By avoiding short positions, what we as individual investors do is add an element of stability and clarity to the large investors around the world.
All stock markets are, to a greater or lesser extent, "controlled" by the majority (or not controlled by the minority) of those involved. The specialists on the floor of the NYSE and the market makers for the NASDAQ are both very experienced in, and fully capable of, handling any short-term volatility in the stock markets.
Since this war that has been declared by the President of the United States will be fought over a period of years, it would be good to do things to support the economy of the country, both over the short-term and the longer-term.
If we place our trust in the people that control our money, by avoiding short positions in stocks, several things might happen:
One bad thing would be that those we have put our trust in would use this action by us to make money for themselves. That puts them on the side of the bad guys. If some jackhole that makes a market in some stock is shorting it when nobody else is, he's going to stand out like a sore middle finger.
Another bad side effect is that shorting could be more equated to "un-American". I don't have a problem with that right at the moment. I know where I'm at personally.
We lose potential profits, since anyone that shorts stocks as a normal part of their investment strategy makes money doing it.
The good thing that might happen is this:
Those that are forced, by the movement of the markets, to take short positions as a matter of course will be better able to judge what might happen in the future, since we have pledged not to contribute to any short positions.
If managed properly, such as with the use of options to offset risk, we can adjust ourselves so our current and future positions in the markets are no more risky than last week.
Anyone at the SEC who is looking at clues relating to the movement of money for support of terrorism would have a shorter list of people who are making money if the markets get worse.
Although shorting is a necessary part of the liquidity of the stock markets, it can be easily handled by other people besides us. I personally shorted stocks on an almost daily basis, just like I went long stocks on almost a daily basis.
Anyone (such as the US government) who is interested in supporting the stock markets and getting them to level out and stop going down, and everything that that suggests, would be better able to predict the future if they could see the short interest in the equity markets become much more predictable.
The less volatility in the markets, the less chance there is for some evil bastard to make fast money. Or launder some dirty money. Or a bunch of other bad stuff.
The SEC has recently relaxed the rule on companies buying back their own stock. This adds money into the markets. Companies such as CSCO have already stated they are going to start buying back their stock. The Fed is pumping large amounts of dough into the markets also.
So as a group, "Individual Investors that Support the United States" I am proposing that we not short stocks for a while and see if we can help find a bottom on the markets and send a message to everyone that we, as citizens of the United States, are all in full agreement with our President.
Thanks,
TLC |
