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Key Insights Into Short Selling


Readers Report

KEY INSIGHTS INTO SHORT-SELLING

Specialized expertise--particularly medical expertise--is not unique to short-sellers ("The secret world of short-sellers," Cover Story, Aug. 5). Virtually every Wall Street brokerage firm employs one or more former physicians or scientists as research analysts to evaluate biotechnology and health-care stocks. So do many "long-only" investment institutions, including Dreyfus Corp. and Alliance Capital Management.

Great investment research--both on the long side and on the short side--results from leveraging that expertise with shoe leather. Emotional responses, such as those of the short-sellers who "despise" and brokerage analysts who "love" a particular stock, can trip up even the most diligent analytical efforts.

Teena L. Lerner

Riverdale, N.Y.

Short-selling, like long-term investing, is nothing more than taking a position on a security--based on an informed opinion--and waiting to see if you're on the right side of the trade. It is for this reason that regulatory agencies spend countless dollars ensuring that brokerages include the key phrase: "There may be a loss of capital trading securities" in every disclosure document, whether account application form, advisory newsletter, or fund prospectus.

M.J. Rollo

Senior Investment Strategist

International Offshore Investments Group Inc.

Vancouver, B.C.

Heavy short-selling shifts the supply curve to the right, so it crosses the demand curve at an artificially low price. That's how short-selling hurts stock prices. If shorts try to close their positions all at once, there isn't enough stock and the price goes ballistic. That's how it causes price volatility. We don't need anybody monkeying with the supply curve. The article was an annoying whitewash of an unnecessary practice.

Erwin Aldinger

Glen Mills, Pa.Return to top

PRESERVATION, SURE, BUT AT THE RIGHT PRICE

Maxxam Inc., its Pacific Lumber Co. subsidiary, and Charles E. Hurwitz are willing to make Headwaters Forest and a 1,500- to 1,700-acre buffer zone available for public preservation, so long as there is just compensation for it, as guaranteed by the Fifth Amendment to the Constitution ("Save California's redwoods--but not this way," News: Analysis & Commentary, Aug. 5).

Recognizing the high value of this property, Maxxam, Pacific Lumber, and Hurwitz have made clear their willingness to be creative and flexible in terms of the compensation.

A swap of assets that, together, constitute just compensation is the way to preserve Headwaters.

Robert W. Irelan

Vice-President, Public Relations

Maxxam Inc.

HoustonReturn to top

GET THE U.S. UP TO SNUFF ON BOMB SLEUTHING--NOW

In your article "Where are the bomb sniffers?" (Science & Technology, Aug. 5), John W. Wood Jr., president of Thermedics Inc., says that it is ironic that someone wishing to be screened by the latest American explosive-detection technology must fly out of a European airport. I believe "despicable" or "shameful" are the more appropriate words.

Such inconsistencies in antiterrorist policy are inexcusable. It is unbelievable that such luggage-screening devices are not used at U.S. airports. Public opinion in the U.S. must pressure the government to follow its European counterparts in exhausting all preventative measures to prevent terrorism.

Pedro Mackay

Monterrey, MexicoReturn to top


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