Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 1
Could someone plz explain Bill's comments on "price discovery"? Why are shorts important?

Because a healthy system involves allowing investors to profit from their evaluatory edges. You want a situation where people have an incentive to look for problems. It does not solve bubbles, but having short selling be banned eliminates an extremely healthy component of a free and fair market.

"Banning shorting" makes no sense in a healthy market. You're essentially forcing investors and speculators not to be able to hedge. This makes no sense with commodities (farmers use forwards all the time to essentially "short" the stuff they're currently growing, as do drillers). It allows the people who are risk averse to participate in a market that they otherwise might not.

Bill Mann
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.