So you sell a security that does not belong to you: Is that a naked short? If yes, how can that be legal if they are not paying a fee to the owner?
Most of the talk about how bad is short selling is just not very informative: There is nothing wrong on this activity in itself. I think it is perfectly rational and ethical to short a stock from a company that you think is going down.The hedge funds that shorted Lehman or Enron not only were right and made money in between, they unintentionally signaled that something was rotten in those companies (yes, the invisible hand). Not the heroes of Ayn Rand, just another butcher providing dinner to itself and the community (yes, again Adam Smith).
Having said the above I do think short selling securities in a naked way (see an older on this subject) is just plain theft. What the custodian or borrower of somebody else securities should do is engage in a borrowing transaction with the owner of these assets and pay a fee if required --could be zero, my point is the transaction should exist. This is not only the ethical way to proceed, but the unintentionally efficient one as "sands in the wheels" to this activity in markets prone to "overshootings" seems to me to be the best answer, or second best, given that markets are far from perfect (as much as I like Adam Smith).
No comments:
Post a Comment