The popular opinion is that shorting a company is evil or cruel and the act of doing so grinds a company into the dirt so that rich people can get richer. I have heard loads of people repeat this and it is clearly the opinion that most people have, and I have been downvoted many times for suggesting otherwise here and in other places.
Short selling is not, in fact, evil. and no, I am not defending the hedge funds. What they did with GME was worse than intentionally driving the price down (which is not what they did), what they actually did was engage in levels of capital management stupidity that rivaled the pumping and massive long positions on margin in mortgage backed securities prior to 2008. Every single investment firm that was short GME and did not close their position as soon as they saw that ilthe stock was over 100% shorted should go out of business.
Shorting a stock that is 140% shorted is really, really stupid, because you are exposing yourself to immense risk of a very big squeeze and being forced to close your position at a massive loss that far exceeds your initial investment without any chance of holding the position until the price comes back down after the squeeze. Any professional capital management firm that shorts a 140% shorted stock and then loses their shirt during the inevitable squeeze deserves to be bankrupt and deserves zero stimulus or bailouts because they fucking suck at investing.
If you think that the act of shorting itself is somehow immoral or intended to drive the price down, you do not understand what shorting is. It is no different from taking profit or bailing out on a long position, and nobody considers that to be evil. Closing a long is the exact same thing as opening a short, the difference is that short selling is done on margin and you run the risk of getting shares called back and being forced to close at a loss, plus there is unbounded downside risk and you can only gain 100% returns on your principle. Shorting is fine and not a bad thing, it can be a useful tool for ALL investors, but it has caveats that give it additional risk compared with long positions and if you do not take that risk into consideration (like Citron) then you are just a bad investor.
In fact shorting can bring companies back from the dead as short sellers take profit on the fall of a stock. Short selling can make the difference between a vertical cliff crash in a long-only market, and a slow decline in a balanced short-long market, buying a company valuable time to find profitability.
The stupid risks by elites with political power over the system are not exactly stupid per se, they’re more like evil, corrupt, dishonest risks..... Risks taken with the calculation that you’ll get bailed out if you lose due to the power you have over the government. Same thing with the S&L scandal. Disregard for the economic consequences to everyone else as long as you’re still high on the hog.
Trump said “our leaders are so stupid” regarding China, because that explanation is less controversial than the reality, but that wasn’t the real issue. The real issue is that they’re corrupt and will sell out the country and merge with the CCP if they think they can make money off of it. That’s the real problem. Disregard for the population as long as you’re still in the oligarchy.
If they were ethical then they’d just be stupid, but they’re not ethical and the reality is that it’s corruption.
Well yes, I agree. Capital management funds are free to take "stupid risks" because they know their corrupt government buddies will undermine the free market and bail them out if they fuck up.
This is what is evil, not short selling. We should all be allowed to take on the risks associated with volatile or unbounded-risk investments, but we should ALL have to suffer the consequences of those choices equally, big firms and government officials should not be exempt and play by different rules. When they fuck up, they should burn like everyone else would in the same position.
I agree that short selling isn’t bad in theory, honestly though I still wonder if it should be illegal or more limited somehow or if put options should be used instead. But what do you think about naked short selling? I mean being able to borrow, sell, then borrow what you sold again to sell it again seems like a massive recipe for abuse.
Of course it should not be illegal. You might as well make it illegal to sell a long position too at that point, or make trading on margin illegal.
Naked puts are even riskier than shorting common stock (just as risky as naked calls) and are derivatives so they don't drive the price (as much).
This is why it is a red flag when Nancy Pelosi buys 1M in calls. They could easily expire out of the money and worthless, and she would lose the entire premium she spent. Nobody buys 1M in naked contracts without knowing something. The fact that New TSLA dealings were announced a week later means she should be in prison.
And it doesn't work like you said, because you have to BUY to close out a short sale of common stock, which drives prices up. You don't short, drive the price down, and then immediately profit because you now owe a debt that varies in value greatly with time to whoever you borrowed from.
Thats how short squeezes work. People short, price goes up, the short sellers owe stock to someone and they have to buy it back but don't want to pay more to buy it back than what they originally sold for, so this drives the price up further, more short sellers have to buy to cover, ect. Ect. So anyone that shorts a stock will eventually drive the price up in the future when they close the position, just like any long buyer will drive the price down when they eventually sell to take profit. Until then, any and all gains or losses are unrealized.
The popular opinion is that shorting a company is evil or cruel and the act of doing so grinds a company into the dirt so that rich people can get richer. I have heard loads of people repeat this and it is clearly the opinion that most people have, and I have been downvoted many times for suggesting otherwise here and in other places.
Short selling is not, in fact, evil. and no, I am not defending the hedge funds. What they did with GME was worse than intentionally driving the price down (which is not what they did), what they actually did was engage in levels of capital management stupidity that rivaled the pumping and massive long positions on margin in mortgage backed securities prior to 2008. Every single investment firm that was short GME and did not close their position as soon as they saw that ilthe stock was over 100% shorted should go out of business.
Shorting a stock that is 140% shorted is really, really stupid, because you are exposing yourself to immense risk of a very big squeeze and being forced to close your position at a massive loss that far exceeds your initial investment without any chance of holding the position until the price comes back down after the squeeze. Any professional capital management firm that shorts a 140% shorted stock and then loses their shirt during the inevitable squeeze deserves to be bankrupt and deserves zero stimulus or bailouts because they fucking suck at investing.
If you think that the act of shorting itself is somehow immoral or intended to drive the price down, you do not understand what shorting is. It is no different from taking profit or bailing out on a long position, and nobody considers that to be evil. Closing a long is the exact same thing as opening a short, the difference is that short selling is done on margin and you run the risk of getting shares called back and being forced to close at a loss, plus there is unbounded downside risk and you can only gain 100% returns on your principle. Shorting is fine and not a bad thing, it can be a useful tool for ALL investors, but it has caveats that give it additional risk compared with long positions and if you do not take that risk into consideration (like Citron) then you are just a bad investor.
In fact shorting can bring companies back from the dead as short sellers take profit on the fall of a stock. Short selling can make the difference between a vertical cliff crash in a long-only market, and a slow decline in a balanced short-long market, buying a company valuable time to find profitability.
The stupid risks by elites with political power over the system are not exactly stupid per se, they’re more like evil, corrupt, dishonest risks..... Risks taken with the calculation that you’ll get bailed out if you lose due to the power you have over the government. Same thing with the S&L scandal. Disregard for the economic consequences to everyone else as long as you’re still high on the hog.
Trump said “our leaders are so stupid” regarding China, because that explanation is less controversial than the reality, but that wasn’t the real issue. The real issue is that they’re corrupt and will sell out the country and merge with the CCP if they think they can make money off of it. That’s the real problem. Disregard for the population as long as you’re still in the oligarchy.
If they were ethical then they’d just be stupid, but they’re not ethical and the reality is that it’s corruption.
Well yes, I agree. Capital management funds are free to take "stupid risks" because they know their corrupt government buddies will undermine the free market and bail them out if they fuck up.
This is what is evil, not short selling. We should all be allowed to take on the risks associated with volatile or unbounded-risk investments, but we should ALL have to suffer the consequences of those choices equally, big firms and government officials should not be exempt and play by different rules. When they fuck up, they should burn like everyone else would in the same position.
I agree that short selling isn’t bad in theory, honestly though I still wonder if it should be illegal or more limited somehow or if put options should be used instead. But what do you think about naked short selling? I mean being able to borrow, sell, then borrow what you sold again to sell it again seems like a massive recipe for abuse.
Of course it should not be illegal. You might as well make it illegal to sell a long position too at that point, or make trading on margin illegal.
Naked puts are even riskier than shorting common stock (just as risky as naked calls) and are derivatives so they don't drive the price (as much).
This is why it is a red flag when Nancy Pelosi buys 1M in calls. They could easily expire out of the money and worthless, and she would lose the entire premium she spent. Nobody buys 1M in naked contracts without knowing something. The fact that New TSLA dealings were announced a week later means she should be in prison.
And it doesn't work like you said, because you have to BUY to close out a short sale of common stock, which drives prices up. You don't short, drive the price down, and then immediately profit because you now owe a debt that varies in value greatly with time to whoever you borrowed from.
Thats how short squeezes work. People short, price goes up, the short sellers owe stock to someone and they have to buy it back but don't want to pay more to buy it back than what they originally sold for, so this drives the price up further, more short sellers have to buy to cover, ect. Ect. So anyone that shorts a stock will eventually drive the price up in the future when they close the position, just like any long buyer will drive the price down when they eventually sell to take profit. Until then, any and all gains or losses are unrealized.