Comments on Alan Kohler “The phantom menace”, 26/05/2009, http://www.businessspectator.com.au/bs.nsf/Article/The-phantom-menace-pd20090526-SDSSL?OpenDocument&src=sph
The phantom menace of short selling means it is destabilising and increasing the volatility of stock market. Its merits in increasing the liquidity of stocks is noted, but speculators should be using other market instruments to bet on any stocks falling.
For that purpose, there are options and warrants available for many stocks. By using those derivatives, the phantom menace can be avoided, while still providing the opportunities for speculators to speculate a fall in any firms' prices. It also prevents the so called free rider problem by the promoters of short selling.
Any excessive market volatility and unnecessarily destabilising forces should be avoided if possible. Speculations can be good if properly used, but they can be also destructive, causing unnecessary strife to firms. It can be a force to destroy social productive assets and values. The gains by speculators are not worth the pains to the society.