EPTAsk and answer stupid questions here! - Page 773
| Forum Index > General Forum |
|
hitesito
United States1 Post
| ||
|
AbouSV
Germany1278 Posts
Although it's not quite the goal of this thread. So feel free to ask and/or answer a question of the sort. | ||
|
Evotroid
Hungary176 Posts
What I wonder is: Is there a theoretical benefit for allowing this practice in the market? Eg.: monopolies are bad for the market, if we wish to maximize its usefullness to society, and they are generally fought against by legal systems (with more or less success). For shorting the obvious problem in my mind is that once we allow people to short, they get a vested interest in not creating, but destroying value, which I would think is highly undesirable. Still, it seems perfectly legal, and not at all a new practice, so, what gives? Does it act as a damper on some other potential feedback loop in normal cases, ultimately resulting in a more stable market? Is it just an unintended loophole that was never closed for whatever reason? | ||
|
Emnjay808
United States10665 Posts
Just my 2cents | ||
|
MineraIs
United States846 Posts
| ||
|
RvB
Netherlands6274 Posts
On January 29 2021 09:02 Evotroid wrote: Not to bandwagon too much on current events, but all the GME stuff made me finally look up what the hell is "shorting". What I wonder is: Is there a theoretical benefit for allowing this practice in the market? Eg.: monopolies are bad for the market, if we wish to maximize its usefullness to society, and they are generally fought against by legal systems (with more or less success). For shorting the obvious problem in my mind is that once we allow people to short, they get a vested interest in not creating, but destroying value, which I would think is highly undesirable. Still, it seems perfectly legal, and not at all a new practice, so, what gives? Does it act as a damper on some other potential feedback loop in normal cases, ultimately resulting in a more stable market? Is it just an unintended loophole that was never closed for whatever reason? Good question! It's not an unintended loophole. Short sellers play an important role in price discovery and to make markets more efficient. Ideally we'd want capital allocated to more productive companies since that increases growth in the long run. Short sellers play a part in this since they benefit when the price of a stock decreases. As a consequence they look for companies with stock prices which are overvalued compared to their fundamentals and frauds. An example of this Hindenburg research which was a short seller of Nikola. Nikola is a zero emission vehicle company which wants to make trucks. They claimed all kinds of revolutionary technology. Hindenburg research shorted the stock did it's due diligence and released a report showing they're full of shit (Nikola is now under investigation by the sec as well). Other investors saw the report, concluded Hindenburg was probably right, took out their money and invested it in actual legit companies. In general it's only the companies with bad fundamentals which complain about shorts. Warren Buffet for example said he likes shorts since they'll have to buy the shares eventually. His company has good fundamentals and isn't a fraud so he doesn't have much to fear. | ||
|
Simberto
Germany11839 Posts
On January 29 2021 20:27 RvB wrote: Good question! It's not an unintended loophole. Short sellers play an important role in price discovery and to make markets more efficient. Ideally we'd want capital allocated to more productive companies since that increases growth in the long run. Short sellers play a part in this since they benefit when the price of a stock decreases. As a consequence they look for companies with stock prices which are overvalued compared to their fundamentals and frauds. An example of this Hindenburg research which was a short seller of Nikola. Nikola is a zero emission vehicle company which wants to make trucks. They claimed all kinds of revolutionary technology. Hindenburg research shorted the stock did it's due diligence and released a report showing they're full of shit (Nikola is now under investigation by the sec as well). Other investors saw the report, concluded Hindenburg was probably right, took out their money and invested it in actual legit companies. In general it's only the companies with bad fundamentals which complain about shorts. Warren Buffet for example said he likes shorts since they'll have to buy the shares eventually. His company has good fundamentals and isn't a fraud so he doesn't have much to fear. The problem with that is that it assumes a mostly rational connection between share value and stuff the company does. I think GME shows that that is not really a true thing (I think Bitcoin proves a similar point), and the value of a companies shares doesn't seem to be highly connected to what the company actually does. Stock prices seem to be mostly related to some weird nebulous mass psychology thing combined with sneaky shit big players at the market do, instead of what the company of the stock actually does. | ||
|
Acrofales
Spain18291 Posts
On January 29 2021 09:02 Evotroid wrote: Not to bandwagon too much on current events, but all the GME stuff made me finally look up what the hell is "shorting". What I wonder is: Is there a theoretical benefit for allowing this practice in the market? Eg.: monopolies are bad for the market, if we wish to maximize its usefullness to society, and they are generally fought against by legal systems (with more or less success). For shorting the obvious problem in my mind is that once we allow people to short, they get a vested interest in not creating, but destroying value, which I would think is highly undesirable. Still, it seems perfectly legal, and not at all a new practice, so, what gives? Does it act as a damper on some other potential feedback loop in normal cases, ultimately resulting in a more stable market? Is it just an unintended loophole that was never closed for whatever reason? There isn't really anything unintended about it, nor is it a loophole. If lending shares to other people is legal, then shorting them is a natural consequence. -I lend you my share, and expect you to give it back in 24 hours/48 hours/6 months/whatever timeframe, with X% interest. -You sell that share and pocket the money. When the loan is due (or before, if you wish), you buy that share back, and give it back to me. Well done, you have successfully shorted. There is nothing inherently malicious about shorting, if you treat the stock market as traders do. If you go long, you shouldn't worry about it: you are betting on the long term prospects of a company and the dividends they will pay from the profits, the stock price rising is almost just an added perk. It's when people treat stock as having any inherent value (and thus something that has value in its own right, rather than just as what it represents), and market forces take over: traders can make money by thinking a stock becomes more valuable in the short term, despite the underlying company not really doing anything different from one week to the next. The moment you allow that (and there are huge financial benefits to allowing that), shorting just comes as part of the package. | ||
|
RvB
Netherlands6274 Posts
On January 29 2021 20:37 Simberto wrote: The problem with that is that it assumes a mostly rational connection between share value and stuff the company does. I think GME shows that that is not really a true thing (I think Bitcoin proves a similar point), and the value of a companies shares doesn't seem to be highly connected to what the company actually does. Stock prices seem to be mostly related to some weird nebulous mass psychology thing combined with sneaky shit big players at the market do, instead of what the company of the stock actually does. There is a connection or do you think it's coincidence that the most profitable companies also have the largest market cap? You're right that GME's stock is totally disconnected from the value of the underlying company right now. But that's just short term. After the short squeeze the price will be much more in line with what we would expect. Just look at VWs short squeeze. It peaked at 1000€ but rapidly went to normal afterwards. Long term markets really aren't as irrational as people think. | ||
|
Burned Toast
Canada2040 Posts
Did quick research but didnt not find much... | ||
Liquid`Drone
Norway28797 Posts
There might be a thread in that specific forum if someone else has suggested what you want to suggest or something reasonably related to it. | ||
|
Karis Vas Ryaar
United States4396 Posts
| ||
|
DarkPlasmaBall
United States45925 Posts
On January 31 2021 17:06 Karis Vas Ryaar wrote: Did NASA actually propose giving John Glenn the medal of honor after his Friendship 7 flight? Wikipedia says it did but lists no sources and when I googled it none of the official nasa/government sites I read mention anything like is. It seems something that would be odd to leave out if it actually happened. NASA says he received the medal: https://www.nasa.gov/content/profile-of-john-glenn Or do you mean specifically for F7? NASA just lists all his awards, not necessarily saying the reason for each one, but I would guess it would be due to his F7 mission. | ||
|
Karis Vas Ryaar
United States4396 Posts
| ||
|
DarkPlasmaBall
United States45925 Posts
On February 01 2021 03:07 Karis Vas Ryaar wrote: thats the space medal of honor which is a different award. Wikipedia says they proposed giving him the normal medal of honor. Ah okay. | ||
|
Uldridge
Belgium5159 Posts
| ||
|
Gorsameth
Netherlands22369 Posts
On February 04 2021 07:48 Uldridge wrote: it would not have enough money to do much of anything.What would happen if a country would tax based on a fundraising/crowdsourcing/voluntary basis, instead of an obligated, yearly taxation? | ||
|
Simberto
Germany11839 Posts
Besides the obvious problems of possibly too little revenue to do the stuff the state would need to do, i see another big problem with the country giving up a huge lever to steer people and the economy. Modern tax codes are as complicated as they are because they are used to promote "good" behaviour, and discourage unwanted behaviour. If you want people to drink less booze, you can put a tax on it. If you want people to have children, you can give tax benefits for that. If taxes are voluntary, you lose this softer way of steering the country, and are only left with much more aggressive options like bans and punishments. Also, my guess is that rich sociopaths and companies would never pay any taxes. Which in turn makes other people not want to pay taxes, because if that rich asshole doesn't, why should i? It could work in a society where working for the common good is expected, and where there is a lot of social pressure towards contributing to the tax fund. | ||
|
Harris1st
Germany7202 Posts
| ||
|
Dangermousecatdog
United Kingdom7084 Posts
On February 04 2021 07:48 Uldridge wrote: That's kind of the situation before modern states developed. Back when kings were just a noble among other nobles. What happened? They had to centralise and reform themselves or get run over by those who did. The entire history and birth of the modern state is that of centralising economic and political power.What would happen if a country would tax based on a fundraising/crowdsourcing/voluntary basis, instead of an obligated, yearly taxation? | ||
| ||
