Shorting Obfuscates Scarcity.
The stock market is about supply and demand for the paper, or shares. People place a value on that paper based on fundamentals projected into the future. Buy and Hold Investors do this as routine, based on fundamental research. Inside the trade, these people are enemies where companies with emerging value is clear. The Inside trade says' The Actions over here and diverts the attention of market wannabees to it, choking off liquidity to many companies simply because the supply is owned by someone outside the circle. This is a more than fair characterization of this industry,in other words," the publics money is used to juice the insiders profits routinely".
Shorting Obfuscates supply, by manufacturing shares from a pool of shares called the float. The trade has most of tomorrows stars on the carpet right now trying to wipe out competition for these valuable shares, while much mal invested capital is rotated quietly to where future value lies.The problem with this as detailed in Moguls post and what is happening NOW with many small and mid caps is that the inherent scarcity that supports a stocks underlying future value, is totaly diminshed by the rampant and effective inside the trade manufacturing of supply as an effective price suppression weapon.
Remember when JNPR came public and ran up to 300+ dollars per share?
At that time a market cap was placed on the company against the total outstanding of 45 million shares. When in fact the market place was bidding up only the available pool of 2.7 million shares.
People fail consistantly to understand the role of the float as a relative constant in the market. Inside the trade the resources brought to bear are stacked against everyone not in the inner circle. In other words, once you buy stock, the trade manufactures your gains or losses not on fundamentals but on the manipulation of the Supply.
This is particularly agregious in small and mid cap companies where floats are very thin. Instead of rewarding investors who do the work of uncovering future value, the inside game is to identify and destroy these investors who got there first. Understanding full well that they can get away with it because they are the mechanics of the trade.
The Public needs to revolt against the inside trade, and force the SEC to write regulations that restores Supply and demand factors to the market. In an efficient market Supply and demand are all that there is. In a manipulated market Supply and demand are the enemy of those whose capital is outside the window of opportunity. Liquidity becomes the game, where value is established by juicing the trade, and scarcity is used against investors according to what % of the trade is owned by the inside trade versus the public. |
