Hey Jesshortsellers
It’s been ages since I’ve had the everyday banter outside financial circles speak about short selling! Since the 2008 financial crises and the movie the big short, a few years later no ones really spoke about this form of trading in public conversion.
It’s been going on for years, and due to its risk and betting against something such as a business that creates jobs, this so-called dark art has had a narrative pushed on it of evil short-sellers.
Those trying to kill companies for a quick profit and think nothing of the lives they ruin.
The narrative game
This narrative is so strong and hard to break, but like anything in life, it’s a lot more nuanced than that.
- Are their short-sellers who put out dubious research or PR campaigns once they've taken a position so they can push prices down and pocket the spread on a short term trade?
Yes!
- Are there short-sellers who do the research, spot a dying business model being propped up, find fraud and stop companies from suckering in investors by putting them out of business?
Yes!
Short selling is part of running an effective market, while it's by no means squeaky clean, it's part of the ecosystem, and we can't paint everyone with the same brush.
Enter Gamestonk gate
The GameStop story has gripped the financial press with a firm narrative. The retail traders, the little guys, aiming Wallstreet and their big bad short selling. Some are hailing this a victory, but if we look at the facts, it's again more nuanced than that.
Yes, there was naked speculative short selling at play, with hedge funds shorting more than the available stock float and then ramped up with leverage. This is a dangerous game to play, and when spotted by the retail guys, they blew up the trade by leveraging the derivatives market.
Retail won the first round
Some GameStop retail investors made a killing, getting in early, but since this stock will eventually revert to its actual value of 0, many bag holders will get hurt, depending on where they got in.
Some say that's the cost of blowing up a hedge fund and are fine with sending the message, but whose money is the hedge fund gambling? Certainly not there own or they wouldn't be this careless.
Everyone has the right to bid up a company regardless of its fundamentals; we see this with Tesla and other tech stocks all the time.
Wall street wins round 2 + the war
Wall Street hit back by putting pressure on these retail broker apps to limit access to the market. Having this limit meant hedge funds could gain the upper hand once again and with retail only allowed to close positions, they look to force the market on these shorted stocks back down.
The unintended consequences
However, the damage has been done, billions have been lost, and retail has sent a powerful message to the wrong people, in my opinion.
In the process of sticking one to the hedge funds and this warning that they'll be going after short-sellers, many good short sellers are not going to take the risk. Even if they are correct, the danger is too great of getting caught in the crossfire.
As short sellers pull out of the market, they remove any breaks on the market. Fraud, malinvestment and scams can continue to take up more of the public market, and with the prices only getting bid up without short-sellers, it's only going to sucker more people into the market who will end up getting hurt.
I am by no means against the WSB crowd, I hope their message is heard, and things do change, but I think what has happened leaves us in ever more dangerous territory.
Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, comment "I am a Jessie."
Let's connect
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Yeah I agree we need more shorting! Damp eeet!
Looks like shortsellers are going to take a back seat now and that means any stonk will get bid up, more zombie companies will get their shares pumped to the moon! Sigh
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at the very least they showed those wall street guys that their power isn't absolute!
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A chink in the armour yes but they quickly corrected it so I don't think Wall Street is too concerned also with short selling seen as a chink why would anyone go short? Just load up on SPACS and keep bidding up the market till it crashes up, without shorts the breaks are off
It was intestinal story - Gamestore
I qas watching the video how the pleople hold the share and denied to sell and the people doing short selling entrapped....
Yeah it's really just a manifestation of the market trying to find a release valve for all the pressure it's facing by refusing to correct due to money printing
Would be great (but maybe impossible) to get stats on the percentage of "white hat" vs "black hat" short sellers.
I'm afraid there are much more ill intended ones but I hope to be proven wrong.
Wall Street winning the war ? Hmm I'd say they won the second round and will try to keep their business in balance.
But long term effects might prove they lost more than few drops of money. They blew their cover and the trust of the masses in the stock markets (for what it's worth).
What I'm saying is that episode was eye opening for a lot of people and way more than Wall street would have liked.
They scared away people feeding money into stocks and I hope those people will come to crypto instead.
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Oh gosh that would be cool, but I doubt you could find such data, maybe someone more clued u can let us know.
I think so too, the best thing to come out of this is the conversations and realize that this is all a casino. I do hope people see how rigged the game is and why they shouldn't be playing and move into Bitcoin. The more that happens the less power they have over financial markets
That's exactly how I feel, and I wish more people just pull the plug and switch to greener lands.
They want to play their game with their rules (and change it when needed) ? good for them but they'll play by themselves screwing each others. If/when retail investors move we will see who is laughing :)
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Interesting take. Like removing the apex predator from an ecosystem. What could go wrong?
I like that analogy, it's going to be a free for all, breed until you start to eat one another
I came to know about short selling a few years ago but I still struggle to understand, how this all work.
This is a reverse psychology, we all want things to go into positive direction but here we want them to go into negative direction to make some gain.
This will be a gain for us but lost of others.
Where in normal circumstances, everyone wins ( of course if stock is properly valued not over valued like we see with lot of them these days)
It is really a complex way of trading since you have to know your stuff because your losses can basically be unlimited in a short trade. They take really risky bets so they have to be pretty confident in what they are doing and that markets aren't being artificially driven or they would run out of capital to hold shorts, which is whats happening.
I don't know if we ever get fair valuation on anything anymore, lol we all in loopy land now
Short sellers provide a very valuable service but since 3q 2020, I think they're going to have it real tough.
Too much cheap money is going to make it easier for them to get squeezed like with GME and Hertz.
Indeed and if you shorting a company with good fundamentals you would be dumb you just making it cheaper for value investors to tap into cheap free cash flow
So it's not like shorting is this bad thing if you short a shit company and it goes bust it's because it's shit! If you short a good company it shouldn't matter what their share price is since they are profitable lol
This is an interesting view. Are you aware of any data that shortselling across the market has deminished? It is a very profitable business and the question is if retail is as organized and pushy in the mid- and longrun to really be a thread.
I wasn't aware of the trend but I was listening to a podcast from Bill Fleckenstein and they were talking about Jim Chanos and how shorting are participating less because the risk-adjusted rewards aren't worth ti when there's a put on companies and retail gambling
Good Post Bro
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whats so good about it?
The part where you remind us that the Hedge Funds aren't really losing money - they are losing their clients money. You also insinuate that their clients are little guys.
So. The "win" is actually a deep deep loss?
Nah - they just took out the dinosaurs pinky nail. It's gonna be a slow and painful death.
lol, I appreciate the detailed response, funds are a mixed bag, you never know whose money is really funding all this, the incentive structure is broken, they still get a management fee if they lose and if they win they pocket a sweet bonus.
If it is the death of wall street, it comes at a price to all of us since we're all stuck in this fiat system. They will kamikaze this thing before they lose
It’s not the end.
It is not the beginning of the end.
It is the end of the beginning.
😂🙄
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LOL i feel you, I like calling it the end game because it sounds dramatic and because it makes me feel like im part of the Avengers