Anthony @ Equity Investigations, Dear Anthony, Message Board

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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony,

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To: Anthony@Pacific who started this subject	3/30/2003 4:11:06 AM
From: ayn rand	of 122087

Shorting the reason for the bear market? ................................................ "Now some observers are calling for controls on hedge funds which can "short" the market. Shorting, they say, is one of the reasons for the bear market. "Hedge funds bad, bull markets good" is the simplistic reasoning. Much of the whining is from companies who cannot make a profit. Hedge funds provide liquidity, pure and simple. If you take away the ability to short a stock, you will increase the risk premium on that stock because it will drive away investors and liquidity. If you want to induce a stock market crash, and I mean a real crash, not a slow drawn out secular bear market, then all you have to do is reduce the ability to short in this market. It will dry up liquidity faster than you can say 1987. If hedge funds cannot "hedge" their risks, they will simply withdraw from the market. That will take away liquidity and drive up the risk premium. This may seem counter-intuitive, but hedge funds did not create the bubble and are not responsible for the bear. The writer we analyzed earlier decided falsely that the US reason for starting the Iraqi war was because we wanted to maintain a strong dollar. He looked for a reason to justify his beliefs about the US, and found a conspiracy. Those who suggest that this bear market is the result of hedge funds who short stocks look for a scapegoat to blame their own failures to properly manage risk and invest or to manage their companies and make a profit. The best antidote to someone shorting your stock is to make a profit and increase them every year. If you can't do that, then don't whine when your stock price goes down." -John Mauldin Weekly E-Letter Boneheads, Iraq and the Artificial Dollar March 28, 2003 By John Mauldin

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