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Later in the nancial crisis, a number of CEOs attributed their declining stock performance partly to short sellers In an internal memo to employees, John Mack, CEO of Morgan Stanley, said, What s happening out there It s very clear to me we re in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down 11 In the case of Morgan Stanley, the volume of short selling in the stock consistently increased in the two months prior to the adoption of short-sale restrictions by the SEC on September 22, 2008 This increase in short selling was signi cantly correlated to a proportional decrease in Morgan Stanley s share price over the same time period It is therefore reasonable to conclude that short sellers are likely to have placed substantial negative price pressure on the rm s stock.

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In Congressional testimony, Dick Fuld, then CEO of Lehman Brothers said, The naked shorts and rumor mongers succeeded in bringing down Bear Stearns And I believe that unsubstantiated rumors in the marketplace caused signi cant harm to Lehman Brothers 12 Fuld seems to have been right Leading up to his rm s September 15 bankruptcy ling, not only did short selling consistently increase in volume, but a burst of short selling on September 9 also coincided with a 45 percent decrease in the rm s share price on that day alone Since this decrease occurred in the absence of new material information, a bear raid is a likely explanation John Thain, the CEO of Merrill Lynch, contended that short sellers bet against Merrill as its share price fell and credit became harder to come by, creating a vicious downward spiral13 However, the evidence does not support Thain s contention.

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Ahead of the September 14 announcement of Merrill Lynch s acquisition by Bank of America, short selling had gradually increased over the preceding two months, but at a relatively slow pace There was also a low correlation of short sale volume to the share price of Merrill Lynch during this period Similarly, the failures of Fannie Mae and Freddie Mac on September 8, 2008, seem to have been caused more by long-standing fundamental factors (discussed in 2), than by short selling The high daily levels of short selling in both stocks in early September coincided with the release of material adverse information regarding the future of these two corporations, while the longer-term correlation of short-selling volume to the price movements in both stocks was weak..

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As Einstein pointed out, although energy cannot be destroyed, it can transform itself into mass The excess energy lost during the Higgs field s phase transition when its pointer gives up its ability to turn would convert into a certain quantity of mass This mass, in turn, would become taken up by the gauge bosons that happen to be present Thus, in short, the sacrifice of gauge freedom during the cooling down of space would lend mass to the exchange particles One might think of this scenario as akin to a water flume ride, with a circular boat coasting through calm waters before dropping down a steep hill Imagine boarding the boat at the top of the hill, well before the plunge You don t give much thought to where you sit Because the boat is round, every seat seems perfectly equal.

Figure 2.10 Feedback strength versus external round-trip time in the short cavity limit. The dashed line corresponds to a feedback coefficient C = 1. Source: N. Schunk and K. Petermann, Stability analysis for laser diodes with short external cavities , IEEE Phot. Technol. Lett., 1, 49 51 (1989).

Indeed as the quiet waters gently spin the vessel, no direction appears better or worse than any other This is analogous to the state of complete gauge symmetry But then there is a sudden phase transition as the craft begins its thrilling drop Suddenly the water all seems to flow the same way, establishing preferential seating At the boat reaches the bottom, the kinetic energy of descent converts into one giant splash And guess who is in the front seat As the relatively dry riders sitting in what has now become the back of the boat all laugh at your soaked clothes, you leave the boat feeling somewhat heavier The breaking of the boat s circular symmetry has lent watery weight to your clothes.

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