James Altucher is a financial journalist for The Wall Street Journal and founder of Stockpickr.com. His articles cover every angle of the market; he also stars in feature videos with other financial luminaries. He is the author of Trade Like a Hedge Fund, Trade Like Warren Buffett, SuperCa$h, and The Forever Portfolio.

He has taken a controversial path lately with numerous articles in the New York Post and Huffington Post. Some articles include: "Global Warming Is a Myth," "Should Insider Trading Be Made Legal?" "School of Hard Cash," "The Internet Is Dead (as an Investment)," and "5 Myths the Recession Taught Us."

Rumors of a new addition to the James Altucher library have entered the blogosphere, so I met with James to discuss a possible new book and the response from his recent aggressive views on finance and the stock market.

House Financial Services Committee Chairman Barney Frank has a new proposal to regulate bank transactions. Some of it is OK and some of it perpetuates the abuses that brought Lehman and other financial institutions to their knees.

First the OK part. Frank's proposal would require over-the-counter derivatives to be traded on listed exchanges and sold on exchanges or processed through a regulation platform. This is not good enough. We need transparency for each and every trade done by each and every financial institution. That means that all trades must be done on a listed exchange and cleared through a clearinghouse. All of this data can be put on computers and monitored daily. Then if some trader goes beyond established guidelines, he will be shut down immediately.

The Securities and Exchange Commission has a new point man to head up the compliance division of the agency. His name is Robert Khuzami. Mr. Khuzami is former federal prosecutor.

Mr. Khuzami wants to use subpoena powers to gain cooperation with the SEC in fraud and all kinds of trading schemes and violations. The subpoena power would be given to staff investigators. This is a marked change from the previous policy, which required the Commission to grant subpoenas. Other changes would include plans to submit more immunity requests to the Justice Department.

Remember the fall of Lehman Brothers? During that debacle, 38 millions shares of Lehman were sold as naked short sales, driving the price of Lehman shares to practically zero. The U.S. Securities and Exchange Commission (SEC) stood by and did nothing. To this day, whatever investigation into the Lehman failure was due to short selling is not clear. The SEC has not made the names of the naked short sellers public. The Lehman bankruptcy involved securities fraud under SEC regulations. Why aren't the principals being prosecuted and convicted? The SEC has the power to ban firms and individuals from doing business and impose harsh fines on those convicted in this case.

Short selling has gotten a bad rap lately. If you look at the markets with an open mind you will see that there are people who believe that stock XYZ is going up and Joe the investor wants to buy it to make money. Yet if you talk to a dozen people there will be those among them who say that stock XYZ is no good, that earnings are bad and that the stock will drop further. Here is where the notion of short selling comes into play. If you allow an investor to buy XYZ stock, it is not fair to prevent an investor from selling XYZ stock. Markets are always two sided. There are buyers and there are sellers, otherwise... why have a market?

In the UK, a number of hedge funds are about to sue the Financial Services Authority claiming that it did not have the proper authority to curb short-selling, which cost the funds million of pounds. The FSA is a first cousin of the SEC and performs a similar role.

According to The Telegraph, "Lawyers are being galvanised on behalf of a raft of hedge funds which claim the financial watchdog has illegitimately extended its powers and caused 'wide-spread capital destruction.'"

Whether or not their argument has legal merit, it does have a certain amount of fairness on its side.

Naked shorting, a practice in which investors bet a stock will go down without properly borrowing shares to cover the trade, has always been illegal. The act of shorting itself has for decades been a legitimate enterprise. It acts as a check-and-balance system so that stocks do not rise relentlessly without those who believe they should fail having a stake in the matter.

The SEC has not only done financial harm to a number of hedge funds, it also has taken all of the teeth out of a process that has given trading in stocks an economic and market legitimacy.

If hedge funds sue, they are in the right and ought to prevail.

Douglas A. McIntyre is an editor at 247wallst.com.

A lot was said this past week in regard to the SEC attack on rumor mongering and willful misrepresentation of facts for the benefit of naked short sellers. One point that I'd like to make perfectly clear is this: The SEC's indicated desire to quash the spreading of false negative information by, and for the benefit of, manipulative short sellers, is nothing even remotely akin to a First Amendment issue. The First Amendment does not give protection to slanderers, liars, and sabotage artists. I'd also like to make clear my opinion that honest short selling is a positive, healthy, and necessary practice. I believe it helps to define and benchmark real value within the markets.

The Los Angels Times reported that SEC Chairman Christopher Cox may have his hands full in the wake of a measure that protects nearly two dozen large financial firms from naked short selling. The measure requires "anyone effecting a short sale in these securities (to) arrange beforehand to borrow the securities and deliver them at settlement." It's a rule that is long over due for enforcement and that shall most probably, at least temporarily, lay to rest some serious market abuses.