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How's That Short Sale Ban Working Out?

Tyler Durden's picture




 

A month after the short sale ban was implemented in French and Spanish banks, we thought it important (and perhaps educational for our European politician readers) to note the performance - French banks are down 14% and Spanish banks -8%. Can we finally put to rest the idea that a speculative cabal of mean short-sellers is responsible for the market's jitteriness? Perhaps it is simply a market trying to discern reality from manipulated machinations?

Chart: Bloomberg

On a broader basis, Senior Financials in Europe trade 90bps wider at 319.5bps since the short-sale ban began, Subordinated Financials are 164bps wider at 558bps. Single-name financials performance since the short-sale ban began include UniCredit +165 to 495bps, Intesa Sanpaolo +150 to 455bps, Banca Monte de Paschi +147 to 555bps, SocGen +147 to 447.5bps, Credit Agricole +116 to 335bps, and Banco Santander +52 to 350bps

 

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Mon, 09/12/2011 - 09:18 | 1659207 D.O.D.
D.O.D.'s picture

ummm no, it's mean speculators... everyone knows mean speculators run the show...

Mon, 09/12/2011 - 09:54 | 1659309 MillionDollarBonus_
MillionDollarBonus_'s picture

The short sale ban didn't work out because there are many weak-minded and cowardly investors already holding stocks who are now deciding to sell. This is why I have repeatedly emphasized that stocks should only be priced by PROFESSIONALS. Regular investors are simply incapable of recognising the value of equities, and are punishing those of us with the maturity and courage buy and hold for the long term. If this isn't PROOF that free market pricing is disastrous I don't know what is.

Mon, 09/12/2011 - 10:11 | 1659397 topcallingtroll
topcallingtroll's picture

Hi Hamy!

Mon, 09/12/2011 - 11:45 | 1659818 AldousHuxley
AldousHuxley's picture

Shorting = profit going to somebody; at least the states can tax such profit and wealth is just transferred rather than erased

Shorting ban = pie is shrinking and it hurts everyone except the status quo of incompetent executives

 

Shorting/puts is your insurance against ponzi scam fraud

 

Any wonder why 401ks don't have net short funds?

Mon, 09/12/2011 - 12:30 | 1659956 johansen
johansen's picture

ROFLMAO!

Tue, 09/13/2011 - 04:25 | 1662818 La Guillotine
La Guillotine's picture

This is what the herd is, weak minded and cowardly.  If you are convinced that this sell-off is incorrect then you should welcome it as an opportunity to buy more.  This is Buffet's mantra but don't forget that his mentor lost his shirt in the '30s.

Mon, 09/12/2011 - 09:18 | 1659210 speconomist
speconomist's picture

Dead cat bounce lasted 3 days? Woah!

Also Santander looks like the less weak link of all of them.

Mon, 09/12/2011 - 09:21 | 1659222 Theta_Burn
Theta_Burn's picture

Hmm... Santander bought out soveriegn bank (my bank) here in the NE US awhile back should i have concerns?

Mon, 09/12/2011 - 09:21 | 1659225 Lobbelt
Lobbelt's picture

If one of them looks good, it's because we don't know what's wrong with it _yet_.

Mon, 09/12/2011 - 09:24 | 1659242 speconomist
speconomist's picture

Didn't mean looking good, meant looking less bad, AFAIK diversifying into Brasil some years ago was a good choice for them and has become the main source of profits for them.

Mon, 09/12/2011 - 09:23 | 1659240 Transitory Disi...
Transitory Disinflation's picture

I cleaned out my santander account and was quizzed at the counter.  I spoke really loudly so everyone could here me in the room.

I said your bank will soon fail and I am buying gold.

 

I got some funny looks.....

Mon, 09/12/2011 - 09:31 | 1659270 GeneMarchbanks
GeneMarchbanks's picture

FYI they speak Spanish in Spain, hence the funny looks.

Mon, 09/12/2011 - 09:22 | 1659228 Josh Randall
Josh Randall's picture

I've been shorting peas

Mon, 09/12/2011 - 09:22 | 1659229 Gandalf6900
Gandalf6900's picture

excuse me...we italians feel left out and ignored by your latest study...please update

Mon, 09/12/2011 - 09:56 | 1659331 snowball777
snowball777's picture

Don't you have an auction to...oh...never mind.

Mon, 09/12/2011 - 09:22 | 1659230 PaperBear
PaperBear's picture

Is it time to ban normal selling ?

Mon, 09/12/2011 - 09:29 | 1659265 scatterbrains
scatterbrains's picture

I'm curious what was the total dollar amount of short interest on one of these banks just before the ban vs. the dollar size of it's cds ?

 

Mon, 09/12/2011 - 09:22 | 1659231 Gordon Freeman
Gordon Freeman's picture

"Can we finally put to rest the idea that a speculative cabal of mean short-sellers is responsible for the market's jitteriness?"

--No, we can't...

                J.C. Trichet

Mon, 09/12/2011 - 09:23 | 1659234 GeneMarchbanks
GeneMarchbanks's picture

F A R C E

Mon, 09/12/2011 - 09:23 | 1659235 Construct
Construct's picture

Tyler,

Your fault is that you are 'logical' and 'educated'. Your counterpart is not.

Mon, 09/12/2011 - 09:51 | 1659313 SofaPapa
SofaPapa's picture

Good point.  TD's analysis ignores one of the more "human" dimensions of this decision.  I'm guessing somewhere down in their pious Keynesian souls, they also tell themselves as they go to sleep at night, "It's immoral for someone to profit on systemic failure!"  In other words, there are emotions at play here that have nothing to do with attempting to promote an efficient market, but rather a "moral" one.  Dumb, but very human.

Mon, 09/12/2011 - 09:23 | 1659237 hedgeless_horseman
hedgeless_horseman's picture

La fin est proche!

Mon, 09/12/2011 - 09:24 | 1659244 LawsofPhysics
LawsofPhysics's picture

Just raising the bar Tyler, just raising the bar.  TPTB are eating their own as everyone now wants to buy the world for pennies on the dollar.

Mon, 09/12/2011 - 09:29 | 1659266 MsCreant
MsCreant's picture

Pre-1982 pennies are made of copper. Dollars are made of linen. Sounds like the sellers should go for the pennies.

Mon, 09/12/2011 - 09:41 | 1659289 tmosley
tmosley's picture

Well said.

I would rather have the zinc even than the linen.

Nickels are nice as well, as there is (more or less) only one composition of those, so no need to sort.

Mon, 09/12/2011 - 09:25 | 1659248 johngaltfla
johngaltfla's picture

To quote the Guiness beer commercial:

BRILLANT!

http://youtu.be/2K8Osz9RnvY

Mon, 09/12/2011 - 09:27 | 1659253 Peter K
Peter K's picture

But if there was no short selling ban, the speculators would beat the real money selling the crap. Then how could the stupid money (bureucrats) get out of their positions? ;)

Mon, 09/12/2011 - 09:27 | 1659258 SheepDog-One
SheepDog-One's picture

Ban selling of everything!

Mon, 09/12/2011 - 09:41 | 1659290 tmosley
tmosley's picture

Only buying is allowed!

lol

Mon, 09/12/2011 - 10:00 | 1659352 Construct
Construct's picture

 

Indeed ban selling, period. also make a rule that anyone who write comments on blogs such as ZH lose their jobs behind their back by using intelligence agencies to spy on everyone here and then contacting their employees behind their back.
Mon, 09/12/2011 - 09:37 | 1659281 Monedas
Monedas's picture

Greece up your hungry butts and whet your thirsty rectums ! Monedas 2011 I'm not sure what that means.....I just liked the way it rolled off my tongue !

Mon, 09/12/2011 - 10:02 | 1659360 antisoshal
antisoshal's picture

Seems to me it worked perfectly as planned. The fact that they have ONLY lost 14% in the past month indicates that. Short selling probably would have devalued them to 20% of their initial value by now. It seems ZH has gradually become the functional opposite of CNBC: Hapless cheerleaders for a poorly intellectualized agenda. The logic present in many of the headline posts now is inexplicable. One article proclaims how worthless and bankrupt said banks are, the next proclaims that banning short selling didn't work because said banks are down 14%.

Mon, 09/12/2011 - 10:07 | 1659380 topcallingtroll
topcallingtroll's picture

And the reason greek bonds keep falling in price and demand had gone down is because of short sellers and speculators.

Those meanies!

Mon, 09/12/2011 - 10:24 | 1659452 TheGameIsRigged
TheGameIsRigged's picture

Amen to all of this, brother.  When the mkt goes up on no news...it's ALWAYS good.  When it goes down.....OOOOOOOOHHHHH..  there MUST be a short-selling conspiracy.  Go F yourselves....this is what is called "capitalism and free mkt movement"  Stop the BS!!!!

Mon, 09/12/2011 - 11:05 | 1659621 The Count
The Count's picture

Hey while were at it, lets make lemon faces, morning breath and bad driving illegal!

 

Mon, 09/12/2011 - 11:09 | 1659639 FunkyOldGeezer
FunkyOldGeezer's picture

Ah, but how much lower would they have been with no shorting ban, that's the question?

Tell, me, do you really want a world where anything goes? ANYTHING, no matter how repugnant, no matter how destructive, no matter how divorced from true investing ideals?

If people had to buy into real assets and people invested for more than five nanoseconds i.e they properly bought into the commodity, stock whatever for the right reasons with the idea of their investment making a difference to the underlying asset's ability to perform it's true, proper function  I wouldn't have much of a problem, but when selling becomes a rout because betting against becomes a self fulfilling prophesy, fuelled by greedy, unethical, amoral financial pirahnas, then I have a problem. Feeding frenzies are not a pretty sight.

It really is one thing to own assets and then sell if the going gets tough and completely different just to sell them (a) 'cos you can and (b) just for the hell of it.

That markets have become SO detached from their proper function is a total disgrace.

 

Mon, 09/12/2011 - 12:11 | 1659889 bid the soldier...
bid the soldiers shoot's picture

"Ah, but how much lower would they have been with no shorting ban, that's the question?"

Right on the button, Funky

And then ask yourself how much worse things would be today without QE, monetization and Bernanke? What's happening today could have kicked us in the balls over a year ago.

Hey, but don't think of that. Just daydream about where to spend the profits when gold hits $5000..

Tue, 09/13/2011 - 04:43 | 1662823 La Guillotine
La Guillotine's picture

Probably not much lower.  This short seller was well short way before it all hit the fan and those permanently behind the curve politicians decided they needed to "do something".  I would say most short sellers were unaffected. 

There is no difference to the life you lead and the life of wild animals in the veld.  It is a game of survival of the fittest and anything goes.  To assume any different is to place your head on the block.

True investing ideals?  This is a bit like telling a hyena to play fair.  We are no different.

Mon, 09/12/2011 - 12:31 | 1659928 bid the soldier...
bid the soldiers shoot's picture

PAY NO ATTENTION TO THAT FURRY URSA MAJOR BEHIND THE CURTAIN.

"A BEAR RAID is an attempt by traders to drive down price of a security by heavy short selling. The selling may be accompanied by the spreading of (negative) rumours.

Once the price falls, the traders can cover short positions cheaply.

Once they have built long positions, they then wait for the price to recover and sell at a profit.

A bear raid is usually carried out by a group of traders working together - a single trader is unlikely to be able to sell enough to drive the price down. Even if a single trader could force the price down, the manipulation is likely to be more apparent to regulators who could trace the selling to a single source.

Bear raids are (obviously) a form of market manipulation and illegal in most of the world (except in large financial districts)."

Mon, 09/12/2011 - 13:13 | 1660095 prophet
prophet's picture

Not so much to protect against further decline but to be sure no one new profits from a further decline. 

Mon, 09/12/2011 - 13:30 | 1660154 ghostcommander
ghostcommander's picture

With "naked" and regular short sales tied with CDS, the door is open to malicious propaganda/rumors that can bring a company down.
Also, with the above, money can be made on the way down. Therefore guaranting that those involvede are "too big to fail" That did not work out very well when the "Housing Fraud Bubble" burst bringing on the almost financial market collapse and then the Great Recession.

KISS-keep it simple stupid. If someone wants to make money in the stock market, let them do it the old fashioned way by earning it.
Buy low and sell high without these destructive tools.

Mon, 09/12/2011 - 15:06 | 1660667 MrBoompi
MrBoompi's picture

Seems to me the short selling ban was never intended to keep the stock prices up, but as a way to prevent even amateurs like me from making easy money.

 

 

Tue, 09/13/2011 - 04:52 | 1662827 La Guillotine
La Guillotine's picture

The short selling ban was intended to show the voting public that the government was doing something no matter how pointless in reality.  Then with near complete control of the main stream media these actions can be spun so that the government is presented as indispensible and certainly worth every cent in tax spent.  This is a very rational response to the situation given that politicians know they are in the bullshit industry.

Tue, 09/13/2011 - 22:00 | 1665989 moxia19
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