Chart of Day: Short Ban ‘Mother of All Squeezes’
click for ginormous chart
Bloomberg:
The CHART OF THE DAY shows the jump in short interest this
year in the six worst-performing financial shares in the S&P 500
– American International Group Inc., Washington Mutual Inc.,
National City Corp., Genworth Financial Inc., XL Capital Ltd. and
Wachovia Corp. — along with the percentage of each company’s
shares available for trading that were sold short at the end of
August. Short interest is set at 100 on Dec. 31.WaMu, the Seattle-based savings and loan that’s seeking a
buyer, had 26 percent of its float sold short, the highest among
the six, exchange data compiled by Bloomberg show. Cleveland-
based National City’s short interest increased the most, rising
451 percent to 166.1 million shares, or 22 percent of the float.>
Source:
SEC Spurs `Mother of All Squeezes’ With Short Ban: Chart of Day
Michael Patterson and Alexis Xydias
Bloomberg, Sept. 19 2008
http://www.bloomberg.com/apps/news?pid=20601109&sid=auIOzkxys10U&
September 22nd, 2008 at 11:37 am
Does anyone see a nasty short squeeze also developing in gold, oil and other commodities? Bailoutville is in full swing.
September 22nd, 2008 at 11:39 am
BR,
I broke my discipline and didn’t short at the close Friday because I didn’t know what the short-selling impact would be. I’m paying for that in lost opportunity today (check my comment from Friday).
Now, what’s really scary to me is that, because I missed my entry point, I will not break discipline twice and short today if it calls for it. Knowing my luck, the sell-off accelerates and I miss a big payday thanks to Hank Paulson.
Hard to play the game when you’re not sure what the rules are…
September 22nd, 2008 at 11:41 am
A random observation/recommendation:
http://bobandted.blogspot.com/
is quite informative and is now my third daily finance visit on a daily basis. They don’t post every day, and there is little to no comment traffic, but this is one of the best blogs around.
My current top three are:
1. The Big Picture (stories _and_ comments)
2. Mish (globaleconomicanalysis) (stories only)
3. Bob/Ted Forex Blog, mentioned above
Barry – thank you very much for keeping the comments section clear of the “firsts” and other meta-talk cruft. It really is a distraction on CR and Mish.
September 22nd, 2008 at 11:44 am
Short squeeze in commodities? Maybe, but demand destruction is also in full swing.
September 22nd, 2008 at 12:02 pm
A commodity short squeeze will depend on whether or not the inflationary countermeasures are successful. Bernanke and Paulson believe that a deflation can always be defeated by governmental inflationary intervention, but this is a non-proved theory – inflationary intervention may only (and most likely will) only create a new treasury bubble.
September 22nd, 2008 at 12:19 pm
I want to buy but with the no short rules in place how do you know what the true price of anything is? So I will be waiting until the rules go back to normal. My guess there are many traders/investors that feel the same way.
September 22nd, 2008 at 12:21 pm
I don’t even know where you would have a concern about a short squeeze on commodities, at least for oil and other fossil fuels. Higher oil prices are against the interests of the current regime, at least until Election Day. If anything, I would look for the government to ban going long on crude.
Enjoy Larry Kudlow’s version of a free market.
September 22nd, 2008 at 12:44 pm
I am sure all those who flocked to treasuries last week don’t have kind words for the developing situation.
September 22nd, 2008 at 12:45 pm
It’s incumbent upon anyone who watches CNBC on a regular basis to prove that they do not have shit for brains. Alas…this, too, falls in the category of being a “non-proved theory.”
September 22nd, 2008 at 12:54 pm
Leftback,
I will bet you another burger that we close lower on Friday than today.
Now no cheatin’ this time…I know that was all your money for the last hour Friday, and they had a video on CNN of all those bankers wheeling all those wheelbarrows in and out of your office Friday…frankly I would think a guy as sharp as you would just transfer all that money electronically.
And whoever that was who said Paulson looked like Skeletor…dern you. Everytime I see him now, that is the first thing I think of…my own father, seeing me in the newborn nursery, was said to have muttered,”Looks more like our ugly postman than me”…so I know that cosmetically challanged people can get by in the world.
Please hold your comments about looks in the future.
September 22nd, 2008 at 12:58 pm
Not sure if this chart reveals some critically needed info. Clearly shows multiple increase in the level of shorts YTD but much of these additional positions could be hedged via issuance of equity linked derivatives, listed and OTC. Perhaps a better chart would illustrate the impact of the “No-short financial” (SI indexed) of Friday’s performance to a OK-to-short list.
“Constructive shorting” (for liquidity) is a valuable asset for price discovery and blanket oriented policies are likely to backfire and distort free markets. The market making functions for traders in ETFs, options, convertibles, etc. requires the ability to short in order to keep markets efficient.
September 22nd, 2008 at 1:05 pm
Well…we wrote this weekend that the best trade out there to buy gold/energy and sell the SP500.
Indeed.
We are stuck in a very difficult spot. Either the taxpayers bailout Wall St. or we create hyperinflation to payoff the debts. Why do I feel like the the average American is going to get totally SCREWD here?
- AT
September 22nd, 2008 at 1:13 pm
ah, take a look at fed and dsl. fed has had the best run of any bank and dsl hasn’t done much. they’re both california opt-arm pups. si is ~90%. take a look , barry
September 22nd, 2008 at 1:22 pm
Paulsen = Mr. Burns from the Simpsons. That’s all I have today. Too shellshocked to add anything of value. Still reading everything though. Love this blog.
September 22nd, 2008 at 1:29 pm
Further on demand destruction — China reduces oil imports 10%:
http://www.nakedcapitalism.com/2008/09/chinas-sinopec-to-cut-oil-imports.html
September 22nd, 2008 at 1:31 pm
I do think before you are convinced this bailout will work…just remember a few short weeks ago…a “stimulus package”, Hank’s idea, will set it right…just a few short weeks ago.
Now, where, pray tell did that money go? Do I hear a giant flushing sound?
September 22nd, 2008 at 1:38 pm
And what happened to the options contracts on these same shares?
September 22nd, 2008 at 1:42 pm
Why do I feel like the the average American is going to get totally SCREWD here? AT
AT:
maybe it’s because the average American has been watching the wrong game, and thinks that the new, to him, ol’ adage: “If you can’t figure out who the sucker is, at the Table, then it’s you”, only applies to Poker ?
or, differently: That You’ve been paying attention, because you Know(-ledge), if you don’t, it’s gonna cost ya.
September 22nd, 2008 at 1:53 pm
@Byno: I did the same as you, didn’t want to play the market AT ALL until I knew what the f****ing new rules were so I just stayed long GDX. At least that is working, but like you I missed a nice payday on the short side. Still, can’t complain when you’re making money.
@Bruce in TN. Yes, I was a bit late to the office today as I had to go by the used Lamborghini place to pick up my new ride after last week’s big score. So you are doubling down on the burger bet, eh? I was expecting a pull-back today so I would probably take that bet right now, based on the technical picture I see. Let’s see where we close, I have to give a lecture so will get back to you about 5. By the way, Sergio Garcia is a rented mule. Kim was tremendous.
@AT: Totally agree that gold and oil were the play on Friday. Do you think a $7 pop in oil is overdone, probably get a pullback after supply data on Wednesday? Oil stocks are remarkably soft on the day despite the oil price.
September 22nd, 2008 at 1:53 pm
rww – thanks, that is useful. The question I would have is whether the demand destruction is temporary and largely due to current high refinery utilization, as opposed to actual demand destruction at the Chinese consumer level. Both Sinopec and PetroChina are undertaking huge refinery capacity expansion projects:
http://www.tradingmarkets.com/.site/news/Stock%20News/1894706/
One sure thing I have learned during the tumult in the financial markets: Bruce sure likes his burgers
September 22nd, 2008 at 2:04 pm
Actually Bruce just likes to buy burgers, and I eat ‘em, mostly.
Just got into EWZ, it tends to follow oil up late in the session. If we bounce here, the oil stocks and oil-heavy indexes will lead.
Based on rww above, thinking about getting some DUG tomorrow ahead of the Wed inventory numbers as oil stocks will probably get a pop today and tomorrow.
Thanks to Karen for helping me to see the light and getting me out of Treasuries and into gold, saved me $$$$
The D-train™ seems to have run into a $700B speed bump.
September 22nd, 2008 at 2:07 pm
i got my bum squeezed a little on friday too. and not only at happy hour…
September 22nd, 2008 at 2:10 pm
Jim Cramer is blazing new trails when it comes to being a scumbag. He just wrote a piece entitled, “The Sell Call Still Applies”. The unstated purpose of the piece is to create the appearance that he’s been on the right side of all this, when in fact he’s been pulverized (well, his cult followers have been). Let us recall the title of his macho, attention-grabbing piece about six weeks ago: “That’s Right, You Heard Me, That Was The Bottom”. He is truly the biggest creep in all of finance.
September 22nd, 2008 at 2:10 pm
I also got into Gold on Thurs/Fri/today. Have been in energy stocks for a while. That trade appears to be back on for now as well thanks to the noise on the bailout.
What to do now? Me-thinks buy more Gold in small increments.
September 22nd, 2008 at 2:15 pm
The Evolution of a Used-Car Salesman
August 1, 2007
BEIJING (Reuters) – “Treasury Secretary Henry Paulson said on Wednesday the repricing of credit risk was hitting financial markets, but U.S. subprime mortgage fallout remained largely contained due to the strongest global economy in decades.”
May 7, 2008
“In an interview with The Associated Press, Paulson said that the turmoil that has gripped Wall Street and took a turn for the worse yet again in March has eased somewhat. ‘There’s progress,’ he said. ‘I think we’re closer to the end of this than the beginning.’
July 21, 2008
‘Our banking system is a safe and a sound one,’ Paulson insisted on CNN’s “Late Edition.” He had earlier told CBS, the list of troubled banks would grow.
But ‘this is a very manageable situation … our regulators are focused on it.’
Sept 21, 2008
“Only $700B and worth every penny. Trust me.”
September 22nd, 2008 at 2:18 pm
leftback, glad I could be useful to someone other than myself!
i exited my FXE and have my order in on UDN. other than that, i’m buying nothing. i do not like this market. (also, so sorry to give you the thumbs down on EWZ.)
September 22nd, 2008 at 2:23 pm
@ Jeff M: My plan is to trade around a core position in gold stocks, and go in and out of energy to take advantage of the vol. I think we are in the commodity swing trade again. Hedgies have nowhere else to go and the short $ trade is on again.
At some point when yields reach a strong technical resistance I will creep back into Treasuries, but it may be a while before we all ride the D-train™ again, bro. Right now I am short the 10-year via DKXSX, will leave this on until we hit 4.00 I think.
September 22nd, 2008 at 2:44 pm
Karen,
You may be sharper than a bag full of needles. Like your idea. I will try a little as I contemplate my burger with all the fixins’
September 22nd, 2008 at 2:44 pm
Agreed Leftback, that is until the rules of the game are changed once again.
SRS having a nice 7.20 bump today. Added to prior positions and got in at 71-72 on Friday. Will it last? Who knows…….
September 22nd, 2008 at 2:44 pm
just want to clarify: i’m selling my UDN. may or may not trade around gold. i have zero trust that the markets can return to reason under the new rules.
agree that the 10 year and 30 should soar from these absurd lows but i won’t hold my breath or risk capital.
my plan for now is to keep the money i’ve made this year…
leftback, are you a professor at nyu?
September 22nd, 2008 at 2:53 pm
Karen:
Are you on Fast Money?
……..(grin)…
September 22nd, 2008 at 3:18 pm
hahaha
i was a bit early selling my fxe and udn.. still money in the bank…
so far $usd 76.25 has not halted the fall. never know what paulsen will pull out of his hat, though.
what if they halted ALL trading for a week?
September 22nd, 2008 at 4:49 pm
@Karen:
Not NYU. I’m not Roubini..
Not Stiglitz either. Just an enthusiast.
Economics isn’t exactly brain surgery.
September 22nd, 2008 at 5:04 pm
Do you speak French? I do. So….Fuck me sideways, I am making a lot of money, but I have no idea just how shitty the country we are destroying for our kids and grandkids is going to be. And I don’t really know where I’d rather live.
What I do know (and everyone who knows me has heard me rant about this for years) is that the debt monster we are leaving is wildly immoral. I’ll be surprised is the generations behind us don’t just kill us all rather than pay a dime for our care. And I’m not sure I blame ‘em. What a selfish bunch of assholes, from those my Dad’s age right on down through my age and younger (I’m 51). We, collectively at least, are thieves. With any luck the Chinese will need domestic helpers…..
September 22nd, 2008 at 5:56 pm
Anyone,
If things get worse, is there a respectable chance the government might bar short selling across the table ala pakistan, china ?
any precedent in the States ? TIA
September 22nd, 2008 at 8:26 pm
@ steve r
Look what banning all short selling got Pakistain – market has gone down 20%
It will be a tough sell to ban all shorts if the financials continue to deteriorate in the face of the ban.
In additions the broker dealers are all losing money on the ban as many refuse to trade without the ability to hedge their positions. Extending the ban will ensure people ONLY trade commodities.
Either the economy is WAY better than i thought or we are going to be in a depression next week. Cramer actually recommended buying gold. Ususally when he recommends going long something, BSC, LEH, financials, i either sell or short. Usually when he makes market calls i assume the exact opposite will occur – how many times have we “put a bottom in” since last August?
So imagine my confusion when he states “go long gold” and i already am. Further, instead of selling i want to add to the position.
What is a girl to do….
With respect to kudlow, his final statements tonight prove that you don’t need to take crack to be on crack!