Thursday, September 25, 2008

Who is to say short selling didn't save HBOS (from its management) ?

OK the "I'm not an expert" caveat here, and from what I've seen few other people are either.

But last night I watched what now passes for a documentary at the BBC Panorama which wheeled out a WWII retired RAF pensioner who had lost close to £3k in the dropping HBOS share price and today we have the two Archbishop show going as far as to call those short selling bank robbers.

Of course the father of political lies, Gordon Brown, has tried to use this issue to deflect attention from his own role in the banking crisis ( especially regulation that the ever leftwing BBC harly mentioned in its emoting by intellectually empty Panorama programme on Monday ).

But wait a minute, most of HBOS has survived. The real threat to HBOS wasn't the share price, but a run on the bank by its customers. ( Will evenyone who withdrew their life savings from Northern Rock also be attacked as spivs and bank robbers ? ).

If short selling had an impact, and there is evidence that it was a minor issue ( facts ignored by the likes of Gordon Brown ), then it was to force the hand of HBOS management to make a deal whilst there was still time to do so. Unlike say the fire sale of Lehman Bros assets now underway in which their shareholders, clients and employees have got the worse possible deal.

Of course the left wing placemen and women in the media are happy to push Gordon's little fantasy and get the public worked up about the spivs and speculators. ( Odd that they kept quiet about the pound being forced out of the ERM though .. .)

But Man in a Shed wonders if the short and other sellers of HBOS shares haven't saved the day. After all we now know that the senior management of major banks are quite happy to sit on their hands and hope things get better - as they are some of the few people for whom such a strategy only has an upside.

Any comments ?

PS To declare my interests here - I bank with HBOS, but withdrew most of the money last week as frankly I can't afford to lose it.

PPS Looks like Rowan Williams shoudl have checked his interests before opening his mouth - see here.

4 comments:

The Great Simpleton said...

Interesting theory and maybe one that supports the reason we have short selling which does somethng like:

Short sellers saw that the bank migh be overvalued and took the opportunity. Share price durly followed, not because of shorting but because there really is a problem. The price came down to a point it made sense for llyods to step (with Govt support re competition).

This was surely better than a long drawn out decline and eventual wipeout.

Having said that, I'm not sure I buy the argument that it was shorting wot done it. As A Very British Dude says, only 3% of HBOS was shorted at the time. I tend to the theory that it was a badly managed bank that was looking seeriously under capitalised.

Man in a Shed said...

Yes the FT had a graph of recent share trading which suggested that shorting was a minor part also.

What worries me is the deflection of blame and the sharpening of political axes I see going on.

The Archbishop of Canterbury - who seems sure of very little to do with his job - is very sure "its greed what done it".

But further - I see a link between the managements of Northern Rock, Lehmans and maybe HBOS - that of management who has no wish to be Turkey's voting for Christmas by selling of assets and their banks.

It is almost always worth there saying everything is fine and soldiering on. Much the same way that the lies Gordon Brown tells about national debt and wider debt in society make sense for him, because admitting the truth wipes him out.

We have got ourselves to a position where it is in our politicians and senior bank managers interests to lie to us.

They see no down side.

Perhaps we should take the sort of interest that the US does in white collar crime.

If anything maybe the markets have been on the side of the people .

The Daily Pundit said...

You'll love this.
Church accused of short-selling

'The Church of England has been accused by a think-tank of using short-selling tactics to maximise profit on its £5 billion investments... the religion and society think-tank Ekklesia claimed that in 2006, the Church Commissioners, which manages the Church of England's investments, set up a currency hedging programme that hedged against a fall in the value of sterling, effectively short-selling the British pound to guard against rises in other currencies.'

Man in a Shed said...

Let him who is without sin cast the first stone eh ?

Rowan Williams should get on with the job he has been entrusted to do - or better resign.