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Pakistan banned short selling a while back. It was only supposed to be temporary. Their index rallied 11% from it's lows only to fall back 26% from where the short selling ban was set at. The short ban is still in effect there and it appears they have no intention of repealing it. I'll see if I can like over the story from Minyanville.
Some people think that allowing short sales is necessary to accurately gauge stock values, but other countries have banned short sales altogether. Short sales bring a level of volatility to the market and while they can point to companies having difficulties, they can also damage a strong company that is experiencing short term difficulties. Right now, the stock market as a whole is suffering a confidence crisis as well as a banking/credit crisis. Many strong companies are going to have to reorganize some of their financing, and even though the company is perfectly sound, short sales on their stocks could undermine them and damage them.
Some people think that allowing short sales is necessary to accurately gauge stock values, but other countries have banned short sales altogether. Short sales bring a level of volatility to the market and while they can point to companies having difficulties, they can also damage a strong company that is experiencing short term difficulties. Right now, the stock market as a whole is suffering a confidence crisis as well as a banking/credit crisis. Many strong companies are going to have to reorganize some of their financing, and even though the company is perfectly sound, short sales on their stocks could undermine them and damage them.
Would stocks of good companies be shorted if they weren't over valued to begin with and/or have a ton of toxic crap on their balance sheets? I'd argue that the entire stock market is in a bubble and shorting their entire index would be more profitable than trying to pick winners.
Would stocks of good companies be shorted if they weren't over valued to begin with and/or have a ton of toxic crap on their balance sheets? I'd argue that the entire stock market is in a bubble and shorting their entire index would be more profitable than trying to pick winners.
I Watched the video. Good stuff. Let free market trade the way free market does, dude said. I like that. I think I know why those non-financial companies were added to the ban list. My guess is the SEC just wants to appear impartial by putting other companies in the mix, not just their financial buddies.
Short selling ban on financials "can" end on the 2nd but there's the option to extend for 30 days. The UK extended the ban until the end of the year and thoughts are we'll follow suit.
The biggest issue is with "naked" shorts demolishing otherwise ok companies via rumors and false stories which get it started and then it's a pile on effect when momentum builds up. I've seen it working on a couple of financial stocks and it's ugly and wrong. This whole short thing was aggrivated when the SEC removed the uptick rule and when naked short rules were relaxed. I'm glad they suspended it!
Would stocks of good companies be shorted if they weren't over valued to begin with and/or have a ton of toxic crap on their balance sheets? I'd argue that the entire stock market is in a bubble and shorting their entire index would be more profitable than trying to pick winners.
I'm sorry, I haven't watched your video yet, but I will when I have more time to focus. I'm not opposed to short sales outright, but I do think the suspension right now is a good thing. Too many people involved in the market are lazy about doing their own research. Rumors of shorting can cause people to dump stock in a good company. Normally, the company can rebound because it is sound, but in an economy in crisis, the dumping of stock, the increased cost of borrowing, the loss of confidence can be devastating.
Don't kid yourself. Short selling provides a necessary hedge for certain investors. Without short selling, there is no floor to selling off a stock. Shorts cover at a certain level, providing that floor to stock prices. Then, if you restrict selling longs (e.g. a short-circuit), you amplify the problem because investor confidence is lost everytime this market control take place and the fall resumes.
Don't kid yourself. Short selling provides a necessary hedge for certain investors. Without short selling, there is no floor to selling off a stock. Shorts cover at a certain level, providing that floor to stock prices. Then, if you restrict selling longs (e.g. a short-circuit), you amplify the problem because investor confidence is lost everytime this market control take place and the fall resumes.
But you have to admit naked shorts have gotten out of control....
Don't kid yourself. Short selling provides a necessary hedge for certain investors. Without short selling, there is no floor to selling off a stock. Shorts cover at a certain level, providing that floor to stock prices. Then, if you restrict selling longs (e.g. a short-circuit), you amplify the problem because investor confidence is lost everytime this market control take place and the fall resumes.
Many probably don't even know what short selling is, much less the difference between naked short and regular short. Most probably get their information from their favorite TV station. So when their you-buy-so-I-can-sell guru tells them short selling is bad and he doesn't like it, they buy it.
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