Short-selling is not the problem by mattsteinglass
March 13, 2009, 6:33 pm
Filed under: Economics

One of the most irritating things about Jim Cramer’s performance in Jon Stewart’s remarkable interview with him…

…is where he tries to argue that he’s doing his best to end the “shenanigans” by campaigning against short-selling. Short-selling is not the problem. The first business story I ever got involved in was a story for “Wired” magazine about a Belgian computer voice recognition firm called FLV, the Flanders Language Valley. We killed the story because a short-seller explained to me at length that the entire company was a fraudulent shell corporation that was creating fictive subsidiaries to offload its debts onto, and booking nonexistent revenues from its own subsidiaries’ purchases. It was the Enron strategy, but about a year before Enron broke. People invested in the company tried to tell me the short-seller was just talking his position. He wasn’t. He was absolutely right, and a year later the company collapsed and its principles were sentenced to prison. Short-selling is not the problem. It’s just as easy to lie when talking a stock up as when talking it down. The problem isn’t short-selling; it’s lying.


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