Scrutable

Herainestold wrote: ↑

Thu Jan 28, 2021 7:39 pm

Bird on a Fire wrote: ↑

Thu Jan 28, 2021 7:07 pm

lmfao at the audacity of suggesting that de facto practice of short-selling by hedge farms is a social good

In a rational world, neither short selling nor hedge funds would exist. Of course, neither would capitalism.

Neither would internet trolls.

@boaf According to one of Bolo's much more recent links, "As of the end of 2018, the pension funds of Fortune 1000 companies held about 10% of their assets in "alternative" investments, including about 3.8% in hedge funds and 4.3% in private equity" which made me wonder whether my author had lumped in hedge funds with other alternative investments or whether it reflected a change in strategy. Interesting that the UK appears to be even keener on hedge funds than the US, I wonder if we're still in the region of 15% and may google it if I run out of posts to read here.

bolo wrote: ↑

Thu Jan 28, 2021 7:55 pm

Herainestold wrote: ↑

Thu Jan 28, 2021 7:39 pm

Bird on a Fire wrote: ↑

Thu Jan 28, 2021 7:07 pm

lmfao at the audacity of suggesting that de facto practice of short-selling by hedge farms is a social good

In a rational world, neither short selling nor hedge funds would exist. Of course, neither would capitalism.

Neither would internet trolls.

Internet trolling is a rational response to an absurd wider reality.

jdc wrote: ↑

Thu Jan 28, 2021 7:56 pm

I ... may google it if I run out of posts to read here.

May?

If?

You appear to be hedging.

bolo wrote: ↑

Thu Jan 28, 2021 7:55 pm

Herainestold wrote: ↑

Thu Jan 28, 2021 7:39 pm

Bird on a Fire wrote: ↑

Thu Jan 28, 2021 7:07 pm

lmfao at the audacity of suggesting that de facto practice of short-selling by hedge farms is a social good

In a rational world, neither short selling nor hedge funds would exist. Of course, neither would capitalism.

Neither would internet trolls.

True

Bird on a Fire wrote: ↑

Thu Jan 28, 2021 7:07 pm

lmfao at the audacity of suggesting that de facto practice of short-selling by hedge farms is a social good

Hedge farms sound like a good idea to me.

Bird on a Fire wrote: ↑

Thu Jan 28, 2021 7:48 pm

Herainestold has always been the most puzzling of lpm's sock accounts.

Not as puzzling as my Bird on a Fire sock account.

Bird on a Fire wrote: ↑

Thu Jan 28, 2021 7:07 pm

lmfao at the audacity of suggesting that de facto practice of short-selling by hedge farms is a social good

Nobody came up with a single reason why short selling is bad - apart from very basic beginner errors of thinking share price has an effect on the company's finances.

I was hoping someone would get the correct answer - that it isn't short selling that's the problem but market manipulation by scummy coked-up fund managers. Which is what this particular scummy hedge fund has a reputation for. A struggling company benefits from having its share price driven down by sellers - being over valued is harmful. A thriving company is the other way - benefits from being over valued. But nobody benefits from having its share price manipulated.

I was then going to point that the cure for a hedge fund manipulating a market is not to massively manipulate it the other way. But we never got that far.

That sounds like a take I'd be interested in reading, if you're amenable to redrafting the narrative structure based on audience feedback.

Tricking people into thinking you're suggesting the opposite of what you think is a great device for fiction, or building suspense. But it might have been overly arty for a forum post about the stockmarket.

lpm wrote: ↑

Thu Jan 28, 2021 9:39 pm

Bird on a Fire wrote: ↑

Thu Jan 28, 2021 7:07 pm

lmfao at the audacity of suggesting that de facto practice of short-selling by hedge farms is a social good

Nobody came up with a single reason why short selling is bad - apart from very basic beginner errors of thinking share price has an effect on the company's finances.

I was going to say, that AFAICT the particulars of the case of Gamestop do seem to be fairly unambiguously that the hedge fund w.nkers were indeed w.nkers. I'm generally suspicious of things that go viral like this, and Gamestop is such a perfectly targeted example for the reddit demographic that you do have to wonder if it was chosen to bolster a wider anti-hedge fund or pro micro/day/retail trading narrative.

I'm willing to accept that the practise of short-selling in general may be in some cases defensible. But I can't think of many. The Big Short is an enjoyable film, but tbh I was never quite clear on whether the short-sellers were part of the problem or just amoral profiteers.

But coming in all-guns-blazing in favour of short-selling seemed a bit deaf to context.

lpm wrote: ↑

Thu Jan 28, 2021 9:31 pm

Bird on a Fire wrote: ↑

Thu Jan 28, 2021 7:48 pm

Herainestold has always been the most puzzling of lpm's sock accounts.

Not as puzzling as my Bird on a Fire sock account.

I wondered whose hand that was.

A and B agree that A will sell a sack of potatoes to B at a mutually agreed price.

A doesn't actually have a sack of potatoes, so he borrows one from C, paying a mutually agreed borrowing fee and promising to return a sack of potatoes to C at a mutually agreed time.

A sells the potatoes to B, as agreed, and at some later date A buys a sack of potatoes at the corner shop and hands them over to C, as agreed.

A and B and C are all consenting adults. Everyone involved is happy with the transactions.

A is a short seller. Other than the undoubted fact that A, B, and C are w.nkers who snort too much coke, why is this a bad thing?

lpm wrote: ↑

Thu Jan 28, 2021 9:39 pm

Bird on a Fire wrote: ↑

Thu Jan 28, 2021 7:07 pm

lmfao at the audacity of suggesting that de facto practice of short-selling by hedge farms is a social good

Nobody came up with a single reason why short selling is bad

Well, shall we begin with there being a maximum profit from short selling, whereas the maximum loss is (as, umm, "manicured shrub" funds are finding) everything.
Which brings you down - and your investors, and the people you 'borrowed your hedged shares' from.

It's bad to sell something you don't own, like the Brooklyn bridge. Its morally wrong to profit from somebody else's mis fortune, but I guess that is what
Capitalism is all about.
Honestly, the stock market is bad enough, all those coke snuffling masters of the Universe, but maybe ban the more reprehensible things like insider trading and short selling.

Martin Y wrote: ↑

Thu Jan 28, 2021 12:47 pm

Oh, and there were another couple of oft-repeated comments I didn't understand: one claiming the hedge funds had short sold 130% of the company's shares and the other, maybe related, talking about "naked short selling" which we are told is illegal. We don't learn what it is, nor whether it is illegal in particular jurisdictions.

Naked short selling is selling shares you don't have, so you will need to buy them before the delivery is due. https://en.wikipedia.org/wiki/Naked_short explains where and when it is illegal.

Gfamily wrote: ↑

Thu Jan 28, 2021 11:50 pm

lpm wrote: ↑

Thu Jan 28, 2021 9:39 pm

Nobody came up with a single reason why short selling is bad

Well, shall we begin with there being a maximum profit from short selling, whereas the maximum loss is (as, umm, "manicured shrub" funds are finding) everything.
Which brings you down - and your investors, and the people you 'borrowed your hedged shares' from.

There are plenty of other things in life where you risk losing everything. You might suddenly step out into the road without looking and be killed in a crash, or you might vote for the wrong government and bring on economic disaster or a public health disaster.

If you lose everything in short trades, it's your own money. If your investors lose everything, it's their fault for trusting you with their money. If the lenders of the shares lose their shares (note the losses here are capped to the total shares you borrowed), it's their fault for letting you borrow them and the risk is, presumably, built into the loan fee. All of the people involved are wealthy, sophisticated investors. Do you think these are the sort of people who should be protected from themselves?

bolo wrote: ↑

Thu Jan 28, 2021 4:02 pm

Meanwhile, the weird behavior of these stocks makes other stock prices somewhat lower and more volatile, which means that the 55% of Americans who have some of their savings in stocks lose some money. Probably more than 55% really, as that figure doesn't include pension funds.

No. The vast majority have lost nothing. If you bought a share at $10, and today its price is $100, you have gained nothing. Equally, if its price is $1, you have lost nothing (well, nothing monetary - you may gain and lose hope and fear). However if you sell that share for $100, you have gained $90, while if you sell at $1 you have lost $9. only your actual transactions matter - potential transactions, or other people's transactions don't. Americans who have savings in stocks, if they're sensible, spread the risk across many stocks and invest over the long term. They are no more affected by fluctuations in share price than sea level is affected by tides and tsunamis.

plodder wrote: ↑

Thu Jan 28, 2021 4:22 pm

obviously innovations like high-frequency trading are not just wheezes and benefit us all.

I don't think it is at all obvious. In fact, given the numer of people who complain about it, I'd say it was very non-obvious.

What it does is reduce the spread. i.e. the difference in price between the price you have to pay to buy and the price you get when you sell. This means that if you are a sensible investor you pay less when you buy and get more when you sell, so you profit (admittedly by a pretty small amount). It may also increase liquidity - so you can buy and sell more easily. Of course if you are using the stock market to buy and sell on short timescales, such as day traders do, or some types of funds, you run the risk that the small spread and increased liquidity may be temporarily absent when you need it and you lose money. The sensible, long term investor can merely wait out a situation like that.

nezumi wrote: ↑

Thu Jan 28, 2021 5:27 pm

I say take steps to limit the damage that either shorting or pump and dumps can do and simply limit how much of a shares stock can be borrowed and make sure it can only be borrowed once.

How do you limit the borrowing? Shares are like money - if A borrows $100 from B and uses it to pay C, D can now borrow $100 from C so there is $200 of borrowing going on but only $100. In such trivial examples you can say it's the same $100, but when you have many parties and much smaller amounts passing between them it doesn't even mean anything to claim that this $1 over here is the same $1 as over there.

bolo wrote: ↑

Thu Jan 28, 2021 10:53 pm

A and B agree that A will sell a sack of potatoes to B at a mutually agreed price.

A doesn't actually have a sack of potatoes, so he borrows one from C, paying a mutually agreed borrowing fee and promising to return a sack of potatoes to C at a mutually agreed time.

A sells the potatoes to B, as agreed, and at some later date A buys a sack of potatoes at the corner shop and hands them over to C, as agreed.

A and B and C are all consenting adults. Everyone involved is happy with the transactions.

A is a short seller. Other than the undoubted fact that A, B, and C are w.nkers who snort too much coke, why is this a bad thing?

A can’t afford to replace C’s potatoes. The shop has no potatoes. I go to the shop and have to go without potatoes.

Millennie Al wrote: ↑

Fri Jan 29, 2021 3:21 am

plodder wrote: ↑

Thu Jan 28, 2021 4:22 pm

obviously innovations like high-frequency trading are not just wheezes and benefit us all.

I don't think it is at all obvious. In fact, given the numer of people who complain about it, I'd say it was very non-obvious.

obviously one of our sarcasm meters is on the blink

Millennie Al wrote: ↑

Fri Jan 29, 2021 3:28 am

nezumi wrote: ↑

Thu Jan 28, 2021 5:27 pm

I say take steps to limit the damage that either shorting or pump and dumps can do and simply limit how much of a shares stock can be borrowed and make sure it can only be borrowed once.

How do you limit the borrowing? Shares are like money - if A borrows $100 from B and uses it to pay C, D can now borrow $100 from C so there is $200 of borrowing going on but only $100. In such trivial examples you can say it's the same $100, but when you have many parties and much smaller amounts passing between them it doesn't even mean anything to claim that this $1 over here is the same $1 as over there.

no. banks are allowed to invent money. it’s more complex than this and it’s a rabbit hole of crazy.

I’m struggling to see how selling shares you don’t yet own is morally qualitatively different from selling a share in profits you don’t yet have, which is what companies do when they borrow to invest.

I’m sure that not everything that happens on stock markets contributes to building a stable, fair and healthy economy for everyone because liquidity!, but we’re still short of a good definition of what isn’t and why not.

bolo wrote: ↑

Thu Jan 28, 2021 10:53 pm

w.nkers who snort too much coke,

Surely “too much” is redundant here?

plodder wrote: ↑

Fri Jan 29, 2021 7:43 am

bolo wrote: ↑

Thu Jan 28, 2021 10:53 pm

A and B agree that A will sell a sack of potatoes to B at a mutually agreed price.

A doesn't actually have a sack of potatoes, so he borrows one from C, paying a mutually agreed borrowing fee and promising to return a sack of potatoes to C at a mutually agreed time.

A sells the potatoes to B, as agreed, and at some later date A buys a sack of potatoes at the corner shop and hands them over to C, as agreed.

A and B and C are all consenting adults. Everyone involved is happy with the transactions.

A is a short seller. Other than the undoubted fact that A, B, and C are w.nkers who snort too much coke, why is this a bad thing?

A can’t afford to replace C’s potatoes. The shop has no potatoes. I go to the shop and have to go without potatoes.

This is exactly where you are going astray. There still exists a sack of potatoes. The production of potatoes and the consumption of potatoes carries on unaffected by all this messing around.

The share price has no impact on numbers of customers going into GameStop stores. It doesn't change average spend per shop visitor. It doesn't increase the cost GameStop pays to Sony for a console. It doesn't change wage costs. There is no impact on property costs. Interest costs don't change. Taxes paid are the same. GameStop makes the same cash profit or loss. All the messing around with shares is just messing around with shares.

The only significant outcome is the company now can't attract long term equity investment - its equity is far too expensive.

What would have been more interesting is if the Reddit crowd had committed to buying all games and consoles from GameStop stores in 2021. The company would have seen a surge in sales when the basement boys spend their $600 and divert spend from Amazon etc. Stores would stay open and jobs would be saved. The share price would rise in response to the extra profits and the hedge fund would still have lost a fortune.