11–18 of 18 posts
Naked shorts are basically selling counterfeit stock and should be banned. If I saw a naked short seller being burned at the stake, I wouldn't even spit on them. Covered shorts are a way of renting out a long-term investment that you do not need at the moment. Renting out equity means that the arbitrageurs use it to make the market more efficient. This gives a buyer an improved price today and a seller an improved pr…
Does anyone recall the studies about markets or securities where shorts are banned? I seem to recall that onion commodities cannot be shorted and have a great deal more volatility because of it.
http://chla.library.cornell.edu/cgi/t/text/pageviewer-idx?c=...
In America, it's currently Memorial Day, when we celebrate the people who have fought and died to defend our freedoms -- even freedoms that seem bad. Our soldiers carry our flag into battle and die for our right to burn that flag in protest of their actions.
I hope you aren't an American, given the way you so flippantly propose throwing away freedoms because it might hurt poor little society. "Society" isn't a thing. There are only people. If you propose a change in the laws, then you need to argue about individuals and the liberties they will gain or lose, the freedoms that will be protected or weakened. If you propose throwing away some liberty, you must make a very strong case indeed, as it is much easier to destroy liberty than to win it back.
You are essentially proposing that we take freedom from traders to give security to stakeholders. (Nevermind the fact that stakeholders are often the traders.) That is almost never a win. Without liberty, there is no security. Just ask any slave or dictator's subject.
Lets assume there is not just no social value, but a negative social value to shorting. I fail to see how you can make the leap from saying that shorting is bad for society to saying that we should ban shorting. Alcohol is bad for society, we should ban alcohol. Television is bad for society, we should ban television. In America, it's currently Memorial Day, when we celebrate the people who have fought and died to de…
But seriously there's no reason to get so strident about it these days. Because of rational pricing (http://en.wikipedia.org/wiki/Rational_pricing), it's extremely doubtful you could find a single economist at a respectable institution who thinks shorting is bad.
In a sense, it's such a abstract issue that I can never see a politician stirring populist sentiment against the sober advice of economic policy advisors. It's simply a short term fail-safe to give politicians time to act.
The fund policy was to hold no positions in any firm that violated Catholic doctrine in any way.
His response was something like this:
"Shorting and derivatives like options tend to reduce the volatility of an asset and hence, tend to improve the credit rating of the firm. So shorting can actually help a firm receive funding from banks that are reluctant to lend if the stock price is more volatile. That being said, I would not condemn anyone for shorting securities of firms engaged in immoral behavior."
Earlier quoted context omitted.
Ahh, ok, so blind speculation about even positive outcomes is dangerous (and I can see how this can be just as abused as shorting). So, I can see why paying attention to who is shorting and why they are shorting it is equally important. Personally: I'm by no means a financial person — just super curious about the usury and trading world and the recent blow up that occurred. I'm also super curious to see how economics…
" Blind speculation " on positive outcomes is I'm pretty sure fantastically worse, that's a cause of the worst sort of bubbles, the ones that destroy money wholesale (deflation), with sobering examples like the Great Depression and Japan's two Lost Decades (and counting ... and only WWII broke us out of the Great Depression). Whereas covered short selling pretty much by definition has limited effects; for the purpose…
Shorting sends information and that has serious utility. Having faith in all people, all companies, all industries, all technologies (e.g. buggy whips, punched card ADP) is delusional. If you're basing a ban on short sales on that, you're just sweeping problems under the rug, ones which will get worse and eventually bite back. Question: are you interested in efficient allocation of capital or something else, and if t…
Ahh, ok, so blind speculation about even positive outcomes is dangerous (and I can see how this can be just as abused as shorting). So, I can see why paying attention to who is shorting and why they are shorting it is equally important. Personally: I'm by no means a financial person — just super curious about the usury and trading world and the recent blow up that occurred. I'm also super curious to see how economics…
Regular short selling is fine, and provides information, liquidity, a mechanism to enable Put options, and a much-needed reality check to sometimes irrationally exuberant markets.
The difference is that with regular short selling, the stocks you're borrowing to sell and then buy back later (hopefully at a lower price than you sold them) actually exist, and haven't also been simultaneously loaned to other short sellers.
Naked Short Selling is where some nefarious market participants exploit flaws in the DTCC to short sell many times more shares than are available for loan. This creates enormous, artificial downward pressure on the stock price of the company being naked shorted, which can destroy the company and turn its stock into penny stocks, while providing immense profits for the naked short sellers. It should be illegal everywhere.