Short Sellers Aren't Evil

Short Sellers have become the latest "whipping boy" in the on-going drama with the financial markets.

Currently, the SEC has temporarily banned short selling on a list of 799 financial stocks.

As reported on CNBC, this list seems to have been quickly thrown together - some CEO's have questioned why they were not included on the list, and some were surprised when reporters told them that their stocks were on the list.

Chicago Tribune reporter Joshua Boak reported on Saturday that many exchanges, traders, and economists have been outraged by the ban, and warned that this could disrupt the flow of the markets.

In fact, the SEC has since modified the ban to allow market makers to short stocks - to help maintain liquidity and an orderly market.

Proponents of short selling argue that "investors are best served when they can hear both the reasons to buy and reasons to sell any given security."

Boak went on, in a separate article, to explain his personal experience with short sellers. Back in 2005, when he wrote for the Toledo (Ohio) Blade, Boak investigated the State of Ohio's $50 million investment in rare coins.

It turned out that pension money was invested in shares of Greg Manning auctions - which bought and sold rare coins, stamps, etc.

Shares in Manning Auctions took off after a majority stake was bought by a Spanish company called Afinsa Bienes Tangibles. This company bought postage stamps from money invested by Spanish and Portuguese pension funds. They kept the stamps in a vault and paid the pension funds 8-10% a year.

Short sellers suspected that Manning Auctions was being supported by Afinsa, and that Afinsa was a Ponzi scam - using new investor money to pay old investors.

The short sellers contacted Boak and the Blade - who ended up exposing the scam.

So, he credits short sellers with saving 143,000 pensions.