Prove me wrong! Don't say this or that and have no absolute proof!
Some professor over in yankland said something or other would have been better had shorting been allowed to continue but in fact there was no way of knowing what would have happened - he could not prove it. Many more ppl thought that the situation might have been made much worse had shorting been available - volatility would certainly have been even greater? But how will we know unless we can recreate exactly the same circumstances, allow shorting and then see the outcome???
On the flip side, shorting would probably have caused falls to accelerate - perhaps we could reach "the bottom" even faster and thus reduce the eventual recovery time? Would that be a good thing? Who the hell knows?
All I can tell you is that as an investor, I can determine the value of a stock, but then find it impossible to correlate that value with a sp when a market allows ppl with no stake in that stock to short it. It seems the criteria for shorting a stock is not whether it is "not worth supporting", "has bad management", "has mislead SH's", etc., but if the stock is vulnerable, i.e. can I convince others that this stock is rubbish and take advantage of it!!!
BTW, I have heard the "greater liquidity" argument before. Its an interesting perspective, however if an investors perspective is used, the ultimate goal is a dividend - not today's sp. If a stock is speculative, i.e. no dividends, but has potential future "value", then there is a built in volatility which translates to liquidity - since these stocks will vary in price on a daily basis.
No, I haven't heard a single argument that supports shorting - other than its a form of betting and betting has been around since Adam - so it can't be wrong??? Only problem is, when a shorter wins, there are usually hundreds, if not thousands of losers, however when a shorter loses, only the shorter has the loss. Pretty telling, I'd say...
PS: If I owned a stock worth say $1 and "lent" it out, only to have it returned and its value changed to 90c, I have better make more than 10c per share as a lending fee. If I make 1% as a lending fee, then I am out of pocket - in fact I should not have lent it out at all. When an institution, commissioned to make ME money, lends out stock so IT can make money and without MY knowledge, then isn't that dishonest and not in my favor? I would bet anything, that if ppl knew what there investment managers did this sort of thing, they would dump them - hence the current situation where the stock lender is not disclosed, is in reality a sham and totally dishonest.
