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Financial 9-11? Lehman's CEO: Short selling targeted US Financials
Consider: Richard Fuld's analysis that short sellers targeted US financial firms and drove the prices down, causing a chain reaction of down-rated credit and a cascade of sensational rumor mongering during the election season. Almost seems like the perfect storm. Any evidence that the short selling was an orchestrated trigger for September 2008, seven years later? A financial 9-11 so to speak?
Here's a different perspective of events surrounding 9-11:
www.analystblues.com
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Comments (7)
Respectful to summarize the info at the link.
As to shorting in general, it was a big issue, and always is in a bear, but it only works when fundamentals are slipping already. Why did they slip? Because real estate stopped growing in value, since there was actually a flat economy and there was an inherent upper limit to how big that bubble could grow. And that exposed the garbage that the unregulated investment banks were eager to buy, which was multiply leveraged through multiple credit default swaps.
It is 1929, with the equivalent of holding companies, ownership masquerading as substance.
October 6, 2008 4:45 PM | Reply | Permalink
everyone should just sit back and relax a bit.
yes, I know, assets are melting like icecubes on a july sidewalk, but thats okay, easy go, easy come.
the ranch hands are getting the rope around the bucking horse and these sell-offs are going to get weaker and weaker.
even if we go to DOW 7500 - 8500, its not the end of the world. Just see where we are next year at this time.
the eu bank crisis is about 3-4 days from resolving itself favorably you can thank the germans for that most likely.
cds maturities are staggered over the next five years: that means a soft landing.
credit card defaults are on the way, but compared to the mortgage defaults they are weaker by a factor of 10-100. Hardly a blip for a system that will be flush with cash.
i'm at work, so can't post at length, but its NOT THE GREAT DEPRESSION II. Nouriel needs to take a chill pill or three.
not by a long shot.
all above just my opinion fwiw. opposing forecasts welcome
October 6, 2008 5:22 PM | Reply | Permalink
It was a couple of years after the 1929 crash until the Depression really settled in.
October 6, 2008 6:19 PM | Reply | Permalink
Mike, there is no financial 9-11 that is related to 9-11-01. That link you provided is not a different perspective. It is a neocon perspective, only not as smart. China would have to be suicidal to do what that article suggests. (And, no, Russia's not involved either.)
Washington Post Foreign Service, 9-20-08
...
October 6, 2008 8:01 PM | Reply | Permalink
And, along with what Tom said about shorts only working when the fundamentals are already slipping, the shorting was probably being done by the hedge funds. The ones located in the U.S.
October 6, 2008 8:05 PM | Reply | Permalink
The piece calls for an inquiry to find out if it "probably" was hedge funds short selling or if it was more from China-influenced quarters.
Concluding that it "probably" is won't help us much.
October 7, 2008 12:48 AM | Reply | Permalink
Seashell, first thing that makes your answer a problem is your "neocon" lenses whereby you see neocons everywhere, a la the Red Scare equivalent.
Neocons are seldom interested in saber rattling against China or Russia. Big ticket item deterrent defense contractors may be, but not neocons.
Distressed firms need buyers. When command economies invest in distressed firms it leads to influence, leverage and ownership by a foreign sovereign market participant. That is why "China" can tell the "US side" that it "expects the US government" to do whatever is necessary to protect its investments.
The US government doesn't have to do a damn thing if what you say is true, yet here is China, a foreign sovereign telling it what it has to do because the sovereign has a heavy investment there. Authoritarian regimes that carefully control their economies do not seek only profit --they seek power as a tool of coercive profit, or, more power.
And haven't we all been told we had to get behind the 'whatever is necessary'?
If Chinese firms come into greater ownership or influence over US financials, they will ultimately benefit once the market stabilizes.
So no, China doesn't lose, it just gets more assets and market share at a better price, or more authority until recovery becomes possible, then more money from that too.
Such a scenario is exactly why a temporary price dive driven by short selling would make sense to cash-flush China ready to buy up greater market share in US banks and financials.
Distressed US financials would be viable targets so long as they suffer from a temporary, artificial, reversible short sell surge.
Did it happen? Neither the article nor I have said so. The point of both: it warrants further investigation to rule out artificial price drops via orchestrated activity including sovereigns or sovereign related funds with stakes in the financial markets.
October 7, 2008 12:46 AM | Reply | Permalink
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