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To: russet who wrote (1976)	1/9/2004 8:15:10 AM
From: tyc:>	Respond to of 313060

.."Naked short selling is fraudulent, it is the sale of something that doesn't exist". (I wrote this for my own benefit, and then thought it was good enough to share with others. Excuse me if it it is of no interest) Is naked short selling any different than selling non-existent real estate to unsuspecting investors ? It is very different. What the buyer of common stock bargains for is the BENEFITS to be afforded by ownership each share of common stock issued from treasury. The naked short seller undertakes to provide those benefits while he is short, including an undertaking to pay the full market price when he covers his short. This undertaking is guaranteed by the daily mark-to-market activity of the brokerage house which ensures that there is always sufficient cash in the margin-short account to make this repurchase. Most people see the the expectation of rising market prices as the benefit of common stock ownership, and they object to an activity that might prevent rising prices. But while short selling increases the float of a stock, it doesn't diminish the real benefits that accrue to each share of treasury stock..... Shorted shares must be repurchased eventually... so the ultimate benefits are not diluted. The value of a common stock doesn't depend on the size of the float, it depends on the number of shares issued from treasury.. If market prices are depressed by an increase in the float without an increase in treasury shares, the effect is only temporary...and the buyer of common stock should take advantage of the opportunity presented. But my experience is that an increase in the float enhances market prices by providing the liquidity required by big buyers. Owners of common stock should therefore thank short sellers for increasing the liquidity of their stock. More egregious is the manipulation of stock prices to the upside by owners of a limited supply of stock. This is what dilutes the benefit accruing to the investment dollar. Strangely, this manipulation of prices is popular with buyers who see advantage in the increasing in market price. The advantage is illusory. The manipulators do not guarantee to buy the stock back.