April 15, 2009
Whether or not the up-tick rule or other halt mechanism is instated is irrelevant for the long-term health of our equities markets. Good companies don't go out of business because of short selling they go out of business because they are too thinly capitalized or are experiencing/experienced poor managerial decisions or simply bad luck. Lehman Brothers would not have been susceptible to a bear raid had the company been better capitalized. The same is true for Morgan Stanley and Goldman Sachs immediately prior to the temporary suspension of shorting financial institutions last year. That nearly all the major financial services firms were poorly capitalized and therefore at risk of a bear raid, is more a reflection of poor oversight and regulatory authorities turning a blind eye of their obligations than anything else.
On a different note, I've heard and read comments arguing against shorting because of the volatility generated during a short-squeeze. Somehow, none of them mention anything regarding volatility enabled by margin trading or other common trading practices.