Tuesday, January 06, 2009

FSA short-selling ban: The canary lives again!

I was never in favour of the FSA banning short-selling so am relieved they've decided to let the ban expire.

I blogged about this back in September when the ban was introduced, pointing out that short-selling acts like the proverbial canary in a mine. It alerts the market to who's going to go bust next.

Recessions are miserable and painful (especially if you're looking for a first serious job in one), but they are also a good way of clearing the chaff. Companies such as Woolworths and Waterford Wedgwood were not viable before the recession - the downturn has merely dealt them a mercifully swift death blow. Wedgwood, for example, had debts of £415 million and hadn't made a profit for six years. 

Any institutions knocked out by a frenzy of market speculation probably wouldn't survive that much longer anyhow. Some killings are better done quick.

1 Comments:

  • At 6:46 pm , Blogger Tom Papworth said...

    It was a stupid piece of knee-jerk regulation and it is a relief that it will be allowed to expire.

     

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