Should shorting be suspended/banned?

Trembling Hand said:

Nioka You are truly full of it!! You are a speculator in exactly the same way as I am.

What percentage of you investment capital goes directly to the company?? For their operation needs? VERY LITTLE!! I know you are going to post some example when you took up a rights or share placement But come on!! 99% of transactions on all markets are for the purpose of speculation. Whether its a period of seconds or years.

On another issue you are not the only one to come from a business back ground and I find your righteousness about the evils of shorts staggeringly ignorant. What happens in capitalism when one side gets a monopoly on price setting? BUBBLES.

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I think you should study business msnagement. That may give you an understanding of company capitalisation. Of course I am a speculator, an investment speculator. I also trade.

It's Snake Pliskin said:

Cordelia,

You have made this point in many of your posts.

Most like me are sick of the lies and rumour like attitudes of people who don't really understand what short selling as a whole provides the market with.

Naked shorts are not healthy for shorting as a topic in general I do admit.

Try some shorting it will show you why it is healthy for the market.

Cheers..

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I understand perfectly well why covered shorts are healthy for the market ..whateve r gave you the idea I didn't go back and read my posts properly and stop making a fool of yourself.....

Please show me where I have stated that covered short selling is not good for the market....

jeflin said:

I am against naked shorts but not shorting. They are a necessary counterweight to ridiculous valuations.

If the market depends on the longs to sell their shares, the bubble may extend infinitely before popping with dire consequences. There is little incentive for a person is holding onto an existing stock to cash out when the share prices continue to climb.

To allow prices to come back to a reasonable level, another group of investors (shortsellers) have to enter the market and their sole interest is to profit from a decline in prices and return back the shares thereafter.

By banning the short-sellers, one half of the equation of trading is disrupted. In extraordinary circumstances of panic, yes, but if it is indefinitely, then no.

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good post...well said...unemotional, factual but more importantly not aimed at insulting anyone...

nioka said:

I think you should study business msnagement. That may give you an understanding of company capitalisation.

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I don't have to. I left school at the age of 17 and 3 years later had my own business. 80% of the time since then I have ran/owned my own business. I doubt many here could match that.

nioka said:

That may give you an understanding of company capitalisation.

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Yes exactly why shorts are so important. Stops wasted capital and time on companies that use BS to run up their share prices and use that to attract even more capital that is used to prop up share prices to attract even more capital to prop up their share prices..........

Would you like an example. try ABC learning. Try Worldcom. Try Enron. Try Sunbeam.

It's Snake Pliskin said:

Investigate the lies psychic.

Lies do more damage to workers than shorters do.

Shorting is healthy for the market. It provides a bottom and is a catalyst for recoveries in price. So after all the mums and pops sell and shorters have made some they cover their short positions and up comes the price followed by some long traders.

Without shorting, the mums and pops will keep pushing down the price to zero.

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LOL, shorters drive the price down to zero and the mum and pops, end up with very little in their super accounts and end up relying more heavily on welfare (pensions). The companies then go bust and the workers end up on welfare(unemployment). Long-term depression, higher suicide rates etc etc.

Tell me again how shorters benefit the community



Tax payers support shorters behaviour, thats why its now banned.

psychic said:

LOL, shorters drive the price down to zero and the mum and pops, end up with very little in their super accounts and end up relying more heavily on welfare (pensions). The companies then go bust and the workers end up on welfare(unemployment). Long-term depression, higher suicide rates etc etc.

Tell me again how shorters benefit the community



Tax payers support shorters behaviour, thats why its now banned.

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You are deceiving yourself if you think shorters can drive the price down to 0 by themselves.

http://www.asx.com.au/data/shortsell.txt

Disclosed figures show around 1~2% short on ASX majors. Even with double that in undisclosed shorts, that's seriously insufficient to crash a share.

Most super funds are down 10~20%, depending on leverage and cash holdings. While that will hurt retirement savings, I really doubt if that will cause retirees to lose their nest egg and rely on pensions.

psychic said:

Tell me again how shorters benefit the community



Tax payers support shorters behaviour, thats why its now banned.

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psychic Shorters are the ones buying when everyone else is selling. The people that move the big volume in shorts need weeks like the last one to buy back the stock. So when everyone has given up and selling the shorters are the one providing the buy orders to produce the market.

In oz the shorters are not banned. Just naked shorts. In the US & UK some stocks have been temporarily banned from short selling.

As for how they are good to the community. I have to say if you can't see how they play a part in the market mechanics you have a lot to learn about the function of a healthy market.

besides the fact that without shorts there would be no options market. They are essential for price discovery and value setting. Tell me what do you think about oil at $150 a barrel. Would you like the shots to be banned in the oil market as well?????

nioka said:

What I do know is that the real reason for a stock exchange existing is for it to be a vehicle for the provision and maintence of the financial needs of a productive society.

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Nioka - I agree with a lot of the sentiment you express in relation to the purpose of the market and that as a general principle the products on offer in and around the market place should serve some productive function.

Where we differ is on a few points.

Firstly - shorting DOES NOT cause companies to fail or company share prices to collapse indefinitely - in the same way that massive buyups do not cause a company to succeed or a companies share price to rise indefinitely.

Bad businesses fail and good businesses succeed - and ultimately share prices move in line with the value of the business over the longer term. In the short term it can cause abberations but the prices of good companies will recover quickly in the same way that 'pump and dumps' on bad companies quickly lead to the price returning to its pre pumped level.

If a hedge fund 'attacks' the share price of a good business via a short selling campaign this provides a fantastic opportunity for fundamental investors because they can pick up a good business at significantly undervalued prices.

If a hedge fund 'attacks' the share price of a bad business via a short selling campaign this will not bother fundamental investors because they would already have taken their money out of the bad business recognising its price as over inflated vs its worth.

A while ago I started a thread on the topic that you raise (titled "short selling serves no market function"). The responses I got led me to believe that it can be argued that short selling serves some function (as a sort of 'bubble meter') and also to allow options market makers to provide hedge products for investors. As a result of that my main issue with short selling is both the lack of transparency surrounding it, and also the lack of risk management and awareness of risk of the stock lenders. I do not believe that the counterparty risk involved in stock lending is being properly managed by the insitutions that are doing the lending of the stock to the short sellers. I also believe the term 'stock lending' is a complete misnomer.

So more transparency and regulation should be provided around short selling - but to blame investors loss of money or share price collapses on short selling is incorrect. As many have also pointed out - shorters need to buy back the stock they short sell. If shorters attack a good business the price may recover quickly enough that the shorters end up actually driving the price up further through short covering squeezes.

I said no to this. It is just another way of making money and good for all those who are smart enough to excute it properly

Here is a question I have been meaning to ask the Ban Shorting crowd.


Should shorting be Banned in the oil market?

If not why not?

I understand perfectly well why covered shorts are healthy for the market ..whateve r gave you the idea I didn't go back and read my posts properly and stop making a fool of yourself....

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cordelia said:

good post...well said...unemotional, factual but more importantly not aimed at insulting anyone...

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You can learn from your own comments for a start.

cordelia said:

I understand perfectly well why covered shorts are healthy for the market ..whateve r gave you the idea I didn't go back and read my posts properly and stop making a fool of yourself.....

Please show me where I have stated that covered short selling is not good for the market....

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Cordelia,

Without attack I posted which was not directed at you.

You don't short yourself as you have stated.

I never said you didn't understand shorting.

Take it easy.

psychic said:

LOL, shorters drive the price down to zero and the mum and pops, end up with very little in their super accounts and end up relying more heavily on welfare (pensions). The companies then go bust and the workers end up on welfare(unemployment). Long-term depression, higher suicide rates etc etc.

Tell me again how shorters benefit the community

Tax payers support shorters behaviour, thats why its now banned.

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Planet of the apes is a good movie for exposing myths and lies.

Here's the latest from ASIC:

http://www.asic.gov.au/ASIC/asic.ns...ered short selling not permitted?opendocument

psychic said:

LOL, shorters drive the price down to zero and the mum and pops, end up with very little in their super accounts and end up relying more heavily on welfare (pensions). The companies then go bust and the workers end up on welfare(unemployment). Long-term depression, higher suicide rates etc etc.

Tell me again how shorters benefit the community



Tax payers support shorters behaviour, thats why its now banned.

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You do realise the stockmarket is a secondary market and driving the share price of a company down to zero, even if possible, cannot make a company go bust? A company going bust can drive a stock price to zero however.

This thread is just highlighting how much ignorance there is amongst the general investing public and how effective the misinformation campaign by those who really caused this crisis has been.

Can those supporting unrestricted short selling guarantee me that undisclosed short selling that targets a particular business can not be responsible for the price falling below a reasonable level.

Note that my objection is to those short selling stock that they DO NOT OWN or have control of. I believe short selling, correctly carried out, may have some insurance value for some investors.

Selling anything you do not own is FRAUD. If it is not then I have a harbour bridge in Sydney for sale. Any takers?

nioka said:

Can those supporting unrestricted short selling guarantee me that undisclosed short selling that targets a particular business can not be responsible for the price falling below a reasonable level.

Note that my objection is to those short selling stock that they DO NOT OWN or have control of. I believe short selling, correctly carried out, may have some insurance value for some investors.

Selling anything you do not own is FRAUD. If it is not then I have a harbour bridge in Sydney for sale. Any takers?

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Nioka,
Read the link in Captain Black's post. It may make your day. Did I read it correctly? Does it really say that?

nioka said:

Can those supporting unrestricted short selling guarantee me that undisclosed short selling that targets a particular business can not be responsible for the price falling below a reasonable level.

Note that my objection is to those short selling stock that they DO NOT OWN or have control of. I believe short selling, correctly carried out, may have some insurance value for some investors.

Selling anything you do not own is FRAUD. If it is not then I have a harbour bridge in Sydney for sale. Any takers?

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I short sell stock I don't own to hedge my deltas sometimes
Is there a problem??

freddy2 said:

This thread is just highlighting how much ignorance there is amongst the general investing public and how effective the misinformation campaign by those who really caused this crisis has been.

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It seems odd that if you oppose something you ar ignorant. I note that it seems to be the same people supporting short selling are the same ones that promote margin borrowing, another aspect of investing that has contributed to the downfall of many companies. I can remember being told I was ignorant when I opposed the notion of margin borrowing a year or so ago.

I'm often wrong but there is one thing I am dead certain about. Margin borrowing of money that didn't exist and short selling by "fraudsters" is 99% responsible for the current financial problems in this world.

freddy2 said:

You do realise the stockmarket is a secondary market and driving the share price of a company down to zero, even if possible, cannot make a company go bust? A company going bust can drive a stock price to zero however.

This thread is just highlighting how much ignorance there is amongst the general investing public and how effective the misinformation campaign by those who really caused this crisis has been.

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Here here, great post.