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SHORT SELLING of LEHMAN,AIG,CITIGROUP,BEAR STAERNS; PRICE v.VALUE

January 23, 2009

Analysis of:Bank shares gyrate as short-selling ban ends | business.timesonline.co.uk

Short selling seems to get the blame for shares poor performance. How about lousy management? What about highly paid analysts and investment bankers who promote garbage for giant fees? No matter how much stock is sold, a healthy companies' value will be realized over time. Brokerages however get paid way more when they promote a stock and the price goes up healthy or not. Less shares can be used for a deal for instance and more loans can be made as the price rises. Most people know the price but not the value of shares in general. Shorting is a useful hedge against many things. But if shares are promoted to unrealistically high prices amidst overly rosey forecasts and someone is willing to pay that price it is up to that buyer to do their due diligence. Not many companies write sell reports because it is more lucrative to write buy reports. Shorting is riskier in general, but good analysis can pay off both long and short. The game is about due diligence.

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