Financial Terrorism of the Real Kind?!

Thursday Jim Cramer got some attention for raving about "financial terrorism" on TV. he was referring to shorts, but it seemed pretty clear that he was just talking about uber-aggressive short sellers, not actual terrorists, the 9/11 kind. But alas, some people do think that financial terrorists are the 9/11 kind. And I'm a little surprised to see - Ok, I have to say that I'm more than a little surprised to see - Barry Ritholtz airing this theory

I had an interesting phone conversation with Joe Besecker of Emerald Asset Management. (We used to do schtick together on Power Lunch, and made for an amusing financial comedy team).

But Joe is a good money manager, a great stock picker, and a thoughtful guy. He raised an intriguing issue: None of the many hedgies he knew were pressing their bets recently. The bear raids on the banks and brokers were NOT a case of piling on by US based hedge funds. And from what he was seeing and hearing about in terms of order flow, the vast majority of the financial short selling the past week or so were being done overseas. It appears that the lion's share of shorting was coming out of overseas bourses such as London and Dubai. It may not be a coincidence that the financial short selling ban is both here and in London.

Then there is another coincidence: The huge increase in shorting of the financials occurred on the anniversary of 9/11. And on top of that, the same institutions attacked on 9/11/01 were the ones suffering in recent days.

 Sounds pretty, well, crackpotish. But then there's this:

Anyway, it's an interesting theory, one that seemed kinda out there -- until last night's emergency action. Nothing else really explains the insanity of banning short sales -- except for Joe Besecker's questions.

So you have a ridiculous action taken by the Fed (insane, even), but then you come up with a way to justify it by using an even more ridiculous theory.

And question: If you were a true financial terrorist, hellbent on destroying the US economic system, wouldn't you go after true mainstreet names, like Wells Fargo (WFC) and Citigroup (C), rather than narrowly training your "attack" on Goldman (GS) and Morgan (MS)?

Comments

[ritholtz:]

You omitted this paragraph:

"Joe asked the question: Is anyone investigating whether this is a case of financial terrorism? He wanted to know if someone was at least looking into this question (Joe is buds with Jim Cramer, and mentioned it to him, who then omitted to cite in his column that this was Joe's theory, not his own)."

Cramer took the idea from Joe

2008 Sep 22 03:38 PM

[Critical Th...:]

Another possibility: The Federal Reserve, and its masters, intended this crisis to occur. They made easy money available for years in an era of lax regulation with the knowledge that unwise lending and investment practices would result.

Their motive? A weaker America enhances the power of their masters.

2008 Sep 30 02:33 PM