Wednesday, August 20, 2008

Sell Short! It's fun, whether or not you're Jim Cramer ("Mad Money")

First of all, Jim Cramer (CNBC “Mad Money”) has a controversial video on “The Street” where he talks about short selling (link).
Does everybody understand it?

I could laugh at this. Back in 1998 or so, I had “buddies” at the office who actually sold short sometimes, as a kind of hobby. A dangerous hobby (during the Asian financial crisis).

Anyway, the rules to curb “naked short selling” abuses on 19 key stocks were set to expire Aug. 11 (24/7WallStreet link), and I like the analogy to baseball. Say, lets give the Nats 10 at-bats when they play the Yankees (let the Nationals, with 11 losses in a row, be both home and visitors at once). That’s what the rules were like.

Karey Wutkowski writes for Cox and Reuters that the SEC will propose broader rules to regulate short-selling within the next six weeks (Aug. 19), link here.

Then, today The New York Times weighs in with a doom-and-gloom editorial (“No End in Sight”) that a lot more banks, mortgage companies and mainstream businesses will fail. They want a “different” economic stimulus package to increase consumption (start with Food Stamps, the Times says), and jawborne mortgagers to accept the fact that homeowners will have their homes protected by court supervision. The link is here. And, oh yes, everybody is starting to re-accept the fact that Fannie and Freddie will have to be bailed out.

Can someone explain what all this short-selling fiasco really means?

Picture (above): Freddie Mac, in McLean VA (heat and humidity affected the camera resolution that day).

Below: Fannie Mae on Wisconsin Ave in Washington DC, about six blocks S of Tenleytown Metro stop.

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