Is Shorting Stocks Un-American?
Whenever the stock market tanks, I can expect a phone call from my father within a few days asking, Is this craziness hurting you at all? Each time I explain that more people come to Seeking Alpha seeking information when the market melts down so, in that respect, it actually helps me. I also remind him that I'm not trading as much these days as I was last year, but, even if I was, I could profit by riding the wave of a down market.On a more frequent basis, I get kicks out of reading message boards for cult stocks like Sirius XM (SIRI) where longs classify shorts as evil, even immoral souls set on destroying any company or stockholder in their paths. Similarly, I was recently fascinated by Apple (AAPL) longs, who claimed the options marketmanipulates their stock on a regular basis.Taken together, these experiences support a theme that many of us sort of pick up by osmosis at a young age -- it's only natural, and maybe even righteous, to be long stocks. On the flip side, I wonder if any meaningful number of investors consider shorting stocks un-American or, at least, something less than patriotic?As a society, we certainly use the stock market as one gauge of the nation's collective health. That logic could lead you to make the connection that if you bet against stocks -- even one -- you're hoping for a catalyst, any catalyst, to take the stocks you're short down, even if that catalyst brings the broader market down with it. Given the angst Main Street spews at Wall Street, however, I think it's odd that we connect a rising stock market to a thriving economy to a happy, vibrant and upwardly mobile populace. In fact, movements such as Occupy Wall Street appear to hold to just the opposite theme.If we live in the land of opportunity, it only seems natural that investors would go for the jugular when any hint of vulnerability presents itself. I do think, though, that a large core of investors would never even think of shorting an American company. It's as if by putting your money on a General Motors (GM) decline you're not looking out for the best interests of your nation.But I think what people who despise short sellers miss is that most everything is temporary in the stock market. The trade will not go the short's way forever. And, when it stops going their way, they've got to cover, which, in theory, sends the stock higher. In a squeeze situation, buying frenzies often ensue. Simply put, I think shorting actually makes for a healthy stock market. To ban it, ever, even temporarily during a time of crisis, intervenes in one aspect of the market that actually operates quite efficiently most of the time.