Don’t shoot the short sellers

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Don’t shoot the short sellers

Hedge funds

The parallels with 1929 are growing. The equity bear market has lasted longer than any other since the Great Crash. Wall Street banks are under fire for conflicts of interest and questionable practices. And short-sellers are in the dock again, with long-only funds blaming them for exacerbating market falls and demanding regulatory action.


This time the hedge funds, always the scapegoats whenever markets fall but never when they rise, are bearing the brunt. This has happened after every recent market correction - most recently after September 11.


In 1929 US president Herbert Hoover went to war with market bears, ordering stock exchange authorities to ban short-selling in a move widely seen as helping only to deepen and prolong the 1930s' bear market.


The theory today is the same: short-sellers are evil people, they have robbed us of our money and they must be stopped. Never mind that it was the market bulls that pushed prices up to such lunatic levels again that losing money was the only outcome.


Even Axa chairman Claude Bébéar, a supposed champion of free markets and head of one of the largest institutional investors, has joined the chorus.





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