Vitaliy wrote:
> http://www.economist.com/finance/displaystory.cfm?story_id=12381701
> 
> 
> An industry suffers, and regulators have not helped
> 
> HEDGE funds are supposed to hedge. This year, they haven't. The 
> fund-weighted composite index compiled by Hedge Fund Research, a firm that 
> tracks the industry, fell by 4.7% in September, the second-worst month on 
> record. Since the start of the year it has lost 9.4%. The industry's 
> promises of "absolute returns" for investors now ring rather hollow.

The outright "ban" on short-selling wasn't placed on put contracts on 
options, so there never really was a "ban".

Proof-positive was that short-sellers continued to drive prices of the 
financial sector stocks down and down, even while they owned CDO's 
(basically insurance) against the stocks they were murdering.

The rule that SHOULD come back is the up-tick rule, not this stupid 
short-sighted short-selling "ban" by the SEC.  Short sellers would be 
left alone, but a stock would have to trade higher before they could put 
another position on, short.  This slows the downside but doesn't 
over-regulate it.

But... going back to the CDO's... we MUST have transparency in the 
derivatives markets if the system is ever to be trusted.

It's going to be a while until people trust it again anyway, since all 
of this activity was legal, and made financial sector "leaders" tens of 
millions of dollars in bonuses as they stripped their companies of value.

I'm still wondering where the shareholder lawsuits are.

I also wish we could see the government offer the same deal they (and 
Warren Buffett) are getting... give me a "guaranteed" 10% warrant on 
Preferred stock, and I'll be right there to "re-capitalize" those banks. 
  No problem at all.

The crisis isn't over.  Still a lot of blood-letting to take place. 
Next week the insurance policies for Lehman Brothers kick in.  Wonder 
how much money our government will have to give to AIG (who simply 
doesn't deserve it).

Nate
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