Has the SEC just created the buying opportunity of the year? (borrowing, pension)

[harry chickpea]

Quoting a post I made last night-

Originally Posted by harry chickpea

As of 12:01, naked shorts aren't allowed, due to an emergency rule by the SEC.

In essence, when MS dropped today after posting positive earnings, it was realized that the price of it and GS was being driven down by all the vultures using uncovered shorts, driving MS in particular towards insolvency even though it had a strong reserve.

Demanding that shorts play by the old rules is bound to p*** off a bunch of traders, and stop the flow of easy money, but the reality is that their gains were sabotaging any slim hopes of stability, and would end up being paid by taxpayers.

That means the plan to rip the guts out of MS has likely failed, and the stock will rebound some during trading. I like that idea, since I bought a few long shares today at the low. The market will continue to slip, but hopefully at a more orderly pace.

Thinking about this overnight, and remembering some related news on CNBC, I now see that there could be a situation that is unique to conditions, and a huge moneymaker for a few hours this morning.

The incidental news that I heard yesterday was from a pension fund manager who was calling around to all his fund manager friends telling them to NOT let market makers borrow their shares of MS for people wanting to short, in an effort to protect the assets of the pension funds and to help prevent a collapse of MS.

Couple that with the "no naked shorts" rule, and MS is in a position where the ratio of shorts to longs is likely going to be reversed compared to yesterday. Since it was driven down mercilessly to levels far below value, and there are discussions of possible mergers, there is a HUGE potential for longs coming in and driving the price up. Once that happens, the people who shorted it yesterday have no way of driving it back down to cover their short positions, and will have to cover their shorts quickly or lose their literal shorts, pants, shirts, shoes, and houses.

Upward pressure, fear from those who placed shorts, the changes in the rules of the game, and some upset pension fund managers could briefly drive Morgan to as much as double what it was at the beginning of the day yesterday.

The only hopes of those who are doing the shorting is if they can find other shares to borrow. That reserve pool of shares could be exhausted quickly, given the new SEC rule. Remember that the infrastructure for moving long shares is in place and has been operating for years. Because the short borrowing requirement is new, some market makers may not have the systems in place to meet the new requirements.

Am I positive this will happen? No, but I'm betting it will, and if it does I feel it is my patriotic duty to stiff that segment of the market that is attempting to bring down the institutions and businesses of the U.S. by use of naked shorts.

Discuss this with your broker before making any major position moves. This is a market like no other.