Short Selling - Education

[Aussiest]

Also I haven't seen these share prices rise after the shorts have cleared out, in fact they've continued to fall.

Could that possibly be because the SPs have been so decimated nobody is game enough to touch them?

To be honest, i hadn't been following BNB or ABS's fundamentals, so not sure how it all unfolded, and over what time period, in terms of FA.

Still conjecture to me at this point. Interesting conversation.

 

[nioka]

The fact that directors had margin calls against them probably had more of an effect on the share price than short sellers, as these shares would have been dumped on the market at any price

Exactly the point. These shares were targeted by hedge funds short selling BECAUSE the directors had huge margin loans and were vunerable to any downward pressure on their value. Any pressure caused selling which caused further falls which caused further selling all the time adding value for the short sellers. Nothing productive, only destructive.

I repeat ( without bigotry) Objectively "This is why short selling is a blight on the industry."

 

[nomore4s]

Could that possibly be because the SPs have been so decimated nobody is game enough to touch them?

lol, nobody's willing to touch them because of the high levels of debt and therefore risk now associated with these stocks.

If a stocks share price is smashed for no good reason, watch the smart money and bargin hunters come in and drive it back to fair value, but to date we haven't seen that on alot of shares.

Risk is now being repriced for alot of stocks - like I said market conditions have changed. Even if short selling wasn't allowed we would still have had this "bear" market drive - world economic conditions are changing and whether we like it or not this is going to effect earnings and therefore the share prices of alot of stocks.

To blame short selling is a cop out imo.

 

[nomore4s]

Exactly the point. These shares were targeted by hedge funds short selling BECAUSE the directors had huge margin loans and were vunerable to any downward pressure on their value. Any pressure caused selling which caused further falls which caused further selling all the time adding value for the short sellers. Nothing productive, only destructive.

I repeat ( without bigotry) Objectively "This is why short selling is a blight on the industry."

lol, what about the poor fundamentals and huge debt levels of these companies? Isn't this what enticed the short sellers in? Was that productive?
Looked good while credit was cheap and the economy was powering along.

These companies would have been in trouble no matter what due to the greed and the shortsighted vision of the directors.

Loading up on huge margin is very dangerous for any investor whether they are directors or not, imo this is more destructive than short selling is.

 

[tech/a]

Short selling is a blight on the investment market. Investment in shares should be investing capital in a company for productive purposes. Gambling in the value of those shares does nothing at all in the way of productivity. All it does is transfer wealth for someone to someone else and has that wealth diluted in the process. It confuses the value of an investment and , in many cases reduces the capacity of a normally productive business to compete and produce profitably. Short trading should be controlled and each trade should be reported as a trade so that the general investing public know the extent that shares are short traded. I'd be happy to see it banned completely.

In short selling education there should be education in the consequences of the practice before any other education in the process itself.

A Capitalist with a conscious.

Your taking the "P" arent you!

This IS Robin Hood isnt it!

 

[nioka]

A Capitalist with a conscious.

Your taking the "P" arent you!

This IS Robin Hood isnt it!

There is nothing wrong with being a capitalist and having a conscience. I'd like to think that I am an "ethical" investor. I have no desire to end up the richest person in the cemetary. Nor do I suggest that I am Robin Hood or anything like him. And I am not taking the "P". I am serious about the matter. I believe that all trading should be "up front". There should be no deception. There should be no cheating. The system with hedge funds and short selling includes hidden agendas, deception and cheating.

I believe that education in short selling should include an examination of the failings in the process as well as just the "how much can I make out of this" angle.

I have no objection with someone taking a hedge position as insurance against a loss as the system is supposed to do. It is the smart, shonky non productive deals that it encourages that I see as a problem. Operators within these funds are gambling with other peoples money, often their life savings. I have no problem with fast Eddy losing out with ABS but I do have sympathy for a lot of the holders of ABS that were relying on the company to help them in their retirement. There can be no doubt that the problem would not have been as serious as it turned out to be if there were no hedge funds.

The greed of the directors was wrong. Using that wrong to justify another wrong is just as wrong.

 

[tech/a]

While I dont disagree with your idealistic views,personally I gave up living,Should be's/Could be's/Would be's years ago.

I cant change it so I'll use it to my advantage.
Life short---enjoy.

 

[Trembling Hand]

There can be no doubt that the problem would not have been as serious as it turned out to be if there were no hedge funds.

What the hell . ABC were incorrectly reporting a profit when they couldn't make a dime. They now look to be on the wrong end of a class action suit from their own share & bond holders. The shorts kicked off what was inevitable, a bad company going broke AND in the process saving more share & bond holders from throwing good money into a inefficient company, and exposing a poor Gov policy.

There is a perfect example of a "productive" process. Killing the weak rewarding the strong.

 

[Nick Radge]

I do have sympathy for a lot of the holders of ABS that were relying on the company to help them in their retirement.

Tell that to shareholders of Onetel, HIH, Sons of Gawlia, Bell Resources, Elders IXL, Qintex, Bond Corp and the other bunch of losers from the prior era (i.e. the era before hedge funds)

I should also point out that short selling has been active in the US since 1947 and remains an active part of the markets even today.

I think its an ignorant 'blame game' that we're seeing. BNB wasn't driven from $30+ to zip by hedge funds, nor was ABS driven from $8.80 to $0.54 by the same.

Of course we can't seem to to remember that hedge funds drove Qantas from $3.00 to $6.00 making a long term dog look okay for a brief period. What about Gold and Oil? Can't hear an argument from those that rode those mega trends complain, although they would be now because that love story has ended.

Its called hot money and you want to be on the right side of it.

 

[MichaelD]

Some of those here in this thread blaming the evil hedge fund short sellers might want to actually look at some facts first.

Want to know what the big money is doing at the moment? You'll find out in a week or two as more and more substantial shareholder notices are lodged.

6 months ago, these were all selldowns. Now, they are accumulating. "Sell at retail, buy at wholesale".

Big money buys panic selldowns and sells into mania.

Put the blame for your losses where it belongs - on yourself.

Even better - learn to short sell yourself, giving you yet another way to take money from the lemmings.

 

[Julia]

I'm not getting into this argument but note that the original post is from a new member (first post) and appears to be backdoor advertising, as Cuttlefish has already noted. Is this OK with you, Joe?

 

[Joe Blow]

Hi Julia,

I have removed the reference to the website in the first post.

My policy has always been that if people are prepared to contribute useful content to the forums then they should be entitled to have their URL in their signature. However, they are not entitled to promote their website, product or service within their posts. In my view that crosses the line and is considered spam.

The moderators and I will continue to enforce this policy and keep ASF spam free.

 

[Wysiwyg]

The system with hedge funds and short selling includes hidden agendas, deception and cheating.

If indeed this is the case, though it would hardly be admitted if there is a dollar being made, then, as a small player, I turn to the third Newton Law :-

For every action, there is an equal and opposite reaction.

As Nick Radge mentioned on another thread

Its called hot money and you want to be on the right side of it.

It is simply another option to trading the markets that is available to all but not what I consider morally correct too.

One of those `if you can`t beat them join them` things.

 

[fimmwolf]

If you don't short then you are automatically reducing the potential number of profit making opportunities that are available to you.

 

[GreatPig]

The same could be said if you don't buy Lotto, don't play the pokies, don't visit the TAB...

GP

 

[fimmwolf]

The same could be said if you don't buy Lotto, don't play the pokies, don't visit the TAB...

GP

Indeed, there is always opportunity cost in any financial decision.


I guess it wasn't really the point I was wanting to make. My intention was to respond to nioka's statement which sounded a little too moralistic for my liking.

Originally posted by nioka
Short selling is a blight on the investment market. Investment in shares should be investing capital in a company for productive purposes. Gambling in the value of those shares does nothing at all in the way of productivity. All it does is transfer wealth for someone to someone else and has that wealth diluted in the process. It confuses the value of an investment and , in many cases reduces the capacity of a normally productive business to compete and produce profitably. Short trading should be controlled and each trade should be reported as a trade so that the general investing public know the extent that shares are short traded. I'd be happy to see it banned completely.

perhaps my response should have read....

If we ignore completely the commonly accepted philosophy that sentiment, and not rational decision making, drives the markets, then perhaps we can still seek solace in the notion that investors DON'T invest based on company XYZ's current productivity or financial status, but rather what their future expectations are of that company's results will be.

Shorting doesn't tip the scales any more than any other position in the markets.

Taking a position (or not) is of course the traders prerogative. But telling others that you refuse do so based on your sense of what is right, or wrong for that matter, is of course completely irrelevant to the outcome of the market itself.

 

[kam75]

Short Selling is the opposite of buying stock. When buying, we profit by selling at a higher price. Short selling involves borrowing and selling stock we do not own in order to profit by buying back at a lower price. It’s a strategy that can be used as a hedge or to capitalize during a bear market.

WHEN DONE PROPERLY, short selling carries no greater risk than buying stock. Profits will often be realized quicker because stocks tend to fall faster than they rise as the emotion of fear is stronger than greed.

Without doubt the best education I've ever read on how to sell short properly is in Stan Weinstein's book, "Secrets for Profiting in Bull & Bear Markets."

Regards
kam75
_____________________________
http://www.sharesmadeeasy.com

 

[Wysiwyg]

WHEN DONE PROPERLY, short selling carries no greater risk than buying stock. Profits will often be realized quicker because stocks tend to fall faster than they rise as the emotion of fear is stronger than greed.

Excellent recent example is AUD/USD.my trailing stop hit at 93c and the pair now at 80c.Quicker....most definately.

 

[James Austin]

i wonder how aussieshort, the originator of the thread, is doing!

http://www.aussieshort.com/index.html

 

[Panacea]

i wonder how aussieshort, the originator of the thread, is doing!

http://www.aussieshort.com/index.html

Just had a look at the site out of curiosity. Under the 'About Us' link, was this gem...

"Aussieshort was created by Adrian Rowney and Giannis Pantelakakis, Private Client Advisors at Tricom Equities"

These guys can't take a trick.