I have no problem with shorting as a market strategy. It is just that when the shorting is laid on such that it distorts the entire market balance when it becomes a problem. Recall that when the Hunt Bros were accused of manipulation in the silver futures market, they were punished not because the act of buying up silver was illegal, but because their proprietary trading strategy was distorting the entire market. Fine. Then impose the same standard on shorts, and mandate that they are limited in the scale and scope of their market action such that they cannot imbalance the trade.

I will not hold my breath awaiting such action from the inept crooks that regulate our markets.

As for AUM, the numbers are not quite as bad as they appear. AUM trades a fraction of the total volume of its US listed counterpart AUMN. Often there are pros just running arbitrage, ie. they go short one market and simultaneously buy in the other, to pocket the spread from price imbalances. If the US dollar outperforms the Cando, as we saw for much of last week, then we get selling on TSX and buying on AMEX to cash in on that variance.

Nonetheless I do think there is a real problem in that shorts are accounting for a big chunk of the total trade. The strategy worked well for them with ECU, as they could trigger rampant selling and capitulation among longs and then cover at much lower prices, pocketing fat profits along the way. I suspect the story with AUM will not be a fun for the shorts. Firstly because I believe the mining stocks are about to catch wave of money flow that will blow the shorts out of the water, and secondly because I think the share structure and fundamentals for the combined AUM are much stronger than the lame duck ECU and therefore I do not expect AUM to trade at a discount for long.

cheers!

mike