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There's been much talk, most of it at least tacitly approving, of the restrictions or bans imposed in the past few days on so called "short selling" company shares. Most of you probably don't know that my first career, straight out of school., was as a trader on the stock exchange, followed by stints in several stock-broker firms mostly in private client advice and fund management, before I got into IT - which was as a result of my city experience. That's all a bit apropos of nothing really. After all, you'd be right in thinking that if I had been successful in this first career I might now be funding a think tank or something. But it gives a little background to my knowledge of this issue.

Short sellers, per se, are not the problem here it seems to me. Indeed the stock exchange relies on players prepared to go short - that's what market makers are effectively obliged to be prepared to do when they make a price.

Short selling is also an important way of the market getting the information it needs to make accurate value assessments. Longer term shareholders may have more emotional reasons than pure profit to resist pressure. Even perhaps just inertia. Sometimes even tax considerations. Short selling is also a way in which holders of stock can increase their returns on the stock by renting it to the short sellers. Little risk to them.

In my day, you could short sell, effectively, for fourteen working days. The London Stock Exchange used to work on a fortnightly settlement cycle. So for example a deal you do tomorrow, if tomorrow was a new cycle, would not need to be settled until the Monday in the middle of the next fortnightly cycle. If you went short tomorrow, you could, potentially, buy back for cash settlement (a special, premium service for urgent trades that was settled the next trading day) as late as the Thursday night before settlement day - so giving you fourteen trading days to see the stock fall and buy it back.

Nowadays everything is more or less "cash settlement" with positions settled the next working day - hence the self limiting requirement to borrow stock to deliver on short positions.

No, there's nothing wrong with short selling. Once you realize that the secondary market is stocks and shares is a big gambling den in any case, how can you outlaw one type of gambler and not another.

The real problem, it seems to me, with the run on HBOS shares for example, blamed on "short sellers", is the idea that some market players, hedge funds were cited, were "hunting in packs". Now, it is conceivable that even if there's nothing wrong with the fundamental financial health of a company, such a "pack" could be strong enough to provoke a run on a stock simply by weight of numbers. This, however, would be market manipulation. It would be legal, ethical, and even just plain sensible, to suspend trading in a particular share, or even in the whole market, if there was such illegal manipulation going on, or suspected. If a suspension was unwarranted, there should still be the equivalent of a "stewards inquiry" to determine if there was manipulation, a cartel operating, and if so how to punish them.

If the fundamentals were bad for HBOS, and actually I suspect that they were worse than the financial watchdogs have been saying - otherwise opening their books would have been enough to disprove the rumours - then the short sellers simply administered the coup de grace a bit more humanely perhaps than dragging it out for weeks more uncertainty.

I very much suspect that some hedge funds and private equity fund managers do aggressively hunt in packs occasionally. The fact that the secondary market is a gambling den makes it likely. That needs investigating. Market procedures for suspending trading in a market in which the true value of a company has become impossible to assess immediately need looking at. But having a go at the short sellers, who could, after all, just be the people maintaining liquidity in a particular market, is simply creating a scape-goat. The authorities should be ashamed.

Secretary of Defense designate. Knows all about waging war in Iran-Iraq. He was implicated in the arms to Iran scandal. No doubt then he was probably privy to the actions of the CIA in assisting Saddam's troops to target chemical weapons on Iranian troops.

Nice. Now's the time for Saddam to spill.

...well, briefly and involuntarily. There's a Land Value Tax and Transportation policy fringe at the Labour conference tonight hosted by the Professional Land Reform Group of which I am a member, or at least I think I am - they might not think so as I've never had my subscription acknowledged (you know the kind of organisation - we have lots of them in the party!).

Amongst the speakers were to have been Vince Cable and Steve Norris, but Vince cancelled at short notice today, so I was asked to step in. How ironic it would have been me trying to belt up the only toll motorway in the country to get to a panel discussion about transport policy and land tax (especially since I was at school with one of the farmers who must have made a mint out of the toll road as well!).

But alas, what we thought was on at 8pm turns out to be 6.30pm, and without some form of ballistic transport I don't think I could have made that. So the excellent Peter Reilly from ALTER is going to go instead. But it was kind of nice to be asked to step in for Vince...:)

Oh well, maybe next time. I'm not so sure I would have been the best advocate for our new tax policies anyway!

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