I tried to short LEH today and was told that there were no shares in inventory so my trade was cancelled.  Now unlike the criminals that run some hedge funds, I do not get to pull the naked shorting stunt and had to look elsewhere.  But more to the point, if there were no shares left to loan, then I would say significant shorting was already underway before I figured out the play.

Much of the 'rally' last week in the financials was due to short covering.  Now it looks like big money is re-entering the short trade.  The story floated about the commodities was hedge fund selling to raise liquidity.  If the funds are now shorting, then liquidity is not the issue that some tried to suggest, since you need to maintain margin in order to be elligible to short.  I never believe any of the spin that various media outlets try to put on the trading behavior.   Last week was a garden variety bear raid on the metals, and a PPT-induced short covering rally on the financials, neither or which could be sustained indefinately.  Now I think we are returning to business as usual, and once the quarterly window dressing is complete, the main trends will be back in effect.

cheers!

mike