Tuesday, July 15, 2008

Brett Favre: "It's all based on a rumor"

That was his response when he was asked if he was unretiring. It looks like the "rumor" was just a fact that not everybody knew when Brett was texting Ted Thompson.

It's the same with the banks and brokerage firms. As their balance sheets now stand, they're insolvent. That's not a rumor, it's a just fact. The SEC wants to stop rumors; because they don't want the facts to be disclosed at this period of time. They prefer it to be piecemeal.

And the facts are, the biggest liars haven't been the shorts, but the balance sheets!

Today David Trone suggested banning short selling:

Our question was prompted by a research report from David Trone, brokerage analyst at Fox-Pitt Kelton Cochran Caronia Walker, who suggested today that Lehman Brothers Holdings’ best hope of survival is to avoid the public markets completely. Trone endorses blocking short-sellers from brokerage sales completely: “We still believe that an emergency prohibition of short-selling in brokerage shares is imperative.”

Trone made his case thusly: Until the current crisis passes, short-sellers wouldn’t be allowed to borrow and sell stock in the brokerage sector, including Lehman Brothers, Merrill Lynch and Morgan Stanley. These companies, unlike regular banks, have “the unique vulnerability of a type of company that doesn’t have hard assets–it’s built on confidence,” he said to Deal Journal in an interview. Rumors “create an artificial impairment of the business” because the same people and firms that react to the rumors are the ones that are doing business with Lehman. Trone envisions the restriction lasting as long as, say, the Federal Reserve discount window is open to the investment banks. When the crisis passes, the window closes and short-sellers can roam free once more.

“Desperate times call for desperate measures,” Trone said. “When London was bombed, they had to turn the lights off.”

Trone says the borrowing of the stock is a mechanical process that is tracked and is recorded and can be monitored. He reasons that, if you bar short-sellers from the brokerage sector, you would have a more balanced free market: “You’re free to sell the stock if you already own it. The true purpose is to have balance in the marketplace. Around 90% of the time the short-seller is taking that step based on the fundamentals of the company.” That isn’t true in this case, Trone says.

Trone isn’t arguing for a general prohibition of the short-selling practice. There once were limits, contained in the so-called uptick rule that banned shorts from selling their shares while a stock was falling. That rule was in place from 1929 through 2007.

Still, his proposal is just one of several in discussion designed to tackle the apparent influence of short-selling rumors. For some, the ideal solution would be the enforcement of laws already in place concerning rumor mongering; technically, it is illegal to talk down a stock while profiting on its demise

Rumor mongering? Remember the flashing colors warning of terrorist alerts? I guess "fear mongering" is a legitimate political tool, but now the shorts are the "rumor mongerers" as they point out the lies of the banks and brokers.

It would of been nice to not be deceived by Wall Street, but eventually prices will get to a point when fear won't knock down the stocks anymore.

But we're not there yet.

Wall Street is still rumoring that everyone is "well capitalized!

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