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Thursday, January 8, 2009

Pakistan: Life After Removing the Floor Sucks

So back in August of 2008 Pakistan: Has Dumbest Idea Ever, Sets Floor for Stocks.

The floor essentially resulted in a market that went “NO BID”. So the offer sat at the floor level and trading halted. If you had your wealth tied up in the market you were now stuck. This of course caused some serious liquidity issues for various firms and individuals.

Let’s take a look at what happens when the ban is finally lifted… yup… pretty much what we all knew would have to happen. The market simply went and caught up.

Well, since that didn’t work to halt the slide the next obvious step is to blame the evil short sellers… For example if you ban short selling in select financial stocks the market will go up forever. Right?

3 comments:

DXB said...

Yeh, it really was one of the dumbest ideas ever.
Kudos for updating us on this with yet another awesome ninja chart.

Dr Anonymous said...

Why was it the dumbest idea ever if it stopped a run on the market during a panic? It's just another shor-term policy mechanism for keeping assets in the market (like closing the market for a day) when external factors (i.e. the global market and its ramifications) were inducing panic.

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