Subject: File No. 4-581
From: Phillip V Hamilton
Affiliation: Mathematics student, Actuary

August 17, 2009

Bias against short selling has existed for literally hundreds of years and blamed for nearly every financial malady to have occured in history. This has, unfortunately, taken the place of other more prudent reflections on the effect of poor decision making, overzealous risk taking, and euphoric price bidding.

The fact of the matter is that short selling alone cannot keep price valuations collapsed for extended periods of time. Consider that if one man sells a stock short, then attempts to cover his position, in a near instantaneous fashion, he will make no money. There are only two methods to profit from this behavior: the first is to buy from another short seller, and the second is to buy from a individual who is releasing a long position.

If no longs exist to sell, then the shorters can only feed off of each other, up until such point as the last ones attempt to cover. Then that unitary group will drive prices back, tempting longs to relinquish a position so that they can cover their contract. Ultimately, then, long term price valuation lies with the aptely named "longs".

Blaming shorters for the 2008 plunge in the market is like blaming the plumber for clogging your drain. A far better argument can be held on the topic of leverage and marketplace credit instruments, which enabled grotesque overvaluation for the past 20-30 years and set up this unparalled destruction of wealth.

What must not be permitted is to allow of number of inept legislators to attempt to "fix" a system they know nothing about for such misguided reasoning as "creating a level playing field". It is obvious that such men and women wish nothing of the sort intending instead to create a radically unlevel playing field with overwhelming bias to the long side of the market, through litigation against those who attempt to earn wealth from sane price valuations, by stripping basic legal checks that are intended to prevent bubbles like this previous one from forming, and through unsound fiscal policy and sweeping destruction of currency.

Ultimately, the market came down not because short sellers thrust it too low, but because it has, for decades now, been far too high.