Short sale bans have been implemented across the world, yet oddly most stocks across the world have continued to fall... strange. We suspect that perhaps stocks fall because they aren't worth as much as they used to. Or at least that there is serious risk/uncertainty that they won't be. Thus maybe rather than ban short sellers, perhaps we should be asking them for more detail on WHY they are selling various companies short... we might learn something from these evil market participants.
Pershing Square manager, and professional short-seller, William Ackman makes this point below, having this to say about the SEC banning short sales:
One regulator, which Ackman believes has not done the right thing, is the SEC. He criticized its temporary ban on the short selling of financial stocks and a handful of other troubled companies, saying it did "more to destroy investor confidence than any other action taken by the SEC in the past five months." He called the move a "market manipulation at the behest of the SEC." He went even further to say that the SEC would be best to ask the short sellers which companies they are targeting to help sound the alarms on shaky companies.
"People that identified problems should be heralded or at least listened to," he added.
The activist investor also divulged his new long investments, Wachovia Corp. and American International Group Inc. He noted that the two embattled company's are his first financial sector long investments in five years.
I agree, short sellers like Ackman probably have a lot of things to say about what problems might arise next. Perhaps we shouldn't take away their incentive to spot landmines. Some short-selling on US housing prices (let's just imagine) three years ago might have reduced the extent of the bubble and the damage it caused. It's better to learn of problems bit by bit before everything explodes, rather than get sudden huge surprises from banks once they can no longer hide the damage. Banning short sales in the belief that it will cure market malaise is similar to banning doctors who provide negative diagnoses to their patients and thinking that somehow this will cure cancer or at least lessen the damaging effects of disease. We can run wild with similes.
Article link here but requires subscription to TheDeal.com.