Don't Sell Short-sellers Short!

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How big government, big business, big media and big academia block your road to financial freedom- and tell you it's for your own good.

Don't Sell Short-sellers Short!

Posted on 01/30/2007 13:32:00 | Link | Post Comment

My DC lawyer/lobbyist friend has something new for us free-market types to worry about:

Another little bit of evidence that the guiding philosophy of the these past 27 years – Reaganomics -- is slipping away. This one concerns stock trading...
If you don’t have both bulls and bears fighting with each other every nanosecond on Wall Street, you don’t have a fair marketplace.
The political pressure to “do something” about some of the practices of short sellers is high and getting more so. The heat is coming from people in both parties, even a smart man like Chris Cox who worked for Ronald Reagan in the White House. Look at his quote:
"This is already a serious issue and it is showing all signs of growing."
Yes, it is a serious issue but many of the allegations presented in the Wall Street Journal article last week on this subject are seriously flawed. Much of this imagined crisis is a misunderstanding of industry practices and procedures. Much of the agitation to “do something” is being generated behind the scenes by companies who hate it when their stock is shorted. Who wouldn’t! Yes, the short sellers can be bastards, or wrong. (No, I don’t represent them.)
If the SEC makes it harder to short a stock, or limits the rights to borrow a stock, or limits the voting rights which now transfer to the borrower, then the SEC will tip the scale away from the bear. Do we want the referee choosing sides and tipping scales?
That is a serious issue which shows all signs of growing.