Subprime mortgages were in the set of bs fantasy valuations. Their puncture did hurt other people.

...but for the individual who spots a bs fantasy valuation - logic suggests shorting the stock.

You can't short just because you think a stock is over-valued. You can only short when you both think a stock is over-valued and will soon hit a correction. It's that second part that makes shorting dangerous because you can't just call it; you have to call it at the right time.

True, and I considered hedging that phrase. Then I reconsidered, as it's pretty much implicit in the notion of shorting.

The same can be said for investing in a long position.

No, you can hold on to a long position forever; the most you can lose is the amount you invested.

> If you aren't an investor or otherwise involved in one of the company's with a "bullshit fantasy" valuation, how does the "bullshit fantasy" valuation hurt you at all?

Gee, I don't know. Maybe it has something to do with the government giving away 700 billion dollars to financial companies burned by rampant bullshit fantasy valuations...

TARP money wasn't "given away", it was loaned.

The banks have paid back all that money and the US treasury made a profit. The auto industry has also paid back their portion, but the government still holds some stock in the companies, so people can debate whether that portion of it is really "paid back".

http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program

and http://www.financialstability.gov/latest/tg_10082010.html

I should have phrased my question as limited to valuations of tech/software companies only, since that seems to be what we are discussing here.

> I should have phrased my question as limited to valuations of tech/software companies only, since that seems to be what we are discussing here.

OK, then. When the web 1.0 bubble burst in 1999, a whole lot of people lost their money. Bullshit valuations make the stock exchange a snake-oil market.