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.
Trading on margin isn’t illegal, but it is more limited now than it was in say 1920. My vague understanding is that the 1929 crash was caused by insane margin trading like 1000%.
I guess what I’m getting as is, can you think of any limit on short sales that would prevent the “stupid” corrupt risk taking by hedge funds? I mean the obvious answer is “don’t bail them out” so they just destroy themselves, but it seems impossible to prevent this sort of political corruption.
Blocking short sales will not prevent corruption. The only solution is "dont bail them out." Banning shorts of common stock has all kinds of really bad consequences for the market and doesn't fix the problem. Its like the NFA. It makes it confusing and hard as hell for law abiding citizens to own a rifle, but does literally nothing to stop criminals.
The fact is, markets go down sometimes, and if you eliminate the ability for people to react to that or profit off of it, you fuck a whole lot of people over and the markets too. The consumer needs to be able to bet against companies as well as for them, or you will have major, major crashes in the market all the time, or you will make it confusing AF as to what a short sale actually is. The reality is that short selling is just regular selling, but you borrowed the stock first, so do you prevent people from borrowing stock? How does that work when our entire economy runs on lending?
Unfortunately the ONLY solution is capitalism and eliminating corruption. Until we do that, we will have cronyism and pseudo-controlled economic dystopia, like some sort of half-asses pussy form of communism that just doesn't suck as much as the real thing but still sucks pretty bad.
Trading on margin, by the way, is a fantastic way for the underclass to break out of poverty, provided you are responsible. Margin is basically required for day trading.
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.
Trading on margin isn’t illegal, but it is more limited now than it was in say 1920. My vague understanding is that the 1929 crash was caused by insane margin trading like 1000%.
I guess what I’m getting as is, can you think of any limit on short sales that would prevent the “stupid” corrupt risk taking by hedge funds? I mean the obvious answer is “don’t bail them out” so they just destroy themselves, but it seems impossible to prevent this sort of political corruption.
Blocking short sales will not prevent corruption. The only solution is "dont bail them out." Banning shorts of common stock has all kinds of really bad consequences for the market and doesn't fix the problem. Its like the NFA. It makes it confusing and hard as hell for law abiding citizens to own a rifle, but does literally nothing to stop criminals.
The fact is, markets go down sometimes, and if you eliminate the ability for people to react to that or profit off of it, you fuck a whole lot of people over and the markets too. The consumer needs to be able to bet against companies as well as for them, or you will have major, major crashes in the market all the time, or you will make it confusing AF as to what a short sale actually is. The reality is that short selling is just regular selling, but you borrowed the stock first, so do you prevent people from borrowing stock? How does that work when our entire economy runs on lending?
Unfortunately the ONLY solution is capitalism and eliminating corruption. Until we do that, we will have cronyism and pseudo-controlled economic dystopia, like some sort of half-asses pussy form of communism that just doesn't suck as much as the real thing but still sucks pretty bad.
Trading on margin, by the way, is a fantastic way for the underclass to break out of poverty, provided you are responsible. Margin is basically required for day trading.