Bloomberg Gets Timing Wrong: The Short Was Already On

An article suggests that Treasury Secretary Hank Paulson leaked insider information.  It’s catchy headline says “How Paulson Gave Hedge Funds Advance Word“.  But timing of the trades shows the word was clearly not in advance.

According to the article:

  • From July 9 to July 14, short interest rose from 86.3 million shares to 163 million shares–that’s 88% in less than week
  • On July 21, short interest continued to rise, to 240 million shares–that’s another 50% in 1 week
  • On July 21, Paulson gave the notice to investors suggesting a short was a good trade
  • On July 24, short interest peaked at  262 million shares–that’s just a 10% increase after the meeting

I don’t understand how it can be construed that Paulson gave advance notice if the bulk of the shares sold short ( 240 million out of 262 million shares ) were sold before the meeting.

Disclaimers: This is just my opinion — I did not speak to my brother with the SEC. I do not know what other information may have been revealed by Treasury staffers to investors earlier in July, when there was a large increase in short interest.

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