Soros and Congress' Smokescreen

• Report this Comment On November 13, 2008, at 4:45 PM, captainccs wrote:

  Is looking for a scapegoat to blame a form of capitulation? A sign of a bottom? I sure hope so! :lol

  Congress set the seeds to create the mess by promising people who could not afford a home that they could buy one anyway and forcing banks to make the loans under threat of prosecution for discrimination.

  Now they need to find a scapegoat.

• Report this Comment On November 13, 2008, at 5:05 PM, TMFMarathonMan wrote:

  captainccs,

  Thanks for your comment, which I agree with; Congress is entirely complicit in this fiasco!

  Alex Dumortier (XMFMarathonMan)

• Report this Comment On November 13, 2008, at 5:31 PM, donradcliffe wrote:

  Spoken like a true hedge fund shill. If congress had any guts they would ban short selling entirely and cut way back on derivatives.

• Report this Comment On November 13, 2008, at 5:44 PM, TMFMarathonMan wrote:

  Spoken like a true socialist. There may be an argument for improving regulation on certain types of derivatives; however, banning short-selling entirely would plainly be an absurdly ill-founded and anti-competitive measure.

  Alex Dumortier (XMFMarathonMan)

• Report this Comment On November 13, 2008, at 5:45 PM, DBrown7 wrote:

  I couldn't agree more about Congress and their complicity. They seem to have received a free pass in this whole mess.

  I do think it would be a good idea to require periodic disclosure by hedge funds to regulators regarding their activities. I also feel that hedge fund managers should have to declare as ordinary income the money that they make on the carry trade. If you're collecting 20% of the gains made on investing other peoples money, you are paid for a service you provided them and should be taxed appropriately. The fact that the compensation is based on a long term capital gain is immaterial in my opinion. It is not the long term capital gain of the manager's money.

  Of course, any long term gain derived by the manager's personal investment in the fund should receive the preferential tax rate.

• Report this Comment On November 14, 2008, at 6:27 AM, wuff3t wrote:

  "banning short-selling entirely would plainly be an absurdly ill-founded and anti-competitive measure..."

  Would it? I've never been convinced that we need short-selling for the market to function effectively. I'm certainly not blaming short-sellers for the recent crisis - as the article correctly states that's the fault of greedy bankers and ineffective lawmakers. But I believe Monesh Pabrai recently said something (correct me if I'm wrong) about the market not needing short-selling to function properly.

  I don't have any personal vendetta against short-sellers - if the opportunity is there and they want to take that risk, that's a perfectly valid way of making money. It's just that from the point of view of a growing economy I can see why companies need investors' money to grow; I can't see how short-selling (on the whole) benefits those same companies.

  I'd be pleased to be proved wrong - I'm by no means an expert investor so feel free to point out how wrong I am. I can see how short-selling is beneficial in some situations (perhaps keeping valuations from getting wildly out of control and causing a bubble - although as there are always stocks that are over-valued maybe even this isn't that persuasive an argument?). I just don't quite grasp that's it's really necessary - maybe we could live quite happily without it?

• Report this Comment On November 16, 2008, at 12:31 PM, TMFMarathonMan wrote:

  wuff3t,

  Thanks for your comment. I appreciate the spirit of open inquiry in your post. Let me address some of the things you wrote:

  "It's just that from the point of view of a growing economy I can see why companies need investors' money to grow; I can't see how short-selling (on the whole) benefits those same companies."

  Short-selling is not meant to benefit all companies and why should it? There is no rational justification for providing capital to certain companies. Some (a small minority) are outright frauds, but many others simply won't produce an adequate return on investors' capital. That may be even be the case for outstanding businesses if shareholders pay too high a price for their shares. Short-selling is a means for market participants to express this, so it allows the market to set fairer prices for shares. This contributes to the capital formation process by helping capital flow to the companies where it will earn the highest return.

  The question isn't so much whether we can live without short-sellers -- we obviously can -- but rather whether they make our capital markets more competitive. I strongly believe they do.

  I hope this is helpful.

  Alex Dumortier (XMFMarathonMan)

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