Are short traders doing the job of the SEC?

I used to be one of they people that would blame short traders for killing companies stocks and pushing the stock market down out of greed.

But now I have change my tune. Why? Well I now realize that is simple, short traders would not take their positions if they had solid concrete factual information that a company stock is way overvalued. That means that they do their research real well if not they would stand to loose serious amounts of money for their funds. Short traders look at the overall picture of a company and how is position to compete in the short term economic picture.

For some reason short traders have done a pretty good job identifying those companies that are not been well run, that are cooking the books and saying one thing to investors while their balance sheets go up in smokes.

Now I hear that the SEC want to suspend short trading for a period of time because they are creating instability in the markets. Really?! Are the big bad short traders creating this chaos or is the SEC with their poor regulations and "turning their face to the other side" approach that has resulted in this situation.

I wouldn't trust the SEC for nothing, I would better check what the shorts feel about a company before investing a penny on it.

The only thing with short traders is that you can manipulate VERY easily to make money by trading short.

Imagine the hypothetical situation of how you are going to short-trade some airline stocks. Why, just have them crash a couple of airplanes into some buildings, and all of the sudden, you have millions in profit just waiting to be reaped.

Of course, you may have to let it go, and never collect the profits, once people realize you short traded those stocks. So, your plan may have to be more subtle than that. Oh, if only I had an example from recent history to show you how this would work!

While there are short traders who actually do their homework, etc., to make their money, it is MUCH, MUCH easier to manipulate the market to make money if you are so inclined.

After all, notice how hard it is to get people to believe a stock is undervalued?

[edit on 16-9-2008 by sir_chancealot]

Put enough money against a stock falling and it will fall because the wall street people want the percentage so they will follow the money and MAKE the stock go broke. Put enough money on a commodity like wheat or oil and citizens all over the world have to pay more fore those commodities. Apparently they call it the free market economy. These people are very sophisticated.

Yup I saw this one coming. Just blame the shorts, evil shorts that are creating havoc in the stock market. This move would only delay the inevitable and once the shorts are allowed to come back the financials are going to be drag to where they certanly belong... to the bottom.

www.independent.co.uk...

Short Traders add ZERO value to a company... They are useless... The market was NEVER intended to exploited in this manner. The purpose of the market is for companies to sell stock in order to gain capitol to start/expand their operations. Short Traders invest just long enough to siphon off the gains brought about by long term investors.