The recent crap about short selling really has me scratching my head. There is not way that the short sellers caused the recent problems in the financial markets and much more likely are a reaction to the utter bullshit some company CEOs were coming out with.
It is perfectly normal with a balanced hedging strategy to go long in some stock or securities and short in other complimentary stocks or securities. The idea being to more granularly manage your exposure.
The guy who short sold Lehmans simply did not believe what he was being told by the Lehman's management and decided they were in big trouble and backed that hunch with a large short position. Remember that when you take up a short position your potential profits are capped, the price cannot fall lower then zero after all, but your potential liability is unlimited. Being "caught short" in this situation can be very very painful.
Shorting is necessary tool in an investors arsenal and simply banning the practice in a knee jerk way will have as yet unforeseen negative consequences.
