Not-so Freemarkets!

"A long/short hedge fund manager of my acquaintance went to short some Morgan Stanley (MS) via a B/D that clears through Wachovia:"

The Trader comes back: "Wait a second -- that's on the list -- I can't short that."

Fund Manager: No, I don't want to Naked Short it, we have already located a borrow -- this is a clean, legitimate short sale.

Trader: Nope, we clear through Wachovia -- and its on the list - NO SHORTING THESE 19 PRIMARY DEALER NAMES -- PLUS FANNIE AND FREDDIE -- AT ALL.

Fund Manager: That's ridiculous -- how can you not execute a legitimate borrowed short?

Trader: Wachovia. Dems da rulez. You have to go elsewhere.

Fund Manager: Consider it done.

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Postscript: FM added to his Morgan short elsewhere, and initiated a new Merrill Lynch (MER) short. I don't know what it says about Wachovia that they won't even allow shorts in those names (deep doodoo??).

I am paraphrasing Jim Grant, but "Shorting is the financial world's equivalent of free speech."

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