For what it's worth

There's something happening here
What it is ain't exactly clear

Paranoia strikes deep
Into your life it will creep
It starts when you're always afraid
You step out of line, the man come and take you away

We better stop, hey, what's that sound
Everybody look what's going down

-- Buffalo Springfield

When even "permabears" start to chill at the thought of how much carnage there's been of late, and the chasms of despair and destruction that have opened up by the rupture in the credit markets, perhaps it should not be surprising that they turn their thoughts to the rapture envisioned by those whose very reason for being is to bring it all tumbling down, every last mother and child.

Maybe it shouldn't be, but it is. Really, this is just a very serious market meltdown. We only flatter the power and foresight and evilness of the "Dark Forces" when we utter, in hushed tones, the phrase "terrorists".

Thus, Guambat was gobsmacked to read his lodestone's blog,

Terror Attack on US Financials? Joe is a thoughtful money manager, a great stock picker, and a thoughtful guy. He raised an intriguing issue: None of the many hedgies he knew were pressing there bets. The recent bear raids on the financials were NOT a case of piling on by US funds. And from what he was seeing and hearing about in terms of order flow, the vast majority of the recent finacial short selling was being done overseas. Through the grapevine, itm appears the lion's share of shorting was coming out of overseas bourss, such as London and Dubai.

Then there is the coincidence of the huge increase in shorting the financials occurring on the anniversary of 9/11. And on top of that, the same institutions attacked on 9/11/01 were the ones suffering in recent days.

Joe asks the question: MIs anyone investigating whether this is a case of financial terrorism?

its an interesting theory, one that seemed kinda out there -- until last nights emergency action. Nothing else really explains the insanity of banning short sales

Ah, that's not paranoia, that's just Barry's hyperbolic way of pointing out how positively ludicrous it might be to continue to blame this implosion on short-sellers.

The grand irony of all this is that Naked Shorting has been very profitable for the big broker dealers, like Morgan And Goldman and Merrill and Lehman.

If you want to know who to blame for the past 5 years of naked shorting, you only have to places to look: The financials themselves, and the nonfeasance of a feckless SEC.

As Guambat has said before, it may be ludicrous, and it may be punitive to some to crack down heavily on them in their moment of glory, and it may lack the symmetry that would be required to "prick the bubble" before it bursts, there are certainly times when reins need to be tightened on all horses to keep the carriage from careening over the cliff.

For what it's worth.


FOLLOW UP 20 Sept:

Barry's alluring cynicism popped up in this post, as well:

The "New" New Deal

If you are a fan of irony, consider this: The conservative movement has utterly hated FDR, and his New Deal programs like Medicaid, Social Security, FDIC, Fannie Mae (1938), and the SEC for nearly 80 years. And for the past 8 years, a conservative was in the White House, with a very conservative agenda. For something like 16 of the past 18 years, the conservative dominated GOP has controlled Congress. Those are the facts.

We now see that the grand experiment of deregulation has ended, and ended badly. The deregulation movement is now an historical footnote, just another interest group, and once in power they turned into socialists. Indeed, judging by the actions of the conservatives in power, and not the empty rhetoric that comes out of think tanks, the conservative movement has effectively turned the United States into a massive Socialist state, an appendage of Communist Russia, China and Venezuela.

To paraphrase Floyd Norris, we have become Marxists, but of the Groucho, not Karl, variety . . .

Floyd Norris also said, in that link, and consistent with Guambat's prior post:

It is a sad commentary that the authorities are most worried about a market that they were unwilling to do anything about when it was growing and growing.

Alan Greenspan, then the chairman of the Federal Reserve, thought it would be wrong for regulators to try to, as he frequently said, “outguess the market.”

There's more from that Floyd Norris article in the follow up to The Creature from the Credit Default Swamp, which provides the best explanation Guambat has read of what credit default swaps are and how they were misused. Highly recommended reading.