I understand that the percentage of the total float is a meaningful statistic as it would indicate the magnitude of the net short position, but to my mind the percentage of the total trading volume is even more important. Apologists often comment that there is a buyer for every seller, as if the shorting does not distort the trade, and that is true to some extent. However it is the nature of shorting that is damaging. On a thinly traded stock, motivated shorts can flood the market and create instability entirely due to the shorting itself. Shorts can be unwound gradually to minimize the reverse effect. And therein lies the problem.

I am sick to death of hearing nonsense about how shorting is healthy for the market and that it creates liquidity, etc... As one who is frequently short myself, I call BS on that! I am short specifically to make money on the trade and I do not give a big rats ass whether a company is healthy or a scam. I am simply looking for a fast buck when I smell weakness. And that is fine since I trade in the order of a few thousand shares here and there. But if you unleash the massive liquidity resources of a hedge fund with a systematic selling blitz onto a thin trading stock, you are doing damage to the company and to the market.

Anyone that may doubt this, consider that shorting bans have been effected at times when entire sectors have been in trouble in the past. Less than 3 years ago a ban was put on shorting of banking stocks. Last time I checked the financial sector was an order of magnitude greater in market cap than the mining stocks. And I thought shorting was so good and healthy for the market? Pure BS! Its a rigged game, run by crooks, and policed by crooks.

Do not look for any support anytime soon. I think the shorts will attack any stock they think they can make a fast buck on, and even when the shorts run sour, I do not expect anything but more manipulation and dirty tactics.

That is not to say I am bearish on the mining stocks. I think the exact situation now applies to the stocks that we saw in many metals nearly 10 years ago. The prices have been run so low that they are compelling buys by any value metrics, and there are few weak sellers left to spoil the party. The shorts are exposed and vulnerable. There is very little profit left to squeeze on the downside and great loss potential to the upside for these crooks. Even if a compliant and regulatory agency will not enforce sanity on this sector, mother nature is about to do so.

I believe a wave of money is going to flood into the mining stocks that will overwhelm any manipulation that may counter it. I think in the end, a quiet bailout will have to be arranged just to save some of the crooks that have gone so far out on a limb, specifically to screw you and me with our holdings in the mining sector. I try to be a cheerful and forgiving man, but I do admit I would like to stab one or two of these hedge fund goons with a pitchfork myself someday if it comes down to a riot in the streets...

I think we are seeing the smart money cover some of the abusive shorts in the sector right now. SLW trends higher yet again, and appears to have broken the barrier at $40. If anyone wants to tell me that barrier was real and part of normal trading activity, I have a bridge in NYC to sell you.

cheers!

mike