NEWS

“EDITORIAL:  In Defense of  Short Selling.”

April 30, 2009.  The Washington Times – “The Securities and Exchange Commission is holding a round table next week to hash out how to regulate short-selling. The SEC would be wiser to let the market decide what stocks can be sold and when.

“Short-selling is a practice by which investors sell stock they think is overpriced and buy it back later after the stock price falls. To do this, investors borrow stock and sell it, hoping to replace it later with shares bought at a lower price. Going short is an alternative to the more common practice of going long, in which the strategy is to pick up stocks that appear to be undervalued with the hope that they will be worth more in the future.

“New regulation being pushed by the Obama administration will make financial markets riskier and thus less stable. New rules to limit short-selling in a down market expose a fundamental lack of understanding of how markets work. Speculators make profits by smoothing out price swings, not by making the swings larger. Crafting policy based on flawed economics will help create speculative bubbles and protect predatory firms. That hardly stimulates the right impulses for a recovery.”