War against Short Selling: France, Spain, Italy, Belgium Ban Short Sales

Regulators/Policymakers maintain a delusion of control.

From Bloomberg, (bold highlights mine)

France, Spain, Italy and Belgium will impose bans on short-selling from today to stabilize markets after European banks including Societe Generale SA hit their lowest level since the credit crisis.

“While short-selling can be a valid trading strategy, when used in combination with spreading false market rumors this is clearly abusive,” the European Securities and Markets Authority, which coordinates the work of national regulators in the 27- nation European Union, said in a statement after talks ended late yesterday. National regulators will impose the bans “to restrict the benefits that can be achieved from spreading false rumors or to achieve a regulatory level playing field.”

The watchdogs are trying to stem a rout that sent European bank stocks to their lowest in almost 2 1/2 years and quell concern that European lenders may be struggling to fund themselves. Banks’ overnight borrowings from the European Central Bank jumped to the highest in three months yesterday, a sign some lenders may have need for emergency cash. Regulators imposed similar limits on short sales in September 2008 following the collapse of Lehman Brothers Holdings Inc.

Politicians and regulators want you believe that prices can be fixed by edict or fiat.

They make you believe that a worthless or junk piece of security should have value because they say so.

The countries planning to impose the ban on short sales have all seen their stock prices crashing.

Essentially France (CAC; orange), Spain (MADX; green), Italy (FTSEMB; light orange) and Belguim (BEL20; red) have been in bear market territories. The performance or % yield from the above chart is seen from the year-to-date perspective. This means that the above does not reflect on the peak-trough returns, which should amplify the degree of losses.

As I pointed out in the same recent case as Korea:

1. Bans hardly have been effective. Instead they are mostly symbolical as the “need to be seen as doing something”

2. Regulators react almost always too late in the game (which means that their markets may be at the process of nearly bottoming out.)

3. I would further add current policies have clearly or overtly been in support of the banking system and the stock market.

4. This only validates the theory that the policy direction of governments and global central bankers has primarily been anchored upon the Bernanke ‘crash course for central bankers’ doctrine of saving the stock market.

5. Importantly, applied policies have been meant to preserve the tripartite cartelized system of the welfare state, central banks and the crony banking system.