Mary,
Point 1, you know as well as I do how incredibly difficult, expensive and time consuming it is to win a libel suit. Dishonest short traders have little fear of this. Besides, it is usually not necessary to engage in blatant lying when distortion, innuendo and half-truths will work just as well.
Point 2, I agree that it is easier to short a loser company. I would also make the observation that it is to the advantage of the short-trader to embellish bad news of the 'loser' company in any way they can and I submit that they do engage in distortion, innuendo and half-truths to exaggerate the problems of the company to get an even steeper decline in share price that might otherwise have been.
It doesn't take the passive observer very long to appreciate that this is exactly the reason why message boards are suddenly flooded with a large number of short-traders willing to bash the company and intimidate other Posters with their in-your-face approach. Tony excelled at this. If he had any compassion for the small investor I certainly missed it.
Short-traders that publicly bash and mash aren't interested in waiting for a company to fall on it's own weight. They want to bring the share price down hard and fast so they can get on to their next target.
Point 3, again, I agree. Shorting a scummy company will bring more profits than shorting an honest one, but that really isn't the issue here. I submit the classic short & distort tactic that we see so often on these message boards is to find a troubled company and then present it in the worse possible light. Distortion is acceptable and encouraged.
Mary, your basic argument is that short-traders perform a service to all investors and the market in general by weeding out the bad dishonest companies. And, on a certain level I agree with you. However, it is the manner in which they bash that is repugnant. They use embarrassing truths about a company to give credence to their own distortions. They don't do it because they care about the little investors that are about to lose their shirts, they do it for their own personal enrichment. They are not there to objectively assess the company's plusses and minuses, or to create a better more transparent company, they are there to undermine the share price, pure and simple.
Certainly, not all short-traders engage in this kind of behavior, but the ones that do, in my book; aren't heroes. They are ethically impaired opportunists who have found an easy way to make money by sitting in front of their computer screens.
JMHO |
