Earlier I mentioned we have no need of government regulation of markets since there are shortsellers, whose work is both necessary and sufficient to keep markets honest. I noted shortsellers bet their own money on their views. I forgot to mention if they pick wrong, they not only lose their own money, the stockholders of the company the shortsellers target also find a benefit in stock appreciation if the shortsellers are wrong. In fact, a targeted stockholder if confident the shortseller is wrong, is move his stock out of trading accounts to limit the amount of stock available in short-covering operations, ever more forcing the price up. Turnaround is fair game.
Regulators just come in after the fact and make things worse. All hail the heroic shortsellers!
Tuesday, March 25, 2008
All Hail Free Market Natural Regulation
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