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There is a place for shorts i.e. as price discovery mechanism, and in many cases, as a price correction mechanism to reveal fundamental weaknesses in a company
by wenc 7y ago
There is a place for shorts i.e. as price discovery mechanism, and in many cases, as a price correction mechanism to reveal fundamental weaknesses in a company with overpriced stock.
Shorting stocks to take advantage of a disaster strikes me as one of the most unethical, immoral things one can do. People still do it, but it doesn't make it right.
(apologies for the moralizing -- my sentiments are not directed at OP who was merely musing and shooting the breeze -- but at amoral Wall Street types).
- rwmj 7y agoI mean, it's an airline. While the CEO might lose his bonus, it's unlikely for a bit of short selling to drive the airline out of business (and so for people to lose their jobs), so I don't think this is really a moral issue. Also, this is exactly a price discovery mechanism - the airline isn't going to be as profitable so it isn't as valuable!
- wenc 7y agoYou could be right, but I think the ethics on it are less neutral than that. (it's hard to say what "a bit" of short selling is -- there are feedback loops in the stock market) Airlines provide fast connectivity between cities for people and goods, which is valuable in a disaster situation, and by shorting a stock to make a few bucks, you'd be creating unfavorable transportation economics in a disaster situation and possibly worsening supply chain constrictions. A short seller would be profiting off the hardship of others.