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- Editorial Market Commentary -

November 5, 2010 (FinancialWire) (Investrend Forums Syndicate) (By Mark Faulk) (Go to http://www.financialwire.net/?s=cmmtry for all recent commentaries.) — Editor’s Note: This post is the second a continuation of a multi-part series. The initial post is available via Investrend Syndications (at http://www.investrendsyndications.net/12-content/manl/faulk/2010/10/php/25.php).

In reality, legal or not, all short selling is manipulative. Our federal regulators have never been able to properly police even legal short selling, and it is increasingly becoming nothing more than a predatory practice aimed at deliberately manipulating down the stock prices of targeted companies, especially in recent years with the unbridled proliferation of hedge funds.

If a stock is overvalued, excessive selling will eventually drive the price back down to a fair value. Do we really need short sellers to speed up the process, to give the stock a push off the cliff as it reaches its peak? Is there really a valid argument that our financial market is the only corner of our free enterprise system where the normal rules of supply and demand are inadequate?

I think it’s time for real advocates for stock market reform to look further than simply policing naked short selling, and to push for stronger enforcement of short selling in general, or even a permanent ban on short selling altogether. The real problem is that as long as hedge funds (which are now owned or controlled mostly by the mega-banks such as Goldman Sachs) are unregulated and allowed to operate in total darkness, they will find a way to utilize short selling to manipulate stock prices in public companies of all sizes.

…to be continued…

(Receive all of this article series by Mark Faulk via Investrend Syndications by writing to content@investrend.com with “More Faulk” in the subject line.)

Mark Faulk, author of “The Naked Truth: Investing in the Stock Play of a Lifetime”, which chronicles an incredible true story of fraud in our financial markets (at http://www.thenakedtruthbook.com/), has written over 150 articles on the topic of financial reform and naked short selling since 2004, and has logged hundreds of hours in radio and television interviews. He is currently working on a major documentary about financial fraud, due to be released in early 2011.

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