Cramer: Shorts Are Not, Should Not Be Equal

This column was first published on RealMoney at 7:08 p.m., July 22, 2008. For more commentary on today's action from the RealMoney writers, click here for a free trial.

Today will be riotously ugly. Today's a day where you could take down a Capital One (COF Quote) or a Citigroup (C Quote) -- some bad credit card exposure there -- off of American Express (AXP Quote). You can bang down Nat City (NCC Quote) into oblivionville off of it and hammer Merrill Lynch (MER Quote) to the point where you could hear the rumors fly of capital needs. Freddie (FRE Quote), merciless Freddie, right at ya. Today's the day when the uptick rule would be the only friend to the notion of owning stocks without fear every minute, fear that they will break your stock. Today's the day that the uptick rule can save Lehman (LEH Quote) from $14 or lower. Today's why we need it.

Yet, every time I do a piece that talks about the need to reinstate the uptick rule or enforce the naked short laws, I am immediately greeted with the same nonsense: why should the longs get protection the shorts shouldn't? In fact, other than the usual gang of two -- Patrick Byrne and David Patch -- I don't get any positive feedback on these pieces like the one I did last night on "Mad Money."

Why aren't they treated equally? First, I question constantly how anyone could even think they are treated equally: I think the shorts are now heavily favored because they can instill fear and panic that the longs don't have the ability to do. They can destroy businesses -- the ultimate goal -- and the longs can't. I don't like that, I don't like it because the great history of the stock market shows that it works better if we regulate the shorts, to make it so they can't overwhelm the longs. The creation of wealth, not the destruction of wealth, is what the market is supposed to be about, it is why it is worth participating in at all, otherwise the mattress or bonds -- only good for the most solvent of operations -- make more sense. Wealth creation is what the stock market's about. That's not what the shorts are about. They can exert a well-needed discipline on valuation. They can even exert a regulatory role in the absence of any serious regulation about the finances of a company. But otherwise, their contribution to society can't really be stressed as something that should be the republic's goal to preserve and protect. The public's interest could do better without them.

Let's say the goals of the stock market are equal, wealth destruction and wealth creation. Then I would 100% favor total equivalence and would laugh at the uptick rules and the naked shorts rule that makes it so easy to sell stock without borrowing it. If you believe that wealth destruction deserves equal protection, I am dead wrong. I think that's a preposterous proposition, right down to the preamble of the Constitution.