Today I was reading a somewhat old story about the sequel to "Wall Street", which is to be called "Money Never Sleeps" and will be set in London this time. Michael Douglas replays his role as Gordon Geeko, while the villain (shouldn't that be Geeko's part?) is going to be a hedge-fund manager who loves to short companies (side note: apparently Javier Bardem backed out of the sequel to make a movie with Julia Roberts. I would.).
It is funny - or sad, you name it - that the movie is set in London and the villain is a hedge-fund manager. The excesses of the City certainly contributed to this image of London being an over-priced place where traders spend their humongous bonuses over-paying for things. Unfortunately, I don't think that the crisis will improve the city's image. Large bonuses will always be around, on top of London being a magnet for rich people that don't want to go to NY.
More interesting is the bad publicity received by short-sellers during this crisis, which definitely contributed to evil character in the movie using it. Academics (humbly including myself) have shown that short-selling is usually a good thing to markets, even naked short-selling.
However, most investors see it as an unlawful way to make money. People never complain when manipulation drives prices up and short-sellers help to bring them down by bringing information to the markets. Neither they complain about the huge liquidity that short-selles bring to the market (about 30% of total) when they need to sell their holdings. Liquidity that decreased a lot during the SEC ban on short-selling right after Lehman's bankruptcy.
I guess it has to do with the behavioral argument that people hate to talk about negative events... Specially the bad CEOs that blame short-seller for their falling sharing place when it is really ccaused by their own poor management.
It is funny - or sad, you name it - that the movie is set in London and the villain is a hedge-fund manager. The excesses of the City certainly contributed to this image of London being an over-priced place where traders spend their humongous bonuses over-paying for things. Unfortunately, I don't think that the crisis will improve the city's image. Large bonuses will always be around, on top of London being a magnet for rich people that don't want to go to NY.
More interesting is the bad publicity received by short-sellers during this crisis, which definitely contributed to evil character in the movie using it. Academics (humbly including myself) have shown that short-selling is usually a good thing to markets, even naked short-selling.
However, most investors see it as an unlawful way to make money. People never complain when manipulation drives prices up and short-sellers help to bring them down by bringing information to the markets. Neither they complain about the huge liquidity that short-selles bring to the market (about 30% of total) when they need to sell their holdings. Liquidity that decreased a lot during the SEC ban on short-selling right after Lehman's bankruptcy.
I guess it has to do with the behavioral argument that people hate to talk about negative events... Specially the bad CEOs that blame short-seller for their falling sharing place when it is really ccaused by their own poor management.
No comments:
Post a Comment