4 ms·

Not directly related to the thread, but I'm surpised by the extreme anti-short seller sentiment? Why is it important that they suffer? Short-selling is what m

by derriz 8y ago

Not directly related to the thread, but I'm surpised by the extreme anti-short seller sentiment? Why is it important that they suffer? Short-selling is what makes almost zero expense mutual/index funds available to mom n' pop investors. Fidelity are about to offer ZERO TER funds on the basis that short-sellers pay heavily to borrow stock from them. It seems analogous to expressing hatred for umbrella sellers because you don't like rain. When I lived in Ireland before the GFC banking collapse, I remember bank executives whipping up public support for a government ban on short-selling bank stocks on the basis of "protecting decent companies from shady speculators and evil gamblers". In terms of cost to society, it was the bank executives who inflicted massive damage and bankrupted the country, not short-sellers of bank stock. Since then, I've been quite skeptical when people blame speculators and short-sellers for the behavior of markets. There's usually some basis for shorting.

spadros 8y ago
I think people here aren't saying they hate shorting in general, but that Musk hates people shorting his company. So it's Musk enjoying twisting the knife in the shorters, not these guys on Hacker News.
- spadros 8y ago
  Also if you're a long term investor you probably hate shorters and traders.
  - RhysU 8y ago
    Unless you want to buy more shares from the shorters or liquidity from the traders. Markets need sellers and market makers.
  - pmart123 8y ago
    I think it depends. I think long-term investors should still look at short interest and read short thesis to understand counter-arguments. Regarding manipulation and herding, I think it depends. Someone could short Apple on merits of valuation. In this instance, due to the company's strong balance sheet, its a matter of debate and opinion among longs/shorts as a short report will not death spiral the company. In situations where a company has a significant among of debt or a cash flow issue or is a financial company, the company generally has to access capital markets at some point in the near future. This is the danger of leverage, or even proving a business model as a public company. In the middle ground, you have a company like NFLX where some investors like Bill Nygren are long and advocate the position due to his belief the company has room to raise prices in the future from say $12/month to $15/month, shifting the PE ratio from 150 to 20. My assumption would be that a short thesis would have much less impact on scaring the market to instigate a death spiral for NFLX. So with Telsa, it is in a vulnerable position due to being in a highly capital-intensive business, negative cash flow, and significant liabilities. But, it also is the only car company ever to presell hundreds of thousands of cars and a CEO who has delivered on big visions and promises before. I have no personal investment in Tesla, but I hope Elon succeeds as I appreciate his ambition.
belltaco 8y ago
Here's a good piece on why. https://teslamotorsclub.com/tmc/threads/elon-musk-vs-short-sellers.118431/ https://teslamotorsclub.com/tmc/threads/elon-musk-vs-short-s...
apexalpha 8y ago
What real world value do short sellers add? Owning a stock used to mean that you invested in (a part) of a company. You risk your money to get some of the real world gains the company hopefully makes. Now, the stock is the product, not the company. It's become a game in itself. It adds nothing to the real world outside of finance.
- flush 8y ago
  What real world value to long buyers add? Sure, if you invest and the company takes that investment and does really well with it, the world may benefit from an increase in productivity/wealth. But if you invest and the company does poorly and tanks, then the world loses by something because you could have taken that money somewhere productive. The kind of market that produces the most real world value is one where companies are valued accurately. If you think a stock is undervalued, you go long. If you think it's overvalued, you go short. Both actions affect the market value of a stock. Seems like two sides of the same coin. I can't see where an argument against one doesn't work against the other.
- pmart123 8y ago
  Honesty. For instance, investors can't short in India, and it happens to be one of the countries with a reputation of a high proportion of companies with accounting irregularities.

by derriz 8y ago

spadros 8y ago

I think people here aren't saying they hate shorting in general, but that Musk hates people shorting his company. So it's Musk enjoying twisting the knife in the shorters, not these guys on Hacker News.

spadros 8y ago
Also if you're a long term investor you probably hate shorters and traders.
- RhysU 8y ago
  Unless you want to buy more shares from the shorters or liquidity from the traders. Markets need sellers and market makers.
- pmart123 8y ago
  I think it depends. I think long-term investors should still look at short interest and read short thesis to understand counter-arguments. Regarding manipulation and herding, I think it depends. Someone could short Apple on merits of valuation. In this instance, due to the company's strong balance sheet, its a matter of debate and opinion among longs/shorts as a short report will not death spiral the company. In situations where a company has a significant among of debt or a cash flow issue or is a financial company, the company generally has to access capital markets at some point in the near future. This is the danger of leverage, or even proving a business model as a public company. In the middle ground, you have a company like NFLX where some investors like Bill Nygren are long and advocate the position due to his belief the company has room to raise prices in the future from say $12/month to $15/month, shifting the PE ratio from 150 to 20. My assumption would be that a short thesis would have much less impact on scaring the market to instigate a death spiral for NFLX. So with Telsa, it is in a vulnerable position due to being in a highly capital-intensive business, negative cash flow, and significant liabilities. But, it also is the only car company ever to presell hundreds of thousands of cars and a CEO who has delivered on big visions and promises before. I have no personal investment in Tesla, but I hope Elon succeeds as I appreciate his ambition.

belltaco 8y ago

Here's a good piece on why. https://teslamotorsclub.com/tmc/threads/elon-musk-vs-short-sellers.118431/ https://teslamotorsclub.com/tmc/threads/elon-musk-vs-short-s...

apexalpha 8y ago

What real world value do short sellers add? Owning a stock used to mean that you invested in (a part) of a company. You risk your money to get some of the real world gains the company hopefully makes. Now, the stock is the product, not the company. It's become a game in itself. It adds nothing to the real world outside of finance.

flush 8y ago
What real world value to long buyers add? Sure, if you invest and the company takes that investment and does really well with it, the world may benefit from an increase in productivity/wealth. But if you invest and the company does poorly and tanks, then the world loses by something because you could have taken that money somewhere productive. The kind of market that produces the most real world value is one where companies are valued accurately. If you think a stock is undervalued, you go long. If you think it's overvalued, you go short. Both actions affect the market value of a stock. Seems like two sides of the same coin. I can't see where an argument against one doesn't work against the other.
pmart123 8y ago
Honesty. For instance, investors can't short in India, and it happens to be one of the countries with a reputation of a high proportion of companies with accounting irregularities.