Matt Blackman

Playing for a Bounce?

Greg;
Interesting article but it is clear from your last comment on the SEC's recent action "banning" naked short selling that you do not understand what naked short selling is. It is ludicrous to make the statement that by banning the practice which was "banned" in January 2005 with the Regulation Short Sales rules (RegSHO) that the government is "making it illegal for stocks to go down."

However, for some reason, the SEC decided not to enforce the RegSHO rules until recently.

Naked short selling is the destructive practice of selling a stock short without having to first borrow it like everyone with the odd exception of market makers, brokers and hedge funds have to do.

This action by the SEC does not "make it illegal for stocks to go down" as you state, it makes it illegal for those who short stocks to do so without having to first borrow the stock. This practice by the way, effectively allowed those few players the ability to counterfeit the stock which hurts everyone. I explained naked short selling in my March 23, 2007 newsletter at tradesystemguru.com/co.../

There was an excellent 25 min documentary done by Bloomberg in March 2007 entitled Phantom Shares that everyone should watch (which hopefully still works). The link can be viewed at the bottom of the page at tradesystemguru.com/co.../

I don't dispute the fact that with its recent action the government has crossed a dangerous moral hazard threshold in socializing markets but let's not start making charges that simply aren't true.