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. I'm here to get downvoted again.
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 huge long positions on margin in mortgage backed securities that they took prior to 2008. Every single investment firm that was short GME and did not close their position as soon as they saw that the 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.
Was it easy money to short a brick and mortar hardcopy software dealer in the digital download era during a fake pandemic that half the world is panicking over? Yes, and it was also easy money to go long on MBS prior to 2008, and easy money to short the VIX prior to and after 2008, because EVERYONE was doing these things. The whole point of making money in the market is to figure out what everyone else will figure out before everyone else figures it out. If you figure it out after everyone else, you lose money proportional to how many people were doing the exact same thing before the "big news" hits. But everyone long on MBS got FUCKED in 2008. Everyone shorting the VIX got FUCKED in 2008, 2018, and again in Jan 2019. And everyone shorting GME got FUCKED a few days ago. This is called being late to the party and overstating your welcome, and it is what capital investment firms should know better than to do, especially on margin. But they do it anyways because it is profitable until it isn't, and act surprised when a nuke goes off in their bank accounts a few years later. They literally get paid to protect people's money from risk, and they take extremely risky positions like shorting GME. They should go bankrupt.
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.
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. I'm here to get downvoted again.
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 huge long positions on margin in mortgage backed securities that they took prior to 2008. Every single investment firm that was short GME and did not close their position as soon as they saw that the 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.
Was it easy money to short a brick and mortar hardcopy software dealer in the digital download era during a fake pandemic that half the world is panicking over? Yes, and it was also easy money to go long on MBS prior to 2008, and easy money to short the VIX prior to and after 2008, because EVERYONE was doing these things. The whole point of making money in the market is to figure out what everyone else will figure out before everyone else figures it out. If you figure it out after everyone else, you lose money proportional to how many people were doing the exact same thing before the "big news" hits. But everyone long on MBS got FUCKED in 2008. Everyone shorting the VIX got FUCKED in 2008, 2018, and again in Jan 2019. And everyone shorting GME got FUCKED a few days ago. This is called being late to the party and overstating your welcome, and it is what capital investment firms should know better than to do, especially on margin. But they do it anyways because it is profitable until it isn't, and act surprised when a nuke goes off in their bank accounts a few years later. They literally get paid to protect people's money from risk, and they take extremely risky positions like shorting GME. They should go bankrupt.
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.