i think there is a place for it, covered shorts only, the other naked, is just BS.
Its a wierd emotional thing.
To the covered shorts, if super funds should ask investors, tick a box to aprove "we lend your stock out for shorts"??
If i invest in a conservative fund, there is no way i would want them to lend my stocks if they gave me the option, based on emotion.
But the hedge funds, need to get their shorted stock from somewhere?
So back to the ability to short something, is valid, if the market has over-reacted and over bought a stock, and it will naturally come back to fair value. So why not allow those who can see fair value, to sell an overly expensive stock, and redeem when they think fair value.
The only issue that i see, is that it can undershoot fair value, and selling momentum, can destroy a SP, and in a bear climate, difficult to turn momentum around. It gets to a point where a stock has been so oversold, that any capitol raising, can lead to its death roll on dillution issues.
But of course, if the underlying business is sound, at a point of extreme undervalue, fear of the longs re-entering, should cause the new shorters to exhaust, and a covered short rally would redeem the SP to middle ground.
From a trading perspective, IMO, valid, if you dont kill the horse your're riding on.
