Some very good points made by several of you, and it is clear the quality of the posts here is far superior to many of the boards I’ve visited.
Interesting tactics used to combat and/or discredit the argument I have raised so far.
One line of attack was to question my objection to short selling in the light of my own strategy of averaging down and to ask what I meant by long-term. An excellent question because on other boards I’m always criticising people for ambiguity, especially what they mean by short-term view. In the case of short term-investment predictions, for example, I require at least three pieces of information to make the prediction unambiguous. They are target price, stop loss and date of the expiry of the bet or forecast (most of the time I’m discussing statistical methodologies with spread betters hence the reference to bet). It’s amazing how many people refer to a short-term view without having made a decision on at least those three parameters, it’s little wonder most people lose their hard earned dosh.
My definition of “long-term” covers a broad period for it is dependent on reaching a target price before I start to take profits. I select only shares that I believe are in the ten bagger category, and start to take profits at the five bagger stage.
Briefly, having decided that a particular share meets my ten-bagger or more criteria, I save up until I have enough dosh to buy a tranche in that company. I never borrow to invest. That initial purchase immediately sets a price, the price I have paid and I then think in terms of taking some profits at the five bagger and the rest at the ten bagger stage. This may take years, on the other hand it can happen within weeks. If during that period, be it weeks or years, the price falls below the price I originally bought, I try to average down setting a new, lower average price. I may do this many times. But that is dependent on having the dosh available to do it when the opportunities arise.
So when I talk about “long-term” it would be more accurate to say I’ve conditioned my mind to a long-term investment strategy, if it takes that long to realise my target profits, and if that means three, four or five years, then I’m in there for the long-term. In theory I could wait 19 years, my objective being to retire at 45 and that is the time left to accumulate enough dosh for my early retirement.
The action of shorters can therefore affect the timing at which I take profits and slow me up. For example, with TRK I’ve been averaging down whenever the price fell below my averaging down price and when I’ve had enough dosh saved to buy a tranche. Currently it is three times my averaging down price and I will start to take profits when the price reaches five times the averaging down price. Note that my profit target is constantly adjusted with a changing average price. The actions of shorters may stop the five and/or ten bagger price being reached, or at least delay it so that I do not have the cash available in time to reinvest in other shares where the price has fallen.
Obviously I’d much rather take profits as early as I can so that I can reinvest the cash, it follows that any actions that have the effect of diluting the stock in the market is contrary to my overall objective. Shorters are taking a free ride on my share holding and thereby delaying and hindering me. I don’t like people taking a free ride at my expense and I intend to lobby as hard as I can, with other campaign colleagues, to outlaw short selling.
I hope that helps to explain my personal annoyance at short selling. Of course, the harm and damage extends far beyond my own personal circumstances as it effects companies and indeed the very principles underlying the market. We haven’t really touched on those issues yet, but best to get one thing out of the way at a time otherwise it confuses the discussion.
Which leads me back to my argument that short selling is a form of theft. The arguments that have been presented to counter this statement are not really substantive in my view. It amounts to lots of people saying it ain’t theft, but constantly repeating that mantra without supporting it with a viable argument is really not good enough, is it? Someone did make an attempt by taking an example of hiring a car, but there is no impropriety occurring in that example as there is clear agreement between all the relevant parties. There is big difference between paying someone for the wear and tear on the hired vehicle as opposed to thieving it and returning it later.
If someone shorts a share and its price falls, that may affect the timing of me taking profits. That shorter has not asked my permission or the permission of the thousands of other share holders who own shares as their property and collateral. The comparison to a car thief still holds, as indeed I could make a number of other valid comparisons if it comes to that.
Another line used against my argument, was based on pedantry, namely that a “legal theft” was contradictory. Obviously. I’m not trying to argue that short selling is currently illegal, it ain’t, my argument is that it should be made illegal. Just because it is legal at the moment doesn’t mean to say it is just and right, it is in my view a theft and should be treated as such in future legislation.
By the way, for those people who seem to think the government here and in the US are not considering banning shorting, to them I say dream on, you are in for a big shock! I do agree that suddenly banning short selling would give rise to difficulties, that point was validly made by a poster, but hence the need for transitional provisions and I suspect that is one of the delays holding things up. But it will happen I am sure, the drafting of those transitional provisions only buys a stay in execution.
None of the various arguments I have heard so far stand up to scrutiny, I therefore still believe short selling is de facto thieving.