duty

I went away in the mud and the rain
The gang became snide and laughed
I was slayed and I smiled and the pain
Began to subside at last
--Pete Townshend

Not long after Minyan Peter suggested that we're running out of lifeguards w.r.t. transferring risk, chatter came out of Europe that regulators are going to curtail shortselling.

I recall when martial law against shorts was similarly declared in US markets in September 2008. After an initial short covering pop, markets came to rest about 30% lower six months later.

Bans on short selling never work. First, shorts are not the 'problem' when prices are declining. Market forces are merely punishing poor decisions made in the past. Second, shorts provide a layer of liquidity and support for prices when projects are covered. That buying power disappears when shorts are removed from the game. We noted as much back in Sept 08.

Just another in the long line of unintended consequences spawned by bureaucratic intervention.

Would 'think' we'd get a pop somewhere around here (although US markets went south on the chatter this afternoon). If they do pop, then I would think that bears might want to express their bearishness in markets where shorting is (still) allowed (for now).

position in SPX