The NY Times had an article today that perfectly summarizes what is wrong with the SEC and the NY financial press.
I'd link it, but you have to be a subscriber to read it, so why bother?
The deck was completely stacked against any sentiment that was pro public or investor - Dave Patch wrote an eloquent summary that covers that nicely.
One of the pundits at the roundtable Norris sides with is Owen Lamont, who is on sabbatical from his day job to work for a group that seems suspiciously like a hedge fund - what a surprise that he is pro-hedge fund. No conflicts here.
As of July, he's on leave from Yale and working for DKR Fusion Management, LP, out of CT.
Nothing like a group of unbiased authorities, alright.
That is the guy who at the Senate hearing on hedge fund and analyst collusion, gave a 5 minute defense of how good hedge funds are for everyone and everything, ignoring the topic and the allegations of the damage done.
How does this guy keep showing up when he is not just in bed with the industry, but actually works for it?
Ask the SEC. Why not just have David Rocker and Steve Cohen show up? But anyway, I digress. Here's some of Floyd's fine work:
"But a roundtable of economists testifying before the S.E.C. last week produced an interesting idea: Make those who do not borrow pay the same, or more, than they would have had to pay if they did borrow. In other words, use the market to police the market. "
Gee. That's a great idea. Except of course that the cost to borrow will go down as more and more supply, genuine or not, hits the market, trashing the share price. I guess everyone forgot the old Econ 101 lessons about supply and demand. This proposal would be great for the bad guys - legalize their lawlessness, and then let the rigged market set the price for them to destroy companies by selling virtually limitless supplies of shares.
"That would require shining light on the market for borrowing shares, as was proposed by Owen Lamont, a finance professor at Yale who calls short sellers an "oppressed minority."
Yeah, an oppressed minority whose interests resonate with Owen because he works for Wall Street.
"Making everyone happy is impossible. Some economists, like Lawrence E. Harris, a finance professor at the University of Southern California and a former chief economist for the S.E.C., warn that restrictions on shorting can lead to overvalued shares, damaging the economy by leading to inefficient allocation of capital and depressed future returns for those who buy at the higher prices."
Huh. And who gets to decide what is overvalued and what isn't? If a group of hedge funds makes a bad bet on a company like NFI, and then spends two years destroying its share price to salvage their bloated short position, are they correct that it might have been overvalued, or are they merely engaging in stock manipulation to save their bacon for a while? Who gets to play God with the market, and decide from Olympus, what the right value is for stocks? In an auction market, that would be the public. In a manipulated sham of an auction market, that would be whoever runs the printing presses for counterfeiting shares.
Which is why we have legal short selling, versus illegal counterfeiting of shares without limitation. One is a legal bet to the downside, the other a manipulative trading strategy that has been employed and understood for at least 100 years. That's why it was the number one target of the 1934 Securities Exchange Act and the creation of the SEC.
I love how these guys act as though the revelations of the Pecora hearings never happened. How they pretend that the Milken scams involving massive insider trading, both to the downside and to the upside, never happened. How names like Elgindy and Valentine and Badian never sullied their ears.
This is pretty simple, Floyd. Allowing Wall Street to sell however many shares they like, regardless of what the company authorized to be issued, lets them effectively counterfeit shares, creating limitless supply. That will drop the value of the stock, as well as the borrow cost. Who would bother paying a higher borrow when they can simply pay whatever the going rate is to fail and crater the price that way? Our forefathers understood this when they created a regulator which was supposed to end forever the sort of shenanigans that contributed significantly to the destruction of a nation's net worth in the Thirties, and visited global depression on the planet for a decade. But now, the bright lads want us to forget all that, and roll back the rules that cost many their livelihoods and their lives. You know, so that some hedge funds can generate yet more outsized profits at the expense of the public.
Not such a good deal for anyone but the hedge funds and short sellers.
And BTW, run some background on these geniuses before quoting them - you'll find that they all benefit from Wall Street's largess in some way or another. Thus, their unbiased and scholarly opinions are nothing more than the bought-and-paid-for propaganda of those robbing the nation of its savings.