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> in 2018, the team made a $2 billion bet that a series of shopping malls, including Crystal Mall, would eventually fail. If retail tenants vacated and the mall

> in 2018, the team made a $2 billion bet that a series of shopping malls, including Crystal Mall, would eventually fail. If retail tenants vacated and the malls’ landlords defaulted on their mortgages, MP stood to make a killing. Why should it be legal to make billions of dollars in profit off of the failure of something? How does that make economic sense? These guys walk off with a huge bag of cash, a bunch of investors that were trying to invest positively get screwed, the mall dies, and all that money and economic opportunity vanishes. The economy objectively gets poorer in that area, and the ramifications are widespread as areas start to become 'food deserts' and so forth. Are we _really_ to believe that the era of the physical marketplace, the Third Location where you can take your family and kill a rainy day, is really dead? Does nobody want this at all, anymore? Is it possible that we'd already let the malls decay into places people didn't want to be, through lax enforcement of any kind of social discipline that would make it a welcoming space, and this is just the death rattle of the mall from the same problem that will ultimately kill the city itself? Or is it possible that this is robber-baron capitalism, exploiting anything it can find for profit, lobbying and changing laws to make it easier to vampirically suck the remaining wealth out of troubled areas?

xzel 6y ago
It’s legal because there someone on the otherwise taking their bet. They’re not making money on the actual foreclosures, just the bonds going bad, which I agree is kinda similar. Some of those trades you could think of as catastrophic insurance policies. There are a few bigger issues here: why did the malls go bad? Could they simply not adapt to online or were they saddled with debt like some take over companies do? And should a mall ever take out a position like hedgedund did to protect against their own downfall? I’m not really trying to pick sides here but to me we should be more worried about why snd how the malls fell snd less about who made money when they did.
icelancer 6y ago
>> Why should it be legal to make billions of dollars in profit off of the failure of something? Should it be OK to have unchecked long pressure on assets? You think prices are inflated now? They'd be insane without short pressure.
- core-questions 6y ago
  Why does the ownership of a local building need to become a pawn in a big stock-market casino game where people can walk away rich while everything falls apart? It's because these things aren't owned by local institutions that care about the area they are in, at all. They're owned by people who wouldn't even step inside the building if they could avoid it. The crux of the issue is that buildings and facilities that are essentially civic centers have been financialized.
JKCalhoun 6y ago
Sorry, I can't cheerlead for a bunch of corporate chains in an expensive real estate storefront marking up conspicuous consumables 500% and paying their employees minimum wage. Fuck malls. They're reaping now what they sowed a long, long time ago when they killed the family-owned business on main street. The footprint of the modern mall is outrageous in its size. I'd like to think that creative and forward-thinking cities will come up with a much better use for that real estate.
- onemiketwelve 6y ago
  I dunno, some people enjoy malls, they have experiences and products you can't find going from small store to small store. Most small towns don't have a one off Chanel or LV store, and some people want that stuff.
- superhuzza 6y ago
  The size problem doesn't have much to do with malls - it has to do with parking. Many inner-city malls have no parking and seem very space efficient to me. https://www.aerialphotosofnj.com/_images/_photos/aerial/shopping_centers/aerial_photo_shopping_center_2.jpg https://www.aerialphotosofnj.com/_images/_photos/aerial/shop...
- joe_momma 6y ago
  Who do you cheer for then, because ain't no mom and pop shop in existence anymore. The mall was the greatest counter to things like Walmart where a single company was profiting and not a conglomerate of businesses. The banks ruined main street not people trying to find and make the best place to sell things.
  - arc0 6y ago
    I split time between a major world city and a small (10k population) town. Both have many independent businesses. Where do you live that this is not the case?
    - joe_momma 6y ago
postingawayonhn 6y ago
> These guys walk off with a huge bag of cash, a bunch of investors that were trying to invest positively get screwed, the mall dies, and all that money and economic opportunity vanishes. There's nothing in the article to suggest they took any proactive steps to hurt the malls or the businesses in them. They simply identified some risky securities and placed a bet that they would decline in value. The investors that were 'trying to invest positively' should have perhaps some more due diligence on the assets they were buying. Activist short sellers do exist too. For example Hindenburg Research who it seems have done very well off the collapse in the Nikola share price. They certainly provided value to the market through their exposure of corporate frauds.
kaibee 6y ago
> Why should it be legal to make billions of dollars in profit off of the failure of something? How does that make economic sense? These guys walk off with a huge bag of cash, a bunch of investors that were trying to invest positively get screwed, the mall dies, The way you've written this kind of implies that the mall dies because they bet against it. That isn't the case at all. The malls were going to die either way. > and all that money and economic opportunity vanishes. Live by the sword, die by the sword. Malls were part of what killed small mom & pop shops. Things change. Government programs should be in-place to protect people (especially like, normal people) from the worst/unpredictable outcomes of market based economy, but overall, markets are good at allocating capital to what people actually want (whether its actually good for us or not, see: social media). > Are we _really_ to believe that the era of the physical marketplace, the Third Location where you can take your family and kill a rainy day, is really dead? Does nobody want this at all, anymore? Can we please aspire to a better 3rd place than an advertising/consumerist mecca? How about community centers with pools, basketball courts, and arcades? With a mall's food court attached?
- msh 6y ago
  So much this: >Can we please aspire to a better 3rd place than an advertising/consumerist mecca? How about community centers with pools, basketball courts, and arcades? With a mall's food court attached?
Pyramus 6y ago
Let me make the argument for short selling, directly from the article: > "COVID-19 also revealed a dirty secret hidden in the crawlspace upon which many commercial mortgage-backed securities were built. A University of Texas at Austin study published in August claimed that banks knowingly inflated underwriting income for $650 billion worth of commercial real estate mortgages issued between 2013 and 2019, including by 5 percent or more for nearly a third of the roughly 40,000 loans. “A well-documented historical pattern is that fraud thrives in boom periods and is revealed in busts,” the university researchers wrote, adding that end investors were unaware of this hidden risk, a deception akin to buying a Ferrari secretly outfitted with a rusted-out Kia engine. It could be argued that CMBS had been a magic trick all along, with big banks one step ahead, luring investors to pick a card from a rigged deck. It took a global pandemic—an act of God—to reveal this financial sleight of hand." Our (capitalistic) system is rife with fraud, and as the saying goes "fraud creates alpha", i.e. a competitive advantage. Now in a perfect market, the regulator would step in and prevent and punish the fraudsters. However, fraud has positive side effects such as creating employment opportunities (Wirecard employed 2000ee on avg. for 10 years, say), and regulators are underfunded and overwhelmed because less regulation is good for business. So the economic function of short selling is to help price discovery at the minimum and expose fraud at the maximum. Also short selling is a stupid and highly risky idea: You take unlimited (!) downside for a limited upside, and any short portfolio will ultimately go to zero due to markets going up on average.
Taniwha 6y ago
It was the bunch of investors who took the short trade, remember what these guys did was a) rent some shares for X$ promising to return them after some agreed time b) sold them for market rates c) wait a while d) buy them back for (much lower) market rates e) give them back as promised In essence what they did was negotiate away the share's/bond's owner's rights to sell the shares for a period of time - the person doing the short is betting they'll go down, the person renting out the shares is betting they wont
1996 6y ago
> Why should it be legal to make billions of dollars in profit off of the failure of something? Why should it be illegal? One might make an argument in case of naked short selling, but even that is tedious at best. > social discipline ... death ... kill ... robber-baron capitalism ... lobbying ... vampirically suck the remaining wealth out of troubled areas With this choice of emotionally loaded words, I think you want to make a moral or political argument, not a legal or financial one.
- srtjstjsj 6y ago
  Tedious? Naked short selling is fraud.
scatters 6y ago
Those investors are less screwed than if they'd bought in at higher valuations because of a lack of any downward pressure. It might be bad in the short term for the economy of the local area, but the malls were going to collapse sooner or later, and now capital is freed up for more sustainable investments - such as walkable neighborhood shops.
scottlocklin 6y ago
>These guys walk off with a huge bag of cash, a bunch of investors that were trying to invest positively get screwed, the mall dies, and all that money and economic opportunity vanishes. The economy objectively gets poorer in that area, and the ramifications are widespread as areas start to become 'food deserts' and so forth. The investors didn't get screwed; they made a bad investment, and the short sellers didn't have anything to do with the malls failing. It boggles my mind that people look at speculators helping make markets in risk hedging as the vultures. The vultures are swine like Bain who levered up viable companies on debt to "increase shareholder value," looted pensions on bankruptcy and moved manufacturing abroad. Meanwhile McKinsey advising giving pharmacies "rebates" every time someone ODs.... but it's the guys shorting dying shopping malls who are the problem....
- core-questions 6y ago
  > It boggles my mind that people look at speculators helping make markets in risk hedging as the vultures. If you get rich from someone else's failure, you're a vulture, end of story. I think we ought to ban shorting stocks and a pile of other usurious business practices that have become commonplace. Failure should not be making other people rich.
  - scottlocklin 6y ago
    You have no idea what you're talking about. The inability to short bad ideas leads to fraudulent horse shit like Theranos or Bernie Madoff. There are entire short-only hedge funds designed to make a profit while leading to more honesty in financial reporting: there needs to be more rather than less of this.
microtherion 6y ago
> Why should it be legal to make billions of dollars in profit off of the failure of something? The money they made was not in any way extracted from anybody connected to the malls. Imagine sitting on earth with a friend, observing the Death Star through a radiotelescope. You bet the friend $1000 that the Death Star will vaporize Alderaan. You have made $1000 off the event, even though nobody in the Empire or on Alderaan even knew you and your Friend existed, or had any economic involvement in your transaction (and, in fact, given the distance, the event happened before the transaction even took place). > How does that make economic sense? In a larger sense, any transaction where you can bet on the success or failure of particular economic endeavours allows an individual investor to fine tune their portfolio to their dreams or concerns (e.g. if you own a skyscraper in a coastal city and are worried about Kaiju, being able to buy Kaiju insurance helps you sleep soundly at night). Collectively for the economy, such transactions are beneficial, because in their aggregate, they can be a more efficient resource allocation mechanism than a central planning mechanism. > These guys walk off with a huge bag of cash, a bunch of investors that were trying to invest positively get screwed, the mall dies None of which was the hedge fund's doing, see above. > and all that money and economic opportunity vanishes. Analyses like yours often fail to consider what happens with the "huge bag of cash" you mention above: It has just been transferred from the pockets of one investor group to the pockets of another investor group who have arguably demonstrated that they better understand how money is productively spent. So the money is not only going back into the economy, but may well be employed more efficiently.
- core-questions 6y ago
  > None of which was the hedge fund's doing, This is where I differ. When there is an entire financial industry built around the idea of making billions off of the failure of something, what on earth makes you believe they have no incentive to spur it along? > It has just been transferred from the pockets of one investor group to the pockets of another investor group who have arguably demonstrated that they better understand how money is productively spent. Spent _on what_? Are financiers and capitalists just an interchangeable commodity? Do you really think they all have the same interests, the same agenda?

xzel 6y ago

It’s legal because there someone on the otherwise taking their bet. They’re not making money on the actual foreclosures, just the bonds going bad, which I agree is kinda similar. Some of those trades you could think of as catastrophic insurance policies. There are a few bigger issues here: why did the malls go bad? Could they simply not adapt to online or were they saddled with debt like some take over companies do? And should a mall ever take out a position like hedgedund did to protect against their own downfall? I’m not really trying to pick sides here but to me we should be more worried about why snd how the malls fell snd less about who made money when they did.

icelancer 6y ago

>> Why should it be legal to make billions of dollars in profit off of the failure of something? Should it be OK to have unchecked long pressure on assets? You think prices are inflated now? They'd be insane without short pressure.

core-questions 6y ago
Why does the ownership of a local building need to become a pawn in a big stock-market casino game where people can walk away rich while everything falls apart? It's because these things aren't owned by local institutions that care about the area they are in, at all. They're owned by people who wouldn't even step inside the building if they could avoid it. The crux of the issue is that buildings and facilities that are essentially civic centers have been financialized.

JKCalhoun 6y ago

Sorry, I can't cheerlead for a bunch of corporate chains in an expensive real estate storefront marking up conspicuous consumables 500% and paying their employees minimum wage. Fuck malls. They're reaping now what they sowed a long, long time ago when they killed the family-owned business on main street. The footprint of the modern mall is outrageous in its size. I'd like to think that creative and forward-thinking cities will come up with a much better use for that real estate.

onemiketwelve 6y ago
I dunno, some people enjoy malls, they have experiences and products you can't find going from small store to small store. Most small towns don't have a one off Chanel or LV store, and some people want that stuff.
superhuzza 6y ago
The size problem doesn't have much to do with malls - it has to do with parking. Many inner-city malls have no parking and seem very space efficient to me. https://www.aerialphotosofnj.com/_images/_photos/aerial/shopping_centers/aerial_photo_shopping_center_2.jpg https://www.aerialphotosofnj.com/_images/_photos/aerial/shop...
joe_momma 6y ago
Who do you cheer for then, because ain't no mom and pop shop in existence anymore. The mall was the greatest counter to things like Walmart where a single company was profiting and not a conglomerate of businesses. The banks ruined main street not people trying to find and make the best place to sell things.
- arc0 6y ago
  I split time between a major world city and a small (10k population) town. Both have many independent businesses. Where do you live that this is not the case?
  - joe_momma 6y ago

postingawayonhn 6y ago

> These guys walk off with a huge bag of cash, a bunch of investors that were trying to invest positively get screwed, the mall dies, and all that money and economic opportunity vanishes. There's nothing in the article to suggest they took any proactive steps to hurt the malls or the businesses in them. They simply identified some risky securities and placed a bet that they would decline in value. The investors that were 'trying to invest positively' should have perhaps some more due diligence on the assets they were buying. Activist short sellers do exist too. For example Hindenburg Research who it seems have done very well off the collapse in the Nikola share price. They certainly provided value to the market through their exposure of corporate frauds.

kaibee 6y ago

> Why should it be legal to make billions of dollars in profit off of the failure of something? How does that make economic sense? These guys walk off with a huge bag of cash, a bunch of investors that were trying to invest positively get screwed, the mall dies, The way you've written this kind of implies that the mall dies because they bet against it. That isn't the case at all. The malls were going to die either way. > and all that money and economic opportunity vanishes. Live by the sword, die by the sword. Malls were part of what killed small mom & pop shops. Things change. Government programs should be in-place to protect people (especially like, normal people) from the worst/unpredictable outcomes of market based economy, but overall, markets are good at allocating capital to what people actually want (whether its actually good for us or not, see: social media). > Are we _really_ to believe that the era of the physical marketplace, the Third Location where you can take your family and kill a rainy day, is really dead? Does nobody want this at all, anymore? Can we please aspire to a better 3rd place than an advertising/consumerist mecca? How about community centers with pools, basketball courts, and arcades? With a mall's food court attached?

msh 6y ago
So much this: >Can we please aspire to a better 3rd place than an advertising/consumerist mecca? How about community centers with pools, basketball courts, and arcades? With a mall's food court attached?

Pyramus 6y ago

Let me make the argument for short selling, directly from the article: > "COVID-19 also revealed a dirty secret hidden in the crawlspace upon which many commercial mortgage-backed securities were built. A University of Texas at Austin study published in August claimed that banks knowingly inflated underwriting income for $650 billion worth of commercial real estate mortgages issued between 2013 and 2019, including by 5 percent or more for nearly a third of the roughly 40,000 loans. “A well-documented historical pattern is that fraud thrives in boom periods and is revealed in busts,” the university researchers wrote, adding that end investors were unaware of this hidden risk, a deception akin to buying a Ferrari secretly outfitted with a rusted-out Kia engine. It could be argued that CMBS had been a magic trick all along, with big banks one step ahead, luring investors to pick a card from a rigged deck. It took a global pandemic—an act of God—to reveal this financial sleight of hand." Our (capitalistic) system is rife with fraud, and as the saying goes "fraud creates alpha", i.e. a competitive advantage. Now in a perfect market, the regulator would step in and prevent and punish the fraudsters. However, fraud has positive side effects such as creating employment opportunities (Wirecard employed 2000ee on avg. for 10 years, say), and regulators are underfunded and overwhelmed because less regulation is good for business. So the economic function of short selling is to help price discovery at the minimum and expose fraud at the maximum. Also short selling is a stupid and highly risky idea: You take unlimited (!) downside for a limited upside, and any short portfolio will ultimately go to zero due to markets going up on average.

Taniwha 6y ago

It was the bunch of investors who took the short trade, remember what these guys did was a) rent some shares for X$ promising to return them after some agreed time b) sold them for market rates c) wait a while d) buy them back for (much lower) market rates e) give them back as promised In essence what they did was negotiate away the share's/bond's owner's rights to sell the shares for a period of time - the person doing the short is betting they'll go down, the person renting out the shares is betting they wont

1996 6y ago

> Why should it be legal to make billions of dollars in profit off of the failure of something? Why should it be illegal? One might make an argument in case of naked short selling, but even that is tedious at best. > social discipline ... death ... kill ... robber-baron capitalism ... lobbying ... vampirically suck the remaining wealth out of troubled areas With this choice of emotionally loaded words, I think you want to make a moral or political argument, not a legal or financial one.

srtjstjsj 6y ago
Tedious? Naked short selling is fraud.

scatters 6y ago

Those investors are less screwed than if they'd bought in at higher valuations because of a lack of any downward pressure. It might be bad in the short term for the economy of the local area, but the malls were going to collapse sooner or later, and now capital is freed up for more sustainable investments - such as walkable neighborhood shops.

scottlocklin 6y ago

>These guys walk off with a huge bag of cash, a bunch of investors that were trying to invest positively get screwed, the mall dies, and all that money and economic opportunity vanishes. The economy objectively gets poorer in that area, and the ramifications are widespread as areas start to become 'food deserts' and so forth. The investors didn't get screwed; they made a bad investment, and the short sellers didn't have anything to do with the malls failing. It boggles my mind that people look at speculators helping make markets in risk hedging as the vultures. The vultures are swine like Bain who levered up viable companies on debt to "increase shareholder value," looted pensions on bankruptcy and moved manufacturing abroad. Meanwhile McKinsey advising giving pharmacies "rebates" every time someone ODs.... but it's the guys shorting dying shopping malls who are the problem....

core-questions 6y ago
> It boggles my mind that people look at speculators helping make markets in risk hedging as the vultures. If you get rich from someone else's failure, you're a vulture, end of story. I think we ought to ban shorting stocks and a pile of other usurious business practices that have become commonplace. Failure should not be making other people rich.
- scottlocklin 6y ago
  You have no idea what you're talking about. The inability to short bad ideas leads to fraudulent horse shit like Theranos or Bernie Madoff. There are entire short-only hedge funds designed to make a profit while leading to more honesty in financial reporting: there needs to be more rather than less of this.

microtherion 6y ago

> Why should it be legal to make billions of dollars in profit off of the failure of something? The money they made was not in any way extracted from anybody connected to the malls. Imagine sitting on earth with a friend, observing the Death Star through a radiotelescope. You bet the friend $1000 that the Death Star will vaporize Alderaan. You have made $1000 off the event, even though nobody in the Empire or on Alderaan even knew you and your Friend existed, or had any economic involvement in your transaction (and, in fact, given the distance, the event happened before the transaction even took place). > How does that make economic sense? In a larger sense, any transaction where you can bet on the success or failure of particular economic endeavours allows an individual investor to fine tune their portfolio to their dreams or concerns (e.g. if you own a skyscraper in a coastal city and are worried about Kaiju, being able to buy Kaiju insurance helps you sleep soundly at night). Collectively for the economy, such transactions are beneficial, because in their aggregate, they can be a more efficient resource allocation mechanism than a central planning mechanism. > These guys walk off with a huge bag of cash, a bunch of investors that were trying to invest positively get screwed, the mall dies None of which was the hedge fund's doing, see above. > and all that money and economic opportunity vanishes. Analyses like yours often fail to consider what happens with the "huge bag of cash" you mention above: It has just been transferred from the pockets of one investor group to the pockets of another investor group who have arguably demonstrated that they better understand how money is productively spent. So the money is not only going back into the economy, but may well be employed more efficiently.

core-questions 6y ago
> None of which was the hedge fund's doing, This is where I differ. When there is an entire financial industry built around the idea of making billions off of the failure of something, what on earth makes you believe they have no incentive to spur it along? > It has just been transferred from the pockets of one investor group to the pockets of another investor group who have arguably demonstrated that they better understand how money is productively spent. Spent _on what_? Are financiers and capitalists just an interchangeable commodity? Do you really think they all have the same interests, the same agenda?