short selling is unpatriotic

[stevespray]

Loada Dosh.....

"Legal Theft" is an Oxymoron.

Why can't you grasp the fact that short selling is a perfectly normal market tool ? No one is stealing stock from anybody. How would you feel if you borrowed a mates car (with his permission of course) and then the police stopped you and charged you with theft ? On the way to the police station you tell the officers that you were borrowing the car with the owners consent but the officers say that you are being "unethical" and by borrowing a car you are distorting the car market - "If you want a car you should buy your own !" They tell you.
I dont accept your reasoning on issued stock either, the stock being 'borrowed' is issued stock so no dilution is taking place.

Steve.

 

[eminem]

Seems to be a fairly pointless discussion. There doesn't appear to be too many supporters of LD and this is probably a fair representation of the market place too I would think. He is in a very small minority. Let him waste his time lobbying whoever he thinks fit and don't give it a second thought as banning short selling is NEVER going to happen, at least not in our lifetime. Too much big commercial interest in keeping short selling and you would need very, very deep pockets to beat them in the lobbying game.

 

[boy]

The world is flat - Fact!

 

[darrenf]

Just my own quick thoughts on this...

If shorting actual stocks wasn't allowed, then those who wished to place a trade to benefit from a falling stock price would switch their trading activity to derivatives- futures/ options etc.

As actual stock prices are partly affected by stock futures prices, this would have the effect of driving the stock price down, initially falsely in early session trading, but this would bring real stock owners to the market to sell, which would cause the stock price to fall anyway.

As long as we have people who wish to speculate/ hedge on stock prices falling, we will have a thriving derivative market. As long as we have a thriving derivative market, it will have a significant leading effect on the underlying market.

Banning actual shorting of stock would only increase the strength of the derivative market and because of the close relationship between derivative and underlying markets, this would have no effect on the girations of the underlying markets. The only effect would be decreased liquidity in the underlying stocks.

Just my thoughts......

 

[darrenf]

How would you feel if you borrowed a mates car (with his permission of course) and then the police stopped you and charged you with theft ? On the way to the police station you tell the officers that you were borrowing the car with the owners consent but the officers say that you are being "unethical" and by borrowing a car you are distorting the car market - "If you want a car you should buy your own !" They tell you.

Although I like this comparison, to be fair your mate might be a bit miffed if he found out that during the time you borrowed the car, you sold it to some other mug in the morning and bought it back later in the day for £1000 less before handing it back!

 

[stevespray]

good point Darren, however, I would suggest that when you borrowed your mates car it was for the purposes of driving it, likewise when you borrow stock the purpose is to sell it. In both cases all parties are aware of way in which the lent items are going to be used.

Steve.

 

[oatman]

Has he gone?
He doesn't realise that futures markets evolved to enable forward pricing.
As long there's an underlying, there's a future, as long as there's a future, there's an opportunity to short :!:

 

[bonsai]

This thread just seems to underscore how little people really know about efficient markets.

I suspect the main problem that was trying to be addressed was
manipulation of the markets, which is quite a different matter from short selling.

Manipulation occurs both on the buy side as well as the sell side.
But a lot of people won't accept that as the case.
(especially when they are in profit)

 

[oatman]

Spot on Bonsai

 

[Loada Dosh]

Guys and Gals,

To avoid any misunderstanding, I’m not arguing that short selling is illegal or that traders can’t make money by short selling, far from it. My position from the start has been that it is an unethical, inequitable and, in the final analysis, an unpatriotic thing to do. Looking at it in the simplest terms, short sellers continually distort trading in the market and thereby distort information pertaining to a company’s future prospects, and as we know from experience the strategy works because it becomes a self-fulfilling prophecy. That is the essence of the thing.

Of course once the prophecy has been fulfilled the short sellers then congratulate themselves and pretend they must have therefore acted with integrity. The basis of that argument, as we have seen from many of the posts on this thread, appears to be that as the existing laws allow short selling those trading practices have a legal badge of approval, thereby implying an integrity to the practice because the assumption is made, wrongly in my view, that the market is designed to always act with integrity.

This assumption on implied integrity is constantly repeated by posters here, for example as illustarted by the comment made by Stevespray, which is a typical one, when he says
<why can't you grasp that short selling is a perfectly normal trading tools> and then attempts to back it up with yet another car analogy.

The hard truth is which many, but not all, short sellers refuse to recognize, is that the long-term investor loses value through the false pretences used by the short sellers. The key phrase there is “false pretences”. What happens in practice is that when the short sellers cover their position they are in many cases buying shares from the long-termers who have taken fright, they are, by their false pretences taking value away from people who are the true and rightful owners of the shares...prove me wrong.

Chris

 

[oatman]

Short sellers do not distort trading in the market. They are part of the market.
And that is where you're getting it wrong mate.
And nobody is bigger than the market.

 

[neil]

I said - he said

People may not "care" if you are right or wrong. Maybe, as traders, they prefer the Long or Short calls to rhetoric on an individuals perception of fiscal morality.

Maybe this thread should be moved to the "Lounge" since it contributes nothing to trading stratagy.

 

[TheBramble]

Are you saying that long-term investors are harmed by the activities of short-sellers?

Why would you expect long-term investors' benefits to have a priority over those of short-term speculators?

If you'd legislate this activity away you'd also have to legislate for all the other factors that could cause a long-term investor's holding to decline in value. 9/11 for instance. Black Monday in the uK for instance.

Taken to its (illogical in my view) conclusion - you'd have to put a safety net under all companies' shares and guarantee an 'always higher' value. Now, who would underwrite this and who would (effectively) pay?

Whether you or I believe we have a free market or an efficient market is not the issue. We work with markets as they are - including short selling.

If you buy forward currency in your business or even for a holiday way off (like buying a bunch of dollars now for your US holiday later this year) - isn't that short-selling?

 

[DaveJB]

I second Neil's motion, but can we shift it to ADVFN instead?

 

[Loada Dosh]

I would like to address this false concept many of you appear to be desperately clinging onto that the shares are borrowed with the consent of the rightful owner and subsequently sold in accordance with the owner's agreement. This is a mantra touted continually by those trying to justify this trading practice but the moral and factual basis of the argument they present is shaky to say the least. It relies on the notion that short selling already has legality so the transactions occur, at a legal level, with the consent of the rightful owner.

Fine, I understand that, and as I have tried to make clear a number of times, most recently in my last message, I’m not questioning the current legality of this trading practice. The issue here is whether the law should be changed, for the two reasons I have already mentioned and for other reasons. So let’s look at a third reason for banning selling short, which addresses the notion of owner's consent, and introduces certain fundamental tenets in law, the basic rights of and individuals and in particular, but not exclusively, such matters as human rights before the European Court, rights relating to freedom of disclosure etc.

It is perhaps best introduced by way of an example, to give a very simple one, if you own property, you have the right to full disclosure on that property. You therefore have the right to know when your property has been loaned.

Shares are collateral, in other words property. A person therefore has the right to know when their property has been loaned. Of course, in law the buyer also has the right to know they are not buying the property from the rightful owner. The broker is not the rightful owner. The broker should in law be telling the buyer that he, the broker, is not the rightful owner and he has borrowed, or perhaps some would argue in a strict legal sense, “stolen” the property without the owner’s knowledge. The laws pertaining to this are those relating to stolen property. In other words when the short seller covers his position he is purchasing stolen property and so has no right to it until the real owner decides to sell his ownership in that property.

Of course, the above example is an over simplification, in any particular case the devil is in the detail and the lawyers can, and no doubt will, turn areas like this into a legal minefield. But it is one of the reasons being touted for banning selling short by anti-short selling lobby groups, including myself.

 

[dsmodi]

Can i just congratulate loadsa dosh for sticking to his guns even after 7 pages, and the corresponding effort to change his mind by everybody else.

Can i further congratulate anybody else who tries to change his mind after all this.

Loadsa Dosh - I personally don't agree with you, and just don't see the sense in what you're saying, but I respect it, and I'm not even gonna try to change your mind. You're,of course, entitled to your own view, and keep lobbying. If ya win, then you can come back to this very thread and say "I TOLD YA SO!".....and of not then WE WILL!!! lol....

[I wonder if this is now the end to this thread]

 

[Les Battersby]

LOADA DOSH can I borrow some of your BTG shares as I want to short some :cheesy:

Hope you don't mind

Les

 

[DaveJB]

Please let me know what you intend to trade next Loadsadosh, I'd like to buy some as well - confident that if the price falls you'll be so insistent that this was immoral that the entire trading community will get so fed up they let the price rise so you can take your 10% and leave them in peace.
In 7 pages EVERYBODY ELSE has disagreed with you, but you still know best. It's a MORAL issue of course, so one guy can be right and the rest of the world wrong. Fine - I'm happy with my morals and I short, as does anyone else with brain cells that function. Mods - Give me as many demerits as you like, I think the word ronom (anag) is appropriate here, and frankly I think this thread has passed from being a discussion to being an invitation to flame... there comes a point where the posting is so consistently bloody mindedly wrong that it is immoral to object when people give vent to their long suffering spleen!
Seriously. this long since stopped being a discussion, I just can't help coming back ... it's so incredibly stupid it has all the draw of 'Celebrity Tosh' with Simon Cowell, Jordan, Jody Marsh and an infalatable Sheep...
Pass me the hemlock someone...

 

[jpwone]

Ok then Loada Dosh lets look at this from a different perspective.

What about buying shares on margin? Surely, this is immoral at the very least. You are buying shares and not actually parting with the money immediately and probably buying considerably more than your account is actually funded for. This must have an effect on the market and will falsely inflate the market price of a share.

What happens when someone borrows money to buy shares? Does the bank have an obligation to the person who originally deposited the money with the bank to ask their permission for that money to be lent out for the purpose of buying shares?

Now the common sense and obvious answers to these questions would suggest that there is nothing wrong with buying on margin or borrowing money to buy shares. I happen to believe that anyone who borrows to invest/trade in shares wants their head read but I do not deny them the right to do it.

So, there is a different view point even for a long only position. If you really want a meaty campaign to get your teeth into why not have a pop at stamp duty? You are being taxed before you have even made a profit.

 

[DaveJB]

What about mortgages, good, bad, what?