As I sat at home on this early Saturday morning doing some research, I ran across an article I wanted to bring to your attention.  First, I want you to notice the title.  Next, I want you to notice the publication. And finally, I want you to ask yourself if the title/claim lives up to its expectations. 

The title of this piece is "How to Sell a Stock Short," published in Smart Money.  Once again, we have another journalist who most likely has never shorted a stock in her life, yet acting as some experienced pro. 

The most disturbing thing about this article other than the fact that she didn't show the reader how to short stocks, is the fact that Smart Money is engaging in the facilitation of the stock market casino mentality by even discussing the most risky technique for investors. 

As I have stated in the past, under virtually no circumstances should non-professional investors even consider shorting individual stocks. The only possible exception of course is when they are virtually certain of a collapse in share price, which is virtually impossible for anyone to know, professional or non-professional. 

I only mention this rare and difficult to determine exception due to the fact that I was able to identify spectacular shorting opportunities for the mortgage, bank and homebuilder stocks back in early 2007 with the release of Cashing in on the Real Estate Bubble. 

Seeing this trash really ticks me off because it adds to the momentum out there to popularize shorting, which only introduces extreme risk to non-professional investors.  What could be the motive in the article?  Well, think about it.  Wall Street loves this type of trash because it brings more dumb money into the picture. 

I don't expect all non-professionals to understand the full risks of shorting stocks, nor the compliance involved for brokers who wish to short stocks for their clients. But all of you professionals out there know that compliance is extremely rigorous. In the vast majority of cases, most of the big Wall Street firms simply will not permit their brokers to solicit shorting transactions for their clients. 

Yet, with just a click of your mouse, you can short virtually any stock using an online broker; why?  Because they have set up the perfect business.  They essentially have no liability for allowing you to blow yourself up, unlike Wall Street firms.  This of course explains why online brokers have sold you this grand epiphany that you can "do it yourself."  The only thing for certain you can do yourself as far as investments are concerned is blow yourself up. 

Now let's have a look at this useless article.

http://www.smartmoney.com/Investing/Stocks/Active-Trader-How-to-Sell-a-Stock-Short/?afl=yahoo

If this is smart money, I'll take the dumb money. 

Let me point out that the reporter departs from her initial teaser (shorting a stock) into an advertisement for short funds.  First, she mentions Federated's bear mutual fund without bothering to point out that the performance is miserable.  Understand that only since around late 2007 has the fund even yielded decent NET returns. 

At this point, perhaps you are thinking to yourself..."I don't see how this article is so atrocious." If I have described you, it means you have no idea how to short stocks.

I am going to send all subscribers to the newsletter a portion from Cashing in on the Real Estate Bubble, where I provide a brief tutorial on the shorting process; not because I want to encourage you to short stocks. Quite the opposite.  I want to encourage you to never short stocks because it is extremely risky. 

Until you have experienced one or more of the many things that can go wrong when taking individual short positions, you really have no idea of the potential danger in this maneuver.  Let me save you some money; potentially a lot...never short individual stocks. 

I'm going to send this tutorial so you can see just how useless and reckless this Smart Money article is. But I also want to send it to you so you can gain an appreciation of the complexities and uncertainties involved when shorting stocks. 

Now, if you appreciated this head's up, do me a favor and a favor to all of your fellow Main Street investors and email Smart Money. Tell them you do not appreciate such an irresponsible article that tries to make the most risky investment maneuver mainstream, nor do you appreciate the uselessness of the article. Tell them to stick to what they were trained to do - report news.  And you might want to add that they need to stop with the spins and bias because readers want value, not agenda-filled trash that only benefits their financial industry sponsors. 

letters@smartmoney.com

Perhaps even more discusting is reading the favorable reviews for the book by what are obviously sheep.  I'd like to see how this book (published in 2007) helped these guys make money over the past two years. I'm willing to bet any amount of money they got blown out.

Okay, so is his message to stay out of college and use your money to become a stock trader?  What is this guy doing writing a book about investing????  GIVE ME A BREAK. 

Every idiot with MS Word is an investment expert these days.

The sad thing is that these useless books sell because America is the land of the stupid.  And they wonder why they get blown out of the stock market.

In Part 2, I will discuss in detail the performance of these funds the author mentions, showing you that they really don't look so good as one might expect.

http://www.avaresearch.com/article_details-360.html

Printing Version More On Asset Management