My experience is that short sellers do far better analysis than long buyers because they have to. The market is biased upward over time-as the saying goes, stocks are for the long run.

Pressure to produce over the short term - a gun to the head of everyone - encourages excessive risk taking which manifests itself in several ways - fully invested posture at all times, the use of leverage, and a market centric orientation that makes it difficult to stand apart from the crowd and take a long term perspective.

At the worst possible moment, when your fund is down because cheap things have gotten cheaper, you need to have capital, to have clients who will actually love the phone call and-most of the time, if not all the time-add, rather than subtract, capital.

Ultimately, nothing should be more important to investors than the ability to sleep soundly at night.

Short sellers age in dog years.

The government can always rescue the markets or interfere with contract law whenever it deems convenient with little or no apparent cost. (Investors believe this now and, worse still, the government believes it as well. We are probably doomed to a lasting legacy of government tampering with financial markets and the economy, which is likely to create the mother of all moral hazards. The government is blissfully unaware of the wisdom of Friedrich Hayek: "The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.")

Investors need to pick their poison: Either make more money when times are good and have a really ugly year every so often, or protect on the downside and don't be at the party so long when things are good.