THE BALONEY BLITZKRIEG MARCHES ON: Since there seems to be such a high level of interest, as evidenced by the comments I received before I even broached the issue, I guess I'll toss in my two cents on all this "naked shorting" baloney. I devote a chapter to the subject in Wall Street Versus America, but here's the executive summary:

First let's be clear about something: short selling, "naked" or not, is good for investors. That's a proven fact that has been demonstrated time and time again. However, since short-selling wagers on stocks declining, it is viewed as almost un-American and has been used as a scapegoat since the Crash of 1929 and before. However, you need short-selling if you want to have smoothly running, efficient markets. You need that negative input in the process of pricing stocks.

Unfortunately, the mechanics of short-selling have always made it hard to short the stocks that require shorting the most -- illiquid, frequently manipulated, microcap stocks. The Securities and Exchange Commission, via Regulation SHO, actually made it harder for professional traders to short microcaps. That's because to do so you have to do it by "naked" shorting, and SHO pretty well stomps that out.

The SEC should have made it easier to short crap stocks. Instead they made it harder. Now is that dumb, or what? I personally have never shorted a stock and I think it is foolish for amateur investors to try -- almost as dumb as it is to speculate in microcaps. But hey, if you're going to bet on the damn things, you should have the ability to short them as well as buy them, just as you can with large-cap stocks.

And if that drives down the price of the stocks -- so much the better. If the companies are any good, the shorting gives investors an opportunity to buy them at discount prices. I love a bargain, don't you?

So it's really very simple, but the short-bashers have swathed the whole thing in baloney so much, gummed up the debate with so many red herrings and distortions and incorrect assumptions, that it's really a shame. The shame is that a lot of the people who are most upset about shorting of their fave companies would actually benefit the most if it were allowed to flourish. After all, these are great companies, right? And if their companies aren't so great, their beef should be with the companies, not the shorts.

In my book I go into detail on this, but that's the summary.

One thing I find disturbing about this naked shorting business lately is how the anti-naked-shorts have engaged in some really underhanded, cynical tactics to advance their stupid cause. Lately they've been -- oh my, how unique this is! -- bashing the media left and right.

For example, I've seen circulated on the Internet supposed exchanges of correspondence and communications from reporters (note this post and others on the SABEW blog). The transparent aim is to drum up a phony hate-media hysteria. Note the reference to an unrelated payola scandal in this anti-shorting website, replete with this swill:

How many journalists do you think Wall Street pays off every year to write agenda articles? 1% of the total? 2%? 5%? 10%? If there are 500 financial journalists in NY and the surrounding areas, 2% would be 10. Anyone naive enough to think this is an isolated issue is living in a fool's paradise.

This kind of bonehead rhetoric is typical of the Baloney Brigade. And as for the ranting by Overstock's Patrick Byrne about Sith Lords and such -- the only journalistic issue that I see is that some people in the media have actually taken it seriously. I saw one broadcast journalist, a gent I respect, actually give a platform to some of this silliness.

Journalists have a duty to their readers and viewers to call that kind of rhetoric what it is -- baloney. Funny how I keep coming back to that word.