17 replies to this topic

[securelstmile]

Short-selling of borrowed stocks is not unpatriotic, and I see nothing wrong with it. As people mentioned, it makes a market and provides liquidity.

On the other hand, naked short-selling of individual stocks by brokers is at least unethical, if not illegal, as is naked short selling of commodities by large traders.

If shorting was unpatriotic than any business where you sell goods you don't officially own would be unpatriotic. So the farmer who sells the corn he hasn't yet grown or the small business owner who sells t-shirts he hasn't yet received from China are both going short.

But the farmer presumably has resources to grow the corn and he is shorting to hedge the crop in the field. Just as the individual stock trader borrows stock from another account holder and puts up cash as collateral to cover the loan of the security. Both of these scenarios are totally different from naked short-selling by commodities traders and stock brokers.

I see naked short selling as just fraud. Same as if someone sold you something they had no intention of producing.

[denleo]

Printing money like there is no tomorrow is unpatriotic. Denleo

[arbman]

Printing money like there is no tomorrow is unpatriotic.

Denleo

It sure squeezes the short sellers out of their positions though...

[Mr Dev]

If you are free to make money and pay taxes isn't that what this country stands for?

What could be more American !

[no_mind]

I like this quote of Warren Buffett: "Markets are there to serve you, not to instruct you. You can often find a couple of companies that are out of line. Find one; get rich. Most people think that what the stock does from day to day contains information, but it doesn't. It isn't just something that wiggles around. The stock market is the best game in the world. You can take advantage of people who have no morals. High prices inside of a year will typically be 100% of the low price. Businesses don't change in value that much. That is simply crazy. There are extreme degrees of fluctuation, and Mr. Market will call out the prices. Wait until he is nutty in one direction or the other."

[...]

"Naked" short selling of futures? It's called speculation. Someone selling something they don't intend to produce is no different than someone buying something they don't intend to use. Both are purely speculative. All speculative selling, whether spec long liquidation or outright shorting, affects prices to some extent (if nothing else, the bid drops a tick one lot sooner if I sell one lot than if I don't.) It can turn into manipulation if enough size is involved. But that's what CFTC position size limits are designed to prevent. Whether they do or not is open to debate. However, there's absolutely NOTHING illegal or fraudulent about so-called "naked" shorting of futures by non-commercials so long as position limits haven't been exceeded. You can't and therefore aren't required to borrow an intangible, that is, the obligation to make delivery of goods at some point in the future. No current payment to you for goods takes place, and your futures margins only assure the broker that you can pay any loss you may sustain in the meantime. Which is wholly different than selling/shorting a share of a stock that currently exists (either as a physical stock certificate or a book entry which can be turned into a certificate) and must be currently delivered and for which you currently receive the sale price. On another aspect of this, while (future) liquidity from short covering at some point down the road is one "benefit" of short selling, much more important is the contribution of short selling to price discovery. Legitimate short selling helps to move prices toward "real" value more rapidly. Which is why one can make a good case for the elimination of rules against trading on "inside" information. Those rules exist because legislators didn't think it "fair" that those with the inside information should benefit from it. But, of course, all market participants have differing levels of intelligence, experience and information (other than inside information) in general, so no market is ever "fair." Restricting the use of inside information means that markets are less efficient than they could be, and has unintended consequences. For instance, shares of a failing company that might be sold down more rapidly if the insiders were free to act on their knowledge may remain aloft longer, causing some people to buy who might not have done so had the stock become a falling knife. Trying to make markets "fair" just substitutes one set of winners and losers for another. Which is close enough for government work.

[Rogerdodger]

Restricting the use of inside information means that markets are less efficient than they could be, and has unintended consequences. For instance, shares of a failing company that might be sold down more rapidly if the insiders were free to act on their knowledge may remain aloft longer, causing some people to buy who might not have done so had the stock become a falling knife. Trying to make markets "fair" just substitutes one set of winners and losers for another. Which is close enough for government work.

I like the consideration of "unintended consequences" and...
Trying to make markets "fair" just substitutes one set of winners and losers for another.

Usually those who think short sellers are unpatriotic are the ones left holding the bag.
There are a lot of "patriotic" holders of Enron, K-Mart, Worldcon, etc.

[greenie]

Shorting is not patriotic, but buying QID is