Tags: short | positions

Stock Short Interest Soars, Defy Government Efforts

By Dan Weil   |   Wednesday, 15 Jul 2009 09:55 AM

Short positions continue to rise in the stock market, despite the government’s efforts to reign in those stock sales.

Short interest — the number of short-sale positions — rose 1.6 percent on the New York Stock Exchange over the last two weeks of June, to 15.6 billion, and 3 percent on Nasdaq, to 6.9 billion.

Looking at just the Standard & Poor’s 500 Index stocks, short interest jumped to a 2 ½ month high of 10 billion shares, according to data compiled by U.S. exchanges and Bloomberg.

Last year, the Securities and Exchange Commission cracked down against naked short selling to help stanch the stock market’s drop.

But clearly those who talk the talk of a bear market are walking the walk, too.

“It’s clear now that companies’ share prices were not falling due to the action of short sellers,” Eric Newman, a portfolio manager at TFS Capital, told The Wall Street Journal. “There were serious underlying problems at many of these firms.”

Among the hardest hit industries recently have been health care, technology and financial services.

The biggest problem for stocks, of course, is the recession. Data such as the 467,000 job losses in June have sent the S&P down more than 6 percent from its June 12 high.

“There’s just a lot of bearishness,” James Paulsen, chief investment strategist at Wells Capital Management, told Bloomberg.

“It reflects the brutal recession we’re in. There’s a dominance of doubt, and short interest is just a reflection of that.”

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