Betting Against Wall Street's Bears |
| Washington Post - Jul 18, 2008 |
Short sellers sometimes elicit strong opinions among investors. The practice, in a nutshell, involves selling borrowed shares, which the short seller hopes to replace later at a lower price. Because short sellers profit when stocks fall, critics often demonize them as nothing more than nattering nabobs of negativism, in the immortal epithet of Spiro Agnew, Richard Nixon's first vice-president. But ask others and they'll tell you that short sellers keep the market honest by doing the kind of painstaking research that can poke holes in the rationales of analysts who've never met a stock they didn't love -- or want to foist on you.
Wherever the truth lies, it's clear that short-selling is a huge part of the market today. Short interest in the stocks that make up Standard & Poor's 500-stock index has risen to a record 3.6% of the shares trading in those stocks -- far exceeding any figure since 1931, according to Thomas Lee, an investment strategist with JPMorgan. Some 36% of S&P 500 stocks have at least 5% of their float (shares that actually can trade) sold short. Some 18% of S&P stocks have more than 10% of their float sold short.
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- Posted: 2008-07-18 09:56:34
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