More on shorting....
Throughout the history of the market, both in ours and around the world, there have always been a number of tragedies that effect certain companies or the entire market of a country itself in a negative or positive way. Big or small it makes no difference whether the tragedy caused 5 people to die or thousands, it is still an unfortunate incident. No doubt in every case though, someone had invested to take advantage of the situation regardless of who or how many people had died because the financial system is a system of business and people are out to make money or at least prevent from losing what they have. When oil prices go up because an ocean rig is destroyed and 5 people die, is it bad to buy oil on the expected rise because those few people died? Even if this is a rally profit and not a short profit? What about the small company who loses 3 employees to a fire in the manufacturing warehouse but whose business is now incapacitated? Are we to not short this company or not sell our shares out of respect, or does the fact that it was only 3 people make it insignificant? What about those who have a significant amount invested and stand to lose a lot by not taking any action? What about boxing a long position by selling it short to protect your investment? I remember years ago when American Cyanamid (?) in India had an accident and over 1000 people died because of the gas cloud that spewed out to the surrounding communities. No doubt, short sellers took advantage of the company's situation and people sold the stock in general because of the cost of damage to the company. And what about defense companies who make missiles which invariable will kill innocent people whether intentionally or not? Are we to stop investing in them because their products ultimately make them money on the blood of the people their products destroy? Or is it ok, because even if some of those people are innocent, they are from another country and not ours?
If you were to stop trading or investing long or short every time there was a tragic event, whether big or small, in our country or elsewhere, this would be a very restricted market place. And what if shorting were to be discouraged... to what extent should it be disallowed? Can I short the day after the market opens? Or do I have to wait years? Some companies will experience the ramifications of this event for months to come and maybe even years. Think about all the insurance companies who will lose billions of dollars over the course of years over this. Are they to be off limits to shorting for the next few years? Who will define when it will be ok and for what reasons?
I'll say it again...short selling is a function and a tool of the market. It is not an extension of a tragedy. Our country will certainly weep at the loss of human life, but it also must continue to function as a solid entity and part of that is to do business as usual. The market is a business and short selling is part of the market. |
