When I heard that the SEC was going to shake its proverbial finger at short sellers and threaten to do its job, I didn’t exactly rush to see who was on the “Sacred Cow” list. No brainer, right? Big regional and money center banks, the shakiest of the investment banks. I really would have thought that I could have guessed about 15 of the 19 names off the top of my head.
Then, I saw the list.
| Company | Ticker Symbol(s) | YTD % change |
| BNP Paribas Securities Corp. | BNPQF or BNPQY | -15.8 |
| Bank of America Corporation | BAC | -33.4 |
| Barclays PLC | BCS | -36.8 |
| Citigroup Inc. | C | -34.3 |
| Credit Suisse Group | CS | -26.1 |
| Daiwa Securities Group Inc. | DSECY | -2.0 |
| Deutsche Bank Group AG | DB | -31.1 |
| Allianz SE | AZ | -16.7 |
| Goldman, Sachs Group Inc | GS | -15.0 |
| Royal Bank ADS | RBS | -54.6 |
| HSBC Holdings PLC ADS | HBC and HSI | -5.7 |
| J. P. Morgan Chase & Co. | JPM | -8.3 |
| Lehman Brothers Holdings Inc. | LEH | -70.8 |
| Merrill Lynch & Co., Inc. | MER | -42.4 |
| Mizuho Financial Group, Inc. | MFG | 10.7 |
| Morgan Stanley | MS | -27.4 |
| UBS AG | UBS | -47.5 |
| Freddie Mac | FRE | -73.1 |
| Fannie Mae | FNM | -66.5 |
Humph, I’ll take “foreign investment banks I don’t give a crap about” for $600, Alex.
Suddenly, I don’t feel so dialed-in anymore. No Wachovia (WB)? No Washington Mutual (WM)? Apparently, I don’t run in the right rumor-mongering circles. Obviously, some of our naked, short-selling sleaze-balls are trying to destroy financial institutions not even domiciled in the US (and no one invited me).
I mean, dog piling on Fannie and Freddie is one thing; they never made sense (GSE?) and they’ve got silly names, but they’re as American as government subsidized corn to make inferior fuel programs. It’s our right to trash them. But, these companies are “guests” on our exchanges, and we should be extra nice to them. This must be a public relations nightmare for Christopher Cox. How much damage have these maniacs done?
| Company | Short Interest % | Outstanding | Shares Short |
| BNP Paribas Securities Corp. | 0.03% | 895,300,000 | 275,300 |
| Bank of America Corporation | 2.28% | 4,452,783,993 | 101,494,900 |
| Barclays PLC | 0.26% | 1,633,674,505 | 4,207,800 |
| Citigroup Inc. | 2.90% | 5,249,833,103 | 152,024,700 |
| Credit Suisse Group | 0.13% | 1,013,515,969 | 1,349,600 |
| Daiwa Securities Group Inc. | 0.01% | 140,470,000 | 20,900 |
| Deutsche Bank Group AG | 0.48% | 500,400,000 | 2,383,300 |
| Allianz SE | 0.06% | 4,523,500,000 | 2,522,700 |
| Goldman, Sachs Group Inc | 3.47% | 416,380,000 | 14,461,000 |
| Royal Bank ADS | 0.06% | 9,489,300,000 | 5,279,800 |
| HSBC Holdings PLC ADS | 0.25% | 2,365,810,463 | 5,970,500 |
| J. P. Morgan Chase & Co. | 1.62% | 3,426,631,526 | 55,601,200 |
| Lehman Brothers Holdings Inc. | 10.13% | 694,401,926 | 70,312,700 |
| Merrill Lynch & Co., Inc. | 5.89% | 982,799,330 | 57,896,700 |
| Mizuho Financial Group, Inc. | 0.03% | 5,695,846,500 | 1,854,700 |
| Morgan Stanley | 3.28% | 1,109,013,816 | 36,342,600 |
| UBS AG | 0.71% | 2,012,018,718 | 14,385,100 |
| Freddie Mac | 11.69% | 661,550,000 | 77,349,000 |
| Fannie Mae | 14.29% | 982,319,990 | 140,374,000 |
| Total (ex-Fannie & Freddie) | 1.18% | 44,601,679,849 | 526,383,500 |
Not so much, actually.
Fannie and Freddie are excused from this discussion. Let’s focus on the other 17. On July 11, 2008, Bespoke Investment Group reported that the short interest of the S&P 500 was 6.0% (percentage of float), yet the Sacred Cows have a cumulative short interest of just 1.18% (percentage of outstanding – I’m not making another table). Is that really cause for concern? Maybe Barry Ritholtz is right and there are alternate universes at work here. In my universe, 1.18% short interest is no great shakes.
I can understand giving Lehman and Merrill some shelter, even if it’s just enforcing the laws that should be enforced. But Goldman? Why are the “smartest guys on the street” hiding under mom’s apron? They should just buy puts on themselves, make billions and squeeze these cretins until their eyeballs pop; they’ve pulled similar stunts, right?
Do they all belong to a Secret Club or something?
Don’t be silly. Their club’s not a secret and two of the sacred 17 aren’t members (as far as I know). 15 of the 17 (88%), however, are members of the London Bullion Market Association. Only Japan’s Daiwa Securities Group and Mizuho Financial Group are not listed LBMA members. It’s a pretty exclusive club of 120 members (if I counted right). So, 12.5% of the membership just showed up on the SEC’s enhanced investor protection list. Sure, it seems a little weird, but it’s important that the SEC take action to prevent things like what just happened to Indymac. I feel a lot more confident about Wachovia (12% short interest) already, don’t you?
Fun Facts: Most of the gold traded in the world takes place in the over-the-counter [OTC] markets and the London Bullion Market is by far the biggest OTC market in the world.
Let’s review, the SEC has decided to shield a bunch of mostly non-American financial institutions from short sellers (who have shown little interest in shorting them) in order to stabilize our troubled banks, by remembering that it has laws it should be enforcing, because if the institutions that are already safe are assured safety, then the ones in peril should be OK too (trickle down). And there’s nothing weird about that.
Additional sources: Shortsqueeze.com, Google finance.
