Overvaluing Short Sellers
TOOLBOX   Resize
 Save/Share +
COMMENT |
Discussion Policy
CLOSE
In his July 21 op-ed, "Throwing Honesty Out the Window," Sebastian Mallaby argued from a false premise -- that ""short sellers" of stocks are "market watchdogs" who perform a public service by alerting other investors to troubled companies.
Buying short, despite Mr. Mallaby's argument, does not invariably push down the prices of overvalued stocks; if it did, nearly every stock with a price-to-earnings ratio over 15 or so would be shorted -- in other words, most of the stock market. Nor do short sellers habitually publicize their intentions. If they can make a profit from spotting trouble, they have nothing to gain by sharing the wealth with anyone else. Mr. Mallaby may be right that the market needs no more tinkering right now, but using short-selling to make his case sent him in the wrong direction.
BUDD WHITEBOOK
Washington
