Christopher Fildes

The market’s favourite scapegoat

Christopher Fildes on short selling

issue 05 July 2008

Oh, dear, what a setback. The usual suspects have slipped through the net. They will have to be locked up in the Financial Services Authority’s waterside fortress for 42 days, while the investigators try again to find some evidence.

These suspects are the short sellers: everyone’s favourite scapegoat. They are accused of rocking the banks’ leaky boats, of destabilising the stock market, of profiting from other people’s misfortunes, of driving share prices downwards to suit their own book. If it wasn’t for them, we should all be rich, or richer, at any rate, than we are now — or so we are led to believe.

The textbook way to become a short seller is to borrow some shares and then sell them. You hope to be able to buy them back at a lower price, and then return them.

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