THE TIMES ARE CHANGING AND THE MARKETS MUST EVOLVE TO SURVIVE

The market is evolving slowly over the globe and the changes are not always easy to notice. Even the terms have changed and coined phrases seem to emulate a hostile environment more suited to a zoo then a place of business. Follow the herd, they are fleecing the sheep today. Sell your dogs and buy into the monster just found. I guess it all started with the bulls and the bears but as these times change the method of attaining wealth has changed as well. Much like the act of gambling. The original lottery's were focused around who would get sacrificed(not a good thing) and now people line up and hope to change their life for the better.

In Europe  the law makers are making it illegal to short stocks all in a move to slow down or head off the collapse of their economy. At first the banking stocks were taboo to short as these seemed to be the target of choice. The very act of shorting would not have attracted so much attention if it were not for all the negative teaming by the short groups making false claims in Europe about the actual health of these banks. Those rumours caused fear and thus pushed the market against the banks and the shorters were the only ones making money. The global economy suffers in shorting while a handful of investors profit from this activity.

European regulators were quoted as saying "while short-selling can be a valid trading strategy, when used in combination with spreading false market rumours this is clearly abusive."

When the market runs to an investment because of good news the bids may become higher and move on larger volume thus creating buying pressure that investors can observe in real-time and then make an investment decision to buy as well. This is very transparent to the majority of investors playing the markets. The act of shorting creates a false representation of selling pressure accompanied by rumours gives an illusion that is not easy to unmask and thus creates fear selling which is the desired response from the short-sellers. This would seem to be an advantage to the normal course bids placed in the market and even without the false rumors causing fear would still be an advantage to buying pressure IMHO.

I tried to think of a way to compare this type of strategy in everyday life to gain profit and thought of two competing retailers. If I own store A and want to increase my profits by eliminating my competition store B who is in the same sector and proximity to me. If I lower my prices and hire friendly staff I may get a bit more business, but if I go and put up false newspaper ads saying store B is closing out or moving locations I could disrupt their profits and increase mine at a higher rate. As well I could put up fake signs, put free ads on the web or even create a fake blog that gives an impression that store B has bad service and products and a growing number of angered patrons. All of this of course would be a fabrication, but its happening to stocks on bullboards and blogs and the regulators are seemingly slow to react. The whole time the company may have lost half of its market cap.

I think countries should revisit the purpose of shorting in the markets and how it can be regulated to stop the abuses. When stocks are bought they show up as buys and so do sells, I think it would be quite easy to show a flag as "short" on a sale as it occurs so that investors know someone just hedged their bet against the company shares going up in the near term. After all that's what shorting was created for in the first place. No one hid the fact that they shorted. Now it seems no one wants to admit it and the boards being shorted are full of bash teams to push prices lower so they can cover. Under a labelled "short" instrument the market would have the level of transparency it has been claiming to have for so long. In Canada & the USA I doubt that the law makers would be so bold. Some of our protected banks that once were targets of shorting now do it themselves to make money in a bear market.

I think Europe will the first to start the trend to no shorting on any stock. Once the other governments see the success then and only then will they stand up and take notice. The rampant shorting followed by bashing has become so big that one starts to wonder if organized crime is not behind some of it around the globe as we speak. In the end the people will create the change needed and when enough voices speak out things will changed. Of course those manipulators will move onto something else but crime will always evolve as well but lets shine some light on it and stop keeping it in the shadows.