September 2002
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...
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