799 Stocks We Canít Short, Letís Make an Index
September 22, 2008
By Ron DeLegge, Editor
And whether or not you agree with the regulatory Cub Scout leaders and the puppet masters covering their backs, it matters not. Seasonally speaking, shorts simply arenít hip anymore. Come on, you donít need to be a Brooks Brothers-wearing Wall Streeter to know that. Look at your calendar friend, its autumn.
Under the SECís new emergency rules, (quite different from the agencyís old emergency rules) none of the 799 financial stocks on its uncarefully screened list can be sold short. Thatís the bad news. The good news is that all 799 stocks are still solvent, allegedly.
And since no immediate downward selling pressure from our Halloween addicted short selling pals can be expected, at least in the near term, what prevents any of these banned companies from enjoying one of those unbridled late 1990s bull runs? Is the sky not the limit? Has not a new bull market in financial stocks been manipulated, I mean ignited? See Abby Joseph Cohen or Harry Dent Jr., both authorities on bull markets, for the answer. Related News Articles:
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So hereís a novel idea, which is also a wild moose call to Wall Streetís current and would be ETF/mutual fund entrepreneurs. (In other words, anyone that thinks John Bogle is a fraud, please respond.) Letís make an index.
By combining each one of the SECís banned stocks into one big hot dog, we can make a banned from short selling stock index. Then, out of spite, we can reverse license the index to either Dow Jones or Standard & Poorís. Itís time for a new generation of gypsies to begin benefiting from licensing fees.
Better yet, forget them. Letís just launch an ETF, ETN, or whatever financial burrito wrapping that will our give our new index a sense of legitimacy. And if we decided to show backtested results for the index, weíll have to make sure we eliminate the horrific performance of the past 12 months. As the dotcom flameouts taught us, failing before starting is no way to succeed.
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Anyway, itís time to unseat the 130/30, Wal-Mart weighted and carbon credit non-market indexes. Letís put them in their rightful place! (Of course, Iím speaking in terms of obscurity.)
And hereís the perfect name for our new stock index; weíll call it the ďSEC 799.Ē
I can assure you, some companies have constructed much lesser indexes.
Speaking of indexes, did you hear that the Dow Jones Industrial Average (DIA) replaced American International Group (NYSE: AIG) in favor of food giant Kraft Foods (NYSE: KFT)? Hello Philadelphia Cream Cheese and good-bye variable annuities!
I guess having to borrow $85 billion from the U.S. Government disqualified AIG from being considered a blue chip stock. And itís a shame too. Maurice Greenberg was on the cusp of re-capturing control of AIG for the 83rd time. Not that you care, but AIG coincidently also happens to be one of the 799 stocks you canít short.
Come to think of it, letís make our new index with just 798 stocks.