When the Chinese market crashed a few years ago, I recall that their government banned short-selling to the point of jail time as punishment. Fast forward to this weekend, I’m reading that certain countries (South Korea, the UK, Italy, Spain, maybe more to come) have already instituted the ban on short-selling, inverse ETFs and similar trading activities that increase volatility and make market conditions worse than they already are.
Way before the black swan event that the coronavirus has brought upon all of us, it was already bothering me that the short-sellers on this site – both institutional and retail – were using analyses of teased stocks, maybe even positive responses to them, as “sound bites” for what stocks to short next. In other words, too many readers with an attitude of “let others do the homework; just give me the name of the stock to sell short”. Woe to investors seeing some growth potential in the stock or to newbies searching for stocks at ground-floor levels.
And then there are the proprietary-owned institutional apps that see an uptick or two in a stock and the opportunity to take it down and make a quick buck, even when there’s no bubble in the industry niche that these stocks are in. You can guess my reaction to an e-mail I received last month from my brokerage company asking permission to borrow shares from my account and an offer to pay me interest for doing so. The reason was not stated but it became obvious to me that the volume of short-sellers had grown much bigger than in-house share inventory could accommodate.
So what now? Will short sellers take down pharmaceutical companies and health care providers mandated or supported by US government to come up with cures and services that people need? Will short-sellers take down investments in utilities, waste disposal, makers of soap & toilet paper and other very basic human needs? Or has the greed just gone too far and low-life that short-sellers would bet on two critters crossing a road — if only the critters were listed in some Exchange?
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