No Shorting. That's the Rule.
A long/short hedge fund manager of my acquaintance went to short some Morgan Stanley (MS) via a B/D that clears through Wachovia:
The Trader comes back: "Wait a second -- that's on the list -- I cant short that."
The Fund Manager says: No, I don't want to Naked Short it, we have already located a borrow -- this is a clean, legitimate short sale.
Trader: Nope, we clear through Wachovia -- and its on the list - NO SHORTING THESE 19 PRIMARY DEALER NAMES -- PLUS FANNIE AND FREDDIE -- AT ALL.
Fund Manager: That's ridiculous -- how can you not execute a legitimate borrowed short?
Trader: Wachovia. Dems da rulez. You have to go elsewhere.
Fund Manager: Consider it done.
~~~
>
Postscript: FM added to his Morgan short elsewhere, and initiated a new Merrill Lynch (MER) short. I don't know what it says about Wachovia that they won't even allow shorts in those names (deep doodoo??).
I am paraphrasing Jim Grant, but "Shorting is the financial world's equivalent of free speech."
Wednesday, July 30, 2008 | 06:00 PM | Permalink
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I think it's sad we've come to this. Were was the no shorting law in the dot com bust or the oil stocks that just got hit hard? Or how about any stock in my 401k fund.
But those don't jeopardize the whole economy like the banks due. So wait who's telling me I can't short them? Oh yeah the same guys that said they wouldn't jeopardize the economy with insured risk and let the Glass-Steagall Act get removed... Who's fibbing now???
Posted by: GB | Jul 30, 2008 6:15:54 PM
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