Subject: File No. S7-08-09
From: Conrad Choy

May 8, 2009

Short selling is somewhat necessary. There needs to be some serious driving factor to offset overvaluation in stocks.

As stock prices are driven up by speculators, and stock options for executives, there needs to be something that counters the unrealistic prices.

Over the long term, a stock's price should represent the fair market value and performance of a company. Currently companies manipulate their earnings per share by making layoffs or selling assets, just to protect their bonuses and stock options.

These poor business decisions run the stock prices up while running the company right into the ground. People cash in their options, and then cash out of the company.

The only way for anyone else to get anything out of this is to counter with the opposite, short sells.

The real people to blame for our economic fiasco are the unregulated credit default derivatives that were factored into earnings without consideration of liabilities. These things should at least have been booked as liabilities and held in escrow for the duration of the contracts. Its absurd for what is clearly a gamble to be recognized as revenue when it hasn't been earned.

The failure of the derivatives spawned a massive panic, and people pulled money out of the market. The result were shorts taking advantage of the situation to make money. It did help drive the price down, but it also drove it back to a necessary low to average out the excessive highs of the last 3 years.

This current massive run up will result in another run down, all to bring it back within a normal average. And again, the shorts will make money too.

If you ban shorts, then ban stock options too.