Most winners in play-money investing games end up wishing they'd invested real dollars. Not in this year's Stock Market Game for students in grades four through 12, run by the Securities Industry and Financial Markets Association. Well, except for that team that shorted Wachovia Corp. (NYSE: WB) in late September; they managed to more than double their fake money.

The lessons learned may be exactly the opposite of those the Securities Industry board had hoped.

The kids started the game shortly after school began this fall, so most students have experienced a steep slide in their faux portfolios. One student had it worse: he played the game last year and decided to try it out this year with real money, saving his birthday and Christmas money to buy into a mutual fund. Now he's afraid to open his statements (his fund is down 44.9% this year).

Michael Ashworth, a 13-year-old Delaware middle schooler interviewed by the Wall Street Journal, had been getting excited about investing and had asked his mother for stocks for Christmas. After the market downturn? "I told her not to do it. I asked for a parakeet instead," he said.

Perhaps the rest of us would do well to follow the lead of Mr. Ashworth. If not a parakeet, perhaps a flock of chickens?

Ted Allrich is the founder of The Online Investor and author of the just released book: Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he'll offer advice to investors who are just getting started.

There's a way to make money on falling stocks. It's called "going short" or short selling. But before you put in your order, you need to know exactly what you're doing and the consequences. One of them: You can lose an infinite amount of money when you short a stock. Maybe reading further is a good idea.

We've all had stocks that have dropped dramatically in a day or two or week, sometimes 50% or more. What took months or years to achieve is lost in a matter of hours. Wouldn't it be nice if you could make money that fast, or at least make money from stocks when they go down? You can if you short a stock and understand the total concept.

First, shorting a stock means you sell something you don't own. The process is simple: You put in an order to Sell Short a stock, and your broker executes the order, if the stock can be shorted. Sometimes certain stocks aren't allowed to be shorted but that's another column. Let's deal with the ones that can.

The SEC recently eliminated the 'uptick rule', which was put in place after the Great Crash of 1929 in an effort to prevent bear raids. The rule mandated that stocks could only be shorted on an uptick -- the price of the short-sale had to be higher than the last price.

Some commentators, including Chuck Jaffe, are complaining that the end of the rule has allowed short-sellers to pile into stocks more easily than before. And maybe that's true. They complain that this has increased the volatility of the market, and maybe they're right.

But here's the problem: There's really no particularly intelligent justification for the rule. Short-sellers are already required to go through the cumbersome process of borrowing shares before they short. If we're really concerned about the uptick rule making it too easy to short and drive prices down, shouldn't we also implement a downtick rule? That way it would be harder for pumpers and promoters to drive up the prices of stocks.

Of course we shouldn't do that. That would be insane. But it's really not substantially less crazy than the uptick rule.

We have tons of regulations on short-sellers, and the fewer we have the better it is for America -- effective short-selling keeps things from getting out of hand like they did in the internet bubble. It also provides an incentive for investors to uncover fraud. The market has such a bullish bias, and it's great that people can also make money by looking for signs of trouble. That's what makes a market.

According to Hennessee Group, the hedge fund industry had a good June. The average hedge fund posted a 0.88% return. This compares to the S&P's -1.8% performance for the same period.

So far for this year, the average hedge fund has returned 8.7%. How about the S&P? It has clocked about 6%.

While interest rates have been an issue, the fact is that the buyout boom has been extremely helpful for equities. And as seen with the IPO filing of KKR and mega deals like the buyout of Hilton Hotels Corp. (NYSE: HLT), there still appears to be momentum with M&A and private equity.

It's also encouraging that hedge funds have been able to deal with the subprime meltdown. Interestingly enough, it looks like some hedge funds aggressively shorted subprime vehicles. Paulson & Co., for example, posted a 40% return in June because of its bearish bets (there's an excellent story on this in Bloomberg.com).

With credit agencies like S&P and Moody's reducing their ratings of subprime mortgage backed securities, there may be more shorting opportunities for hedge funds. There is also likely to be more pain for firms like Bear Stearns (NYSE: BSC), which have been on the wrong side of the subprime market.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

ShareSleuth, Mark Cuban's pet project (He calls it journalism) that seeks to uncover fraudulent companies has a new target: Orthopedic Development Corporation.

For those of you who are unfamiliar with ShareSleuth, the basic idea is this: Cuban hired a guy named Christopher Carey to do investigative research into companies that may be engaging in deception and then write about them on the website. The way that Cuban pays for it is where it gets a little controversial: Before the "picks" are posted on the website, Cuban is told about them and he shorts them. This is all disclosed on the website, and Cuban bills it as a new type of financial journalism.

While I don't have any problem with what Cuban and Carey are doing, I'm not so sure it should be called journalism: Journalism is paid for through the sale of publications and advertising. ShareSleuth is more reminiscent of the work of Manuel Asensio, an investor who put out research reports slamming stocks he was short.

The site received a fair amount of negative publicity, and its latest pick differs from its first two picks, Xethanol (AMEX: XNL) and Utek (AMEX: UTK). Orthopedic Development isn't public and, as such, Cuban has no financial stake in the company. The choice of a non-public company may be an effort to appease those who complained about the supposed conflict of interest in the earlier picks, but I'm not impressed.

The problem with exposing a non-public company is this: Who cares? There's no way that we can seek to profit from the expose, and it's just not very interesting. Public fiascoes are much more fun to follow.

Meanwhile, Mark Cuban is writing about his colonoscopy on his blog. That could possibly be less interesting than the piece on Orthopedic Development.

Although short selling -- the practice of selling borrowed shares with the hope of repaying the loan by buying back the shares at a lower price -- goes against the American belief that stocks always go up, I have long been fascinated with it. Short Stories discusses what works, what doesn't, and what some of the leading lights in shorting stocks think about its opportunities and threats. I describe possible short trades and I seek your comments and questions for story ideas. I don't offer any investment advice and I don't trade on any of the posts I write.

Last November, I analyzed Bally Total Fitness (NYSE: BFT) and concluded it was a good candidate for a short sale. With its announcement today that it may file for bankruptcy, that looks like a good bet. If you had shorted BFT at $2.53 on November 6th and closed your position at today's $0.67, your return would have been 278%.

Back then I was concerned that hedge fund giant Stevie Cohen, who had bought shares of the company, knew something I did not -- his fund, SAC Capital Advisors, owned 6.9% of BFT. I guess Stevie can afford to lose money on BFT which had $827 million in outstanding debt as of March 14, and said that it may need to reorganize its operations under Chapter 11 if it's unable to restructure that debt. BFT also noted that it won't be able to file its Form 10-K for the fiscal year ended December 31 by today's deadline and it sees a loss from continuing operations for 2006.

I still don't know what Cohen saw in this investment but he still owns a 32,000 square foot mansion in Greenwich, CT -- and I don't.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Bally.

McDonald's Corporation (NYSE:MCD) seems like a very nice company, notwithstanding the fact that it sells a lot of food that can give you coronary artery disease. The company's quarterly earnings were excellent. Revenue went up 10% to $5.88 billion, and net income rose at an even better rate to $843 million.

After all the good news, McDonald's stock moved to a 52-week high of over $42. The stock has been as low as $31.48 in the last year.

So, why does McDonald's have the largest increase in short positions of any stock traded on the NYSE? Not only was the increase large, it was spectacular. Shares short in McDonald's went from 13.1 million to 60.5 million in the month ending in mid-October.

For a short position in a large company to rise 20% or 30% is not odd. But for it to increase by a factor of four times is almost unheard of.

McDonald's stock has not been this high in over six years. And, if it adds a few dollars, it could hit an all-time high. That, by itself, may be a reason to believe that the stock could come down some. Just a little bad news can take shares back a few rungs once they have had such a substantial run.

But if McDonald's continues to do well, whoever bet against them could lose a lot of money.

Douglas McIntyre is a partner at 24/7 Wall St. He does not own securities in companies that he writes about.