Short Selling Once Again in the Crosshairs...Incorrectly

Shorts are getting blamed again. Mr. Pandit of Citigroup is screaming that is the problem with his firm.

http://www.nytimes.com/2008/11/22/business/22bank.html?_r=1&ref=business&oref=slogin

One maneuver that Mr. Pandit has championed is for the Securities and Exchange Commission to reinstate the “uptick rule,” which prevents short-sellers from betting against companies whose stock price is falling. Mr. Pandit has been lobbying the S.E.C. for the past week, as have other Wall Street chiefs.

Mr. Pandit and others have suggested that Citigroup is a victim of short-sellers, which some have blamed for speeding the demise of other financial companies this year.

In actuality the facts show something much different. Short selling has gone down in financials.

Financial Sector (933 Companies) – Short Interest as a percentage of Shares Outstanding

07/10/08 6.29
07/28/08 6.12
08/12/08 5.90
08/26/08 5.83
09/10/08 5.72
09/25/08 5.01
10/09/08 4.26
10/28/08 4.08

A decrease of 35.1% in the short position from 7/10/08 to 10/28/08. Net buying every single period. Total current value of short position: $64.8 Bil.

Investment Banking Brokerage Sub-industry (33 Companies) – Short Interest as a percentage of Shares Outstanding

07/10/08 9.42
07/28/08 8.62
08/12/08 7.80
08/26/08 7.55
09/10/08 7.63
09/25/08 6.28
10/09/08 5.34
10/28/08 5.49

A decrease of 41.7% in the short position from 7/10/08 to 10/28/08. Net buying in 5 of last 7 periods.

Source : Short Alert Research - Square One Analytics