There's nothing slimy about short selling, Barron's says (free), and done intelligently, it can...

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mdmrjsds Comments (502)
 
From the article,
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In reality, there's nothing unfair or devious about betting against a stock that you think will decline, just as there's nothing wrong about betting against the NFL team that you believe will lose the Super Bowl. And over the past decade, investors who shorted some stocks probably would have done much better than the vast majority of individuals, who go only long -- buying shares in the hope of eventually selling them at a higher price. Shorts reverse the process. They borrow stocks and then sell them, hoping that their prices tumble, which would let them replace the borrowed shares for less than what they paid for them.
"""

This paints the wrong picture. If you borrow the shares before hand, and sell actual shares when you sell them, no, there is nothing wrong with selling short. But that is not how shorting is done in the markets. Even covered shorts don't actually sell the stock, they are selling a promise for three days. So shorting is sending false signals to the market. And committing fraud against your counterparty to the transaction. And I haven't even mentioned naked shorting.

Sorry, short selling, as it is practised in American markets, *is* slimy.
5 Jul 2009, 06:47 PM Reply Like

klarsolo Comments (683)
 
Done intelligently, almost anything can be enormously lucrative. What a non-statement.
5 Jul 2009, 07:29 PM Reply Like

TGals Comments (23)
 
Shorting can be enormously lucrative, especially if well timed with a rumor and coordinated with a few black box hedge fund managers...

then throw in a deaf, dumb & blind (i.e. bought and paid for) SEC and it is not only lucrative but damn near risk free!
5 Jul 2009, 09:10 PM Reply Like

Market Sniper Comments (668)
 
Well, I guess we could just ban short selling altogether. Then when there is a deep sell off, there will not be any short covering to put a floor in and start the first up imputus for price action. Then prices can just continue down. This is what happened to the Shanghai Exchange which does not allow shorting of any kind. Also, what about market makers and floor specialists? They can't short either? Then see what happens when EVERYONE wants to sell!The practice of naked shorting is an entire different matter. To be able to short without the intention of ever delievering is fraud. All this railing against short selling exposes only ignorance of how price discovery is acheived and how markets actually work. Without the short sellers, Eron's fraud would have taken even longer to uncover. Be careful of wat you ask for, you just might get it!
5 Jul 2009, 11:38 PM Reply Like

Market Sniper Comments (668)
 
Previous post, I plead tired. Long weekend. As to specialists and market makers...they BUY when everyone sells and they SELL when everyone is buying. Point being, they are charged with keeping an orderly market. Impossible to do without allowing shorting. Also, legal short sellers are captive BUYERS.
6 Jul 2009, 12:06 AM Reply Like

Fighting Yoda Comments (1031)
 
Shorts provide great service to the markets:
- Provide liquidity to the markets
- When markets fall – they are the ones who cover (the shorts) to pull the market up
- Shorts are ones that exposed all the farce in the balance sheets of the financial institutions
- Shorts did not cause the collapse of Bear or Lehman or Wamu or whoever- their toxic and leveraged balance sheets did them in
- Shorts did not cause tulip mania or the dot com bubble or the housing bubble- the reckless bulls did
- The short story always gets distorted with crazy nonsense about ‘rumor mongering’ and ‘naked shorting’ etc. These things have never been proven or substantiated against the shorts, but longs have again and again been proven to be the culprits with reckless pie-in-the-sky bubble stories
6 Jul 2009, 03:01 AM Reply Like