Short Selling Restrictions "A Great Indicator of Imminent Market Crashes" (Mish)

So the next market crash is "imminent," news compliments of Mish at Global Economic Analysis. Believe me when I whisper to you that there is no reason to doubt that it will be soon. Too many signs point to that fact when you realize how screwy the political climate has gotten lately (see the latest health care bill reconciliation wrangle, not to mention the financial bill(s) that just cannot seem to get the necessary Democrats to sign on and pass them with 51 votes). They all know that something bad is right ahead, and whether it happens next month or several months in the future, they have pretty much thrown up their hands and gotten out of town (how high is that number again?). Lots of dull but important market news from the Republican (almost) "progressive" "Mish" dead ahead. (Emphasis marks added - Ed.)

Short Selling Restrictions "A Great Indicator of Imminent Market Crashes

Inquiring minds are investigating Fannie Mae's stunning $72 billion loss for 2009 as well as new short selling curbs. The two are actually related. Let's take a look.

Please consider Fannie Posts $72 Billion Loss for '09.

Fannie Mae reported a staggering $72 billion net loss for 2009, underscoring the challenges that still face the nation's largest mortgage financier and offering more grim news for taxpayers who may ultimately pick up the bill.

The Washington-based company posted a $15.2 billion fourth-quarter loss and said it asked the U.S. Treasury for another $15.3 billion to stay afloat, bringing its total bailout tab past $76 billion. The quarterly results were an improvement from the year-ago period, when Fannie reported a $25.2 billion loss, but the annual loss surpassed the year-earlier loss of $58.7 billion.

While some analysts warn that efforts to modify loans are simply postponing foreclosures and delaying losses, Fannie Chief Executive Michael Williams said the company remained committed to preventing foreclosures. "Our overriding objective is keeping people in their homes whenever possible," he said in a statement.

The government took over Fannie and Freddie nearly 18 months ago as rising loan defaults burned big holes in the companies' balance sheets. The government has agreed to absorb unlimited losses for the next three years and up to $400 billion after that. So far, the companies have taken a combined $127 billion in Treasury support, making this bailout one of the most expensive from the financial crisis.

Short Selling Limits Yet Again

Proving that the SEC has learned nothing from history (I have a nice Fannie Mae example to prove it), the S.E.C. Moves to Put Limits on Short-Selling

The Securities and Exchange Commission voted on Wednesday to limit short-selling of stocks that are falling rapidly in price, The New York Times’s Floyd Norris reports. The rule was adopted on a 3-to-2 vote, with the two Republican members saying that no case had been made to justify any further action against short-selling.

The limits would apply to any stock whose price has fallen at least 10 percent during a day’s session. After that, short-selling would still be legal but not unless the sale was at a price higher than the best bid price then available.

The S.E.C. chairwoman, Mary L. Schapiro, said the rule would force short sellers to stand in the back of the line, unable to sell shares until all actual owners who wanted to sell had been able to do so.“The reason this rule makes sense is because it recognizes that short-selling can potentially have both a beneficial and a harmful impact on the market,” she said in a statement.

The rule makes no more sense than putting buy restrictions on stocks that advance 10 percent. How many variations of this silly rule are we going to see anyway?

In July 2008, they put short selling restrictions on Fannie Mae and Freddie Mac. How well did that work out? Inquiring minds can tune into this real time play by play call.Flashback Tuesday, July 15, 2008: SEC Panic - Shorting Curbs Placed on GSE Stocks

The panic at the Fed, the SEC, and the Treasury department continues.

In an emergency action the SEC Curbs Shorting of GSE Stocks, Considers Limits for Wider Market . . . . Shorting Curbs Can't Help

Shorting curbs cannot possibly help when the problem is solvency not liquidity. In spite of the announcement, shares of Fannie and Freddie are down another 19% each as of 1:40 PM Central.

If the SEC intended to cause a short covering rally in the GSEs, it sure failed miserably. Indeed, the market response shows just how futile the actions of the SEC, the Treasury Department, and the Fed are.

When that action failed, the SEC restricted more financial short selling.

Flashback Wednesday, July 16, 2008: SEC Restricts Shorting 19 Financial Stocks

Big brother has now decided to step in and force the price of all financial stocks up with this SEC short sale order.

So now the SEC is issuing short sale restrictions on financials because Bernanke says it's important for them to rise.

I have news for Bernanke and the SEC. This won't work. China had short sale restrictions on and it did not stop the Shanghai index from falling over 50%. Insolvency cannot be cured by short sale restrictions and many of those companies are insolvent.

All these short sale restrictions are going to do is create a vacuum. Once the shorts are driven out these shares will plunge. And who wants to buy a bond or provide capital knowing or even thinking share prices were artificially inflated.

That action finally triggered a short squeeze. It continued for a week or so. I commented on it a couple days later.

Flashback Friday, July 18, 2008: Short Squeeze In Financials Continues

Fannie Mae is up another 25% today to $13.66 in the wake of Selective Enforcement of Regulation SHO and Bernanke's statement: "It's important for Fannie Mae and Freddie Mac bonds and stocks to rise so they can keep raising capital and aid the mortgage market."

This move in financials is going to fail spectacularly once the panic buying ends, but for now the bulls are having a bit of fun.

Wow. I forgot that utterly stupid comment by Bernanke "It's important for Fannie Mae and Freddie Mac bonds and stocks to rise so they can keep raising capital and aid the mortgage market."

Fannie Mae never did raise any more capital. That short squeeze was the beginning of a violent end. Taxpayers have now bailed out Fannie Mae and Freddie Mac to the tune of $127 billion dollars. Recently Congress upped the taxpayer liability to infinity. Taxpayers are now on the hook for every penny of future losses.

How well did those short selling curbs work? History will be the judge.

. . . As I said on July 16, 2008 ....All these short sale restrictions are going to do is create a vacuum. Once the shorts are driven out these shares will plunge.

Interestingly, my friend "HB" pinged me earlier today with a very similar, but even more ominous comment."Short selling restrictions are a great indicator of imminent market crashes. The biggest market declines in history all happened shortly after short selling restrictions were introduced." Hello Brevard County Florida: 23,000 expected to lose jobs after space shuttle retirement; Local Unemployment Will Skyrocket

Brevard County Florida, 35 miles east of Orlando, is about to get smacked with a loss of 23,000 jobs on news of Space Shuttle Retirement.

Revised projections now show that about 23,000 workers at and around Kennedy Space Center will lose their jobs because of the shuttles' retirement and the new proposal to cancel the development of new rockets and spacecraft.

. . . The updated numbers also include the cancellation of Project Constellation and other initiatives as outlined in the president's 2011 budget, Rice said."Our unemployment rate is going to skyrocket," she warned Thursday during a five-hour Brevard County Commission space workshop. Much conversation centered on the future of human space launches from KSC, and attendees heaped criticism on Obama's strategy.

Mark Nappi is vice president of launch and recovery systems for United Space Alliance, NASA's prime contractor for shuttle operations. As things stand today, he predicted that more than 4,500 of the company's 5,500 Florida workers will lose their jobs.

. . . "The market will drive where space vehicles are launched from," Nappi said. "And if we believe in Florida that we have the birthright to spaceflight operations, we're going to be the Pittsburgh of the steel industry and the Detroit of the car industry."

No Birthright To Spaceflight Operations

One can debate all day whether there are better programs to cut, but Nappi has it correct. Birthright beliefs helped sink Detroit and Pittsburgh.

.I send best wishes to those affected, but there is no birthright to government spending. The sooner we get away from that mentality the better.

Voters Madder Than Ever; 63% Say Better If Congress Not Reelected; Can Republicans Retake The House?

Here are a few polls from Rasmussen in January and February that many will find interesting.

75% Are Angry At Government’s Current Policies

Voters are madder than ever at the current policies of the federal government.

A new Rasmussen Reports national telephone survey shows that 75% of likely voters now say they are at least somewhat angry at the government’s current policies, up four points from late November and up nine points since September. The overall figures include 45% who are Very Angry, also a nine-point increase since September.

Just 19% now say they’re not very or not at all angry at the government’s policies, down eight points from the previous survey and down 11 from September. That 19% includes only eight percent (8%) who say they’re not angry at all and 11% who are not very angry.

A new Rasmussen Reports national telephone survey finds that 63% of likely voters believe, generally speaking, that it would be better for the country if most incumbents in Congress were defeated this November.

Just 19% disagree and say it would be better if most congressional incumbents were reelected. Another 18% aren’t sure.

59% Say Cut Taxes to Create Jobs, 14% Expect Congress to Listen

Only 21% Say U.S. Government Has Consent of the Governed

Seventy-one percent (71%) of all voters now view the federal government as a special interest group, and 70% believe that the government and big business typically work together in ways that hurt consumers and investors.

45% Say Random Group From Phone Book Better Than Current Congress

More voters have greater confidence in the telephone book these days than in the current Congress, and most think their national legislators are paid too much to boot.

A new Rasmussen Reports national telephone survey shows that 45% of likely U.S. voters now think a group of people selected at random from the phone book would do a better job addressing the nation’s problems than the current Congress. That’s up 12 points from October 2008, just before the last congressional elections. Thirty-six percent (36%) disagree, and another 19% are not sure.

Sixty percent (60%) of voters continue to believe those in Congress are paid too much. This is virtually identical to findings last August. but in October 2008, only 49% felt that way.

Can Republicans Retake The House?

In light of the above surveys, many are wondering if Republicans can retake the House of Representatives.

Please consider Republican Renaissance?: GOP Will Gain Significantly, But Probably Remain in House Minority

Click above for the Rethuglican wet dream of future elections. Suzan _____________