by Chris Black
This is not new. On September 18 2008, the SEC temporarily banned most short sales in 799 financial stocks in an attempt to preserve their prices and volatility.
11 days later, on September 29th, the stock market broadly suffered the first of several “crashes” of Autumn 2008.
After losing 25% of its value over the prior year, markets plunged an additional 40% in just the following few months (most in the next several weeks).
Those assets which the ban applied to performed the worst .
It makes sense that when regulators try to regulate panic, it only confirms that the panic is warranted.
Investors feel justified in their lost confidence, and thus justified in their decision to exit (sell).
The SEC said last Thursday that they’re not considering a short-selling ban.
Maybe they learned from last time?
To put it nicely, this is not exactly a regime that learns from its mistakes.