On this year's anniversary of the 9/11 attacks, there was a sudden surge in the activity of U.S. hedge funds originating from overseas... like Dubai. There was a sharp rise in "short selling" of stocks, similar to the suspicious trades in the days preceding September 11, 2001. According to one well-known economist, the same institutions attacked on 9/11 are those suffering now. Coincidence?

26 September 2008: A week ago, the Securities and Exchange Commission (SEC) took the unprecedented step of temporarily banning the fairly common practice of “short selling” securities in response to the widening economic crisis in the U.S. The essence of the ban is that the SEC has placed a hold on “short selling” in 799 financial institutions until October 2, 2008, in tandem with the FSA, which is the British counterpart of the SEC.

In a press release issued September 19, 2008, the SEC made the following announcement (excerpt):

The Securities and Exchange Commission, acting in concert with the U.K. Financial Services Authority, today took temporary emergency action to prohibit short selling in financial companies to protect the integrity and quality of the securities market and strengthen investor confidence. The U.K. FSA took similar action yesterday.

In its most basic definition, short selling (or selling short) is the act of a person or entity selling a security instrument, such as a stock, expecting, for whatever reason, that the price of the security will decline. For example, a person sells the stock today to a buyer at the current price, buying the stock back later at the anticipated reduced price, keeping the difference as profit. Because a person does not actually own the stock they are selling, such transactions are conducted through securities lenders, such as Goldman Sachs, for example.

The concept of short selling is rather simple: the greater the decline of the particular stock, the more money the seller stands to make in pure profit. The inverse is also true: should the value of the stock rise, the seller would then lose money on the transaction. Perhaps the biggest factor that one must keep in mind about selling short is this: the profit is limited but the loss is unlimited. Therefore, the short seller is taking an exceptional risk when engaging in such transactions -an important fact as you read on.

Short selling of stocks: Sound familiar?

At least in part, short selling transactions have been identified as contributing to the demise or imminent demise of a number of longstanding and historically revered investment firms, including but not limited to Lehman Brothers. According to analysts and experts in the financial markets, there has been a very sharp upsurge in market transactions of this type, ultimately causing a portion of the market woes that we are presently experiencing within our financial markets.

Many might recall one of the murkier aspects of 9/11 conspiracy theories involves the speculation of airline stocks in the weeks before the attacks. It has been proven that the options market for United and American Airlines, two of the airlines involved in the attacks, was unusually busy in the days before 9/11 with an extremely heavy volume of "put options," or selling the stocks “short.” The activity was unusual enough that both the Chicago Board Options Exchange (CBOE) and the Securities and Exchange Commission (SEC) initiated investigations into the unusual trading activity.

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