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Thanks for your comments!

Sorry, I still don't get it. I actually understand how shorting works, having done that myself. As Bill said, it is essentially profiting from the knowledge of inefficiency in a company and betting that at some point becaused of that the share price will go down. Similarly I understand a thing or two about hedge funds and using shorts to hedge one's investments.

What I don't get is if you ban hedgefunds and shorts except for the commodity producers, what is really lost? It is true that the opportunity for the smart people who figure out what is wrong with a company goes away but that is not what market should be. It is like being rewarded to solve a puzzle or discover a piece of info that does nothing for others. The idea that shorts eventually make a company realize its wrongdoings is too far fetched. They will realize it anyway.

I don't understand that in the absence of shorts stock market will rise into a bubble and collapse. It happens even with shorts. Bubbles are easy to spot once valuation exceed certain metrics. Staying in the market at high valuation is an individual's risk. Of course if you introduce more and more trading mechanism, they will all find a place in the market and impact the market. Of course some people will make money out of it. But just because something impacts the market does not mean it is neccessary for the market.

In my perception (could be faulty), all this business about hedging, shorting and options trading is nothing but a betting racket and market manipulation mechanism that smart and rich people use to get rich without producing anything. Some sort of legalized online gambling that is not random. ....with the exception of commodity producers and traders where hedging, and futures trading help in long term production planning.
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