No Logic at the SEC

The secret to Warren Buffett's success is to get a deal that no one else can get. He is doing it again, this time with GE (GE Quote), but the reaction of some is concern that GE needs capital that badly. The market popped on the initial news but pulled back quickly and is now trying to figure this out. It is chaos out there, and the fact that Warren Buffett can get a great deal from one of the most important companies in the world is not necessarily a good sign. We'll see how GE acts when it reopens.

I see the SEC is likely to extend its ban on short-selling. Obviously that isn't because it has worked so well. What really amazes me about the ban is that there isn't any proof at all that it helps to keep prices up. None of the markets around the world, like those in China or Pakistan, were helped by a ban, and it is pretty obvious that it hasn't help many of the 1,000 or so stocks that are on the current banned list.

Does the SEC have some information that the rest of us don't have, or is this just political pandering? I imagine that many folks on Main Street really like the idea of banning these evil folks who think that prices may go lower. Pessimists are a group with little popular support, but even if this ban on shorts is politically motivated, why not give us at least some logical argument for putting Zale (ZLC Quote), Ford (F Quote) or Express Scripts (ESRX Quote) on the list. Is IBM (IBM Quote) really being helped by not being on this list?

I guess the SEC really doesn't need reasons for what it does, but it would help the confidence of market players if there were some evident logic. Nothing undermines the market more than arbitrary action by the government. Down the road you have to wonder -- what happens when the ban is lifted?

No positions.