Friday, Jan 23, 2009
FSA and Government on collision course
guardian.co.uk: Hedge fund made millions betting on Barclays crash
One of London's most successful hedge funds has made £12m in just four days by betting on a fall in the Barclays share price, a move that will heighten the controversy over so-called short-selling strategies.
Lansdowne Partners, which also profited from the fall in the share price of Northern Rock at the height of its problems, sold Barclays shares last Friday - when the bank lost almost a quarter of its value in frenzied trading - and bought them back again on Wednesday after they had fallen by almost £1.
Probably more to do with government failure to disclose liability details than blaming hedge funds who take advantage of this fact.
Posted by plato @ 07:13 PM (908 views) Add Comment
18 Comments
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1. bystander said...
Tell us something we didn't already know. Please someone defend short selling for short term profits. Greed, don't ya just love it.
2. paul said...
I'll defend short selling for short term profits.
Making money out of a downturn is something that didn't used to be possible. Working on the principle that no single player is big enough to influence the market for Barclays shares, what Lansdowne did was legal, successful and ethically neutral. I should point out that while lurking in the HPC forums this week, I complained about a post spreading false rumours about Barclays here.
However there is nothing wrong with short selling if the market thinks that the view is rational. Whether the market itself is being rational by short selling is another matter, but that's a wider debate on the nature of share speculation.
The market is as the market is governed, and banning short selling won't work in the long run because unfortunately for UK plc, UK banks are looking very weak.
If you want to attack short selling of shares for profit, you are attacking speculation on shares, which in a globalized economy is unrealistic.
3. little professor said...
The decline in the share price of Barclays has been driven almost entirely by long-only holders of the shares deciding to sell up. Short selling accounted for only 0.02% of the shares sold. This is just media hype.
The share price collapse has nothing to do with short sellers and everything to do with current shareholders bailing out after realizing the bank is well and truly f*cked.
4. bystander said...
interesting thought LP an dPaul, but how and why did the long-holders find out/decide that Barclays was f*cked, without rumour and these rumours need to start from somewhere and without evidence to the contrary I believe that those with most to gain, ie short-sellers, could be behind the many rumours circulating. Rumours are spread by fear and fear can become a self-fullfilling prophecy. This is market manipulation which eventually destroys markets through the destruction of trust. Also LP where did you get the 0.02% for short-selling, just interested to know your surce so I can become more informed and move away from all this media hype.
5. Ilejustwait said...
Banks make money via loans etc why shouldn't hedge funds make money,
the banks gamble with are money,or should I say the tax payers money in
this case,if the hedge funds gamble don't pay off at least the taxpayers
don't have to bail them out.
There just better at investing than banks are !!
6. flintster1994 said...
Just out of interest, what's the difference between this blog and the forums on HPC?
Just wondered?
7. paul said...
flinster, the forums are a bit of a rabble to be honest - there's a lot of off-topic rubbish, a few loons and some house price bulls looking to sabotage the whole thing. I haven't been long on there but I'm not all that impressed.
Seriously, don't bother. There's a lot of thread attrition and most of the time, it's not that interesting. Sometimes, yes, it is relevant but even a stopped clock ...
8. flintster1994 said...
Thanks for that Paul.
9. This comment has been removed as it was found to be in breach of our Blog Policies.
10. P. Riddy said...
Short sellers support falling shares because they are the only buyer on the fall, just as long buyers are the only sellers on the rise. Government (FSA) doesn't like this because short sellers make nationalization more expensive. Clause 4, never repealed.
11. flintster1994 said...
7 and 13. Interesting numbers indeed.
12. troy said...
and more so
seventeen is a good but troublesome year
http://yamaguchy.netfirms.com/7897401/emery/emery_index.html
how can we help those who will not help themselves
in the outgoing and ingoing of the tides
the lies lie unperturbed
by flesh or sin there in
13. bellwether said...
Got burnt on barclays recently but really, as paul said shorting is just part of the game. Also would serve to put a floor on shares more quickly, or at least would if people did not react so much to share price movements which may coincide with the value of a company but having nothing to do with it.
14. gardeniadotnet said...
11. bellwether said... if people did not react so much
Ah, 'people' can be so troublesome when one is trying to 'earn' money. lol
15. bellwether said...
G actually the opposite if people didn't overeact it would be impossible to win because everything would always be fairly priced
16. gardeniadotnet said...
@bellwether...
OOI: Is your job description 'paper pusher' or 'button presser'?
No offence. lol
17. bellwether said...
I guess a bit of both. You hit the bottle early G?
18. gardeniadotnet said...
15. bellwether said... I guess a bit of both. You hit the bottle early G?
Gadzooks! Hoisted on my own petard? That'll learn me.