Don’t Hate Me Because I’m Short. In Defense of Short Selling


You may not be enjoying the current market tumble, but many short sellers are. But don’t hate them. They’re performing an important service as I described in this post from my first month of blogging.

The Small Investor

I was planning to talk further about the investing plan today, but a story today about a new book coming out, “The Big Short” by Michael Lewis on NPR made me decide to post a commentary in defense of short selling instead.  One can read about the book on NPR’s website:

http://www.npr.org/templates/story/story.php?storyId=124690424

I have been short at various times.  Short sellers are demonized in general by society as somehow anti-capitalist, anti-society, and even evil.  When you buy long, you are “injecting capital into the financial system and supporting free enterprise”.  When going short, you’re “hoping that others will lose and companies will fail and people will be out of work”.  Even the IRS treats short sellers differently, in that a short sale is considered a short-term gain and taxed at the higher rate no matter how long it is held open (check this, I’m not an accountant).

Let’s look at…

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