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> who took the view that all short positions were ursary It's more than usury. There is usury involved because "lending" the stock is done with interest. Howev

> who took the view that all short positions were ursary It's more than usury. There is usury involved because "lending" the stock is done with interest. However, the problems don't stop there. Stock shorters, as you point out, actively bet against a company or industry or economic structure in general, it's their benefit to see a company collapse or not do well. This isn't how a stable society should be set up. Furthermore, stock shorting exposes three parties to risk: the original owner, the shorter, and the new owner. There is risk being created in the market that does not justify the value that comes out of it. Let alone the fact that it's possible to short more than 100% of the total stocks, on what planet is this even acceptable? In a normal stock trade, risk is transferred from one party to another equally. The conclusion is that shorting is a heavily immoral, predatory, and dangerous practice. It's quite ironic that when ** hits the fan, the government has to step in to limit certain trades or practices that we've known all along to be dangerous (e.g. they lower interest or ban shorting).

tptacek 6y ago
This simply doesn't make sense. When nobody is incentivized to correct stock prices downwards, you just get injustices in the opposite direction. You can look at the private markets to see what this looks like: Theranos.
- danhak 6y ago
  The law of supply and demand doesn't require shorting in order to "correct" prices downward. The counterpoint to your Theranos example is the fact that Enron existed too. Both of them were fraudulent. Both collapsed after some number of years. One privately held, one publicly-traded and shortable. Same outcome, no? I can't (directly) short the price of strawberries at my farmer's market, or the cost of rent in my small town, or the prices of artwork at an auction house. Price discovery seems to work reasonably well in all these venues. What is with this canard that shorting is necessary for price discovery to occur? There is no such requirement in the law of supply and demand.
  - kasey_junk 6y ago
    Short and long positions are important for things that a) have a future value of money component and b) have risk that can be mitigated in a cost effective way. Artists would take advantage of this in the form of working on commission. Large enough commissions do in fact allow shorting in the form of insurance. The same is true of strawberry farmers & landlords at various places on the size distribution. One of the complaints my farmers market strawberry vendors have is that they don’t have access to the same finance agreements that large producers have. Part of that is because it’s not cost effective enough to short them.
- gher-shyu3i 6y ago
  This is a fallicious argument. Just because we don't allow people to engage in predatory practices, does not automatically mean that everything else is being run correctly. We don't correct one injustice with another. For those injustices in the opposite, we need to set proper rules and hold people accountable. I mentioned several times in this thread that the current financial system is fundamentally broken, big part of which is because it heavily relies on interest, which pushes people to commit even more injustices like the example you mention.
  - tptacek 6y ago
    I responded to your comment because I follow Kasey's comments; I didn't notice your comment upthread suggesting that you believe the entire concept of debt needs to be eliminated. I apologize for replying to you, because I don't think there's any productive conversation we can have.
matwood 6y ago
> Stock shorters, as you point out, actively bet against a company or industry or economic structure in general, it's their benefit to see a company collapse or not do well. Companies that have inefficiently deployed capital or have problems like a Theranos or Enron should collapse. People keep acting like shorts show up to a company like Apple and take it down. That's not at all what happens. Shorts are a lot like vultures. We may not like to see what they do, but they provide a service by cleaning up dead carcasses. If you want to argue that shorters spread (dis)information in a company and should be more closely looked at, I might agree. My immediate counter though would be that I see way more positive information spread in general, and people rarely seem to check that until it so blatantly false things collapse.
- mattnewton 6y ago
  The shorts don’t take money from the company, they take money from people unfortunate enough to invest in a failing company. In some cases that money could have helped the company land, in others it was going towards something doomed and possibly fraudulent, but either way it doesn’t come from the companies coffers directly unless the company does a buyback from the shorts. The people losing money are other investors. What if smart money had to bet on a competitor or growing some other investment instead?
  - kasey_junk 6y ago
    That’s a fine position to take so long as you recognize the vast majority of long money also doesn’t go to the companies coffers unless the do another offering. Your argument isn’t a moral one.
    - mattnewton 6y ago
      Much long money is absolutely used by the company indirectly; they can use their stock like a currency to raise funds with debt, pay employees, acquire companies with stock, etc. Thats hopefully a virtuous cycle where people do more stuff that creates value. I don’t mean to make a moral argument, just question the need for short positions. If the company is truly bad their shares should deflate as demand deflates, no short seller position necessary. I think, from the perspective of the needs of society, punishing bad investors who fail shouldn’t be as rewarding as finding the right investments to grow.
u10 6y ago
Imagine letting companies like Nikola and Valeant Pharma continue to rip off investors.
- danhak 6y ago
  If investors believe shares of these companies are a ripoff, they can sell any holdings and / or abstain from buying. Just like they can do in nearly every other type of market. If a used car salesman is trying to rip me off, I walk away from the deal. I don't need to be able to short his inventory! And the supply / demand dynamics of the used car market will trend toward equilibrium without any such shorting.
  - u10 6y ago
    ok, but what incentives does anyone have to actually look at potentially fraudulent situations, especially if the stock is ripping, as in the case of Valeant Pharmaceuticals? In fact the incentives are so perverse that it pays _not_ to state your research on why the company is not worth what it is. Even the time value spent on research is non trivial. Your example would make more sense if the car they were selling a what may seem as a perfectly fine Lambo, but in actuality it was a lemon. And the only way to find out if it was a lemon or not is to tear it apart piece by piece.
    - danhak 6y ago
      The incentive already exists in the form of long investors doing their due diligence.
      - u10 6y ago
        How does that make any sense? If the stock was growing 15% year over year without any indication that there are any issue, why would any investor want to provide any information or do any research on why that isn't the case? If an investor knew that there was fraud going on they would probably keep it to themselves and simply invest in the company anyways, because the financial incentive is there.
ostrophonics 6y ago
> This isn't how a stable society should be set up and why not? antifragile systems gain stability as they endure shocks. why not cyclically generate then destroy business? makes it easier to funnel resources to the top, because only the biggest - i.e., the most moneyed, hence the most liquid, hence best reactive to risk, hence most stable - firms can survive. you may not like it morally, but two centuries of corporate history leave little to gainsay empirically about this notion.
- gher-shyu3i 6y ago
  Because we already have systems that are already superior and much more stable, we don't have to endure any artificial shocks due to inherent instabilities in the system (caused in large due to interest and other immoral practices). The 2008 crash was just one manifestation of what happens when the system is taken to its logical conclusion, it all comes crumbling down eventually because it is not sustainable. We saw it these past two weeks with GME, however, the big players stepped in to put a stop to it because they can't allow the market to play by their own rules (because they're unstable). I have no issues with businesses going under because they can't compete, that's how a free market operates. I have issues with lending money with interest and other predatory practices, such as shorting, because they destroy economies and/or exploit one class, causing the lender to gain an unfair and immoral advantage simply because he has money. Gain wealth, but do it morally and without exploiting others. I'm all for that.

tptacek 6y ago

This simply doesn't make sense. When nobody is incentivized to correct stock prices downwards, you just get injustices in the opposite direction. You can look at the private markets to see what this looks like: Theranos.

danhak 6y ago
The law of supply and demand doesn't require shorting in order to "correct" prices downward. The counterpoint to your Theranos example is the fact that Enron existed too. Both of them were fraudulent. Both collapsed after some number of years. One privately held, one publicly-traded and shortable. Same outcome, no? I can't (directly) short the price of strawberries at my farmer's market, or the cost of rent in my small town, or the prices of artwork at an auction house. Price discovery seems to work reasonably well in all these venues. What is with this canard that shorting is necessary for price discovery to occur? There is no such requirement in the law of supply and demand.
- kasey_junk 6y ago
  Short and long positions are important for things that a) have a future value of money component and b) have risk that can be mitigated in a cost effective way. Artists would take advantage of this in the form of working on commission. Large enough commissions do in fact allow shorting in the form of insurance. The same is true of strawberry farmers & landlords at various places on the size distribution. One of the complaints my farmers market strawberry vendors have is that they don’t have access to the same finance agreements that large producers have. Part of that is because it’s not cost effective enough to short them.
gher-shyu3i 6y ago
This is a fallicious argument. Just because we don't allow people to engage in predatory practices, does not automatically mean that everything else is being run correctly. We don't correct one injustice with another. For those injustices in the opposite, we need to set proper rules and hold people accountable. I mentioned several times in this thread that the current financial system is fundamentally broken, big part of which is because it heavily relies on interest, which pushes people to commit even more injustices like the example you mention.
- tptacek 6y ago
  I responded to your comment because I follow Kasey's comments; I didn't notice your comment upthread suggesting that you believe the entire concept of debt needs to be eliminated. I apologize for replying to you, because I don't think there's any productive conversation we can have.

matwood 6y ago

> Stock shorters, as you point out, actively bet against a company or industry or economic structure in general, it's their benefit to see a company collapse or not do well. Companies that have inefficiently deployed capital or have problems like a Theranos or Enron should collapse. People keep acting like shorts show up to a company like Apple and take it down. That's not at all what happens. Shorts are a lot like vultures. We may not like to see what they do, but they provide a service by cleaning up dead carcasses. If you want to argue that shorters spread (dis)information in a company and should be more closely looked at, I might agree. My immediate counter though would be that I see way more positive information spread in general, and people rarely seem to check that until it so blatantly false things collapse.

mattnewton 6y ago
The shorts don’t take money from the company, they take money from people unfortunate enough to invest in a failing company. In some cases that money could have helped the company land, in others it was going towards something doomed and possibly fraudulent, but either way it doesn’t come from the companies coffers directly unless the company does a buyback from the shorts. The people losing money are other investors. What if smart money had to bet on a competitor or growing some other investment instead?
- kasey_junk 6y ago
  That’s a fine position to take so long as you recognize the vast majority of long money also doesn’t go to the companies coffers unless the do another offering. Your argument isn’t a moral one.
  - mattnewton 6y ago
    Much long money is absolutely used by the company indirectly; they can use their stock like a currency to raise funds with debt, pay employees, acquire companies with stock, etc. Thats hopefully a virtuous cycle where people do more stuff that creates value. I don’t mean to make a moral argument, just question the need for short positions. If the company is truly bad their shares should deflate as demand deflates, no short seller position necessary. I think, from the perspective of the needs of society, punishing bad investors who fail shouldn’t be as rewarding as finding the right investments to grow.

u10 6y ago

Imagine letting companies like Nikola and Valeant Pharma continue to rip off investors.

danhak 6y ago
If investors believe shares of these companies are a ripoff, they can sell any holdings and / or abstain from buying. Just like they can do in nearly every other type of market. If a used car salesman is trying to rip me off, I walk away from the deal. I don't need to be able to short his inventory! And the supply / demand dynamics of the used car market will trend toward equilibrium without any such shorting.
- u10 6y ago
  ok, but what incentives does anyone have to actually look at potentially fraudulent situations, especially if the stock is ripping, as in the case of Valeant Pharmaceuticals? In fact the incentives are so perverse that it pays _not_ to state your research on why the company is not worth what it is. Even the time value spent on research is non trivial. Your example would make more sense if the car they were selling a what may seem as a perfectly fine Lambo, but in actuality it was a lemon. And the only way to find out if it was a lemon or not is to tear it apart piece by piece.
  - danhak 6y ago
    The incentive already exists in the form of long investors doing their due diligence.
    - u10 6y ago
      How does that make any sense? If the stock was growing 15% year over year without any indication that there are any issue, why would any investor want to provide any information or do any research on why that isn't the case? If an investor knew that there was fraud going on they would probably keep it to themselves and simply invest in the company anyways, because the financial incentive is there.

ostrophonics 6y ago

> This isn't how a stable society should be set up and why not? antifragile systems gain stability as they endure shocks. why not cyclically generate then destroy business? makes it easier to funnel resources to the top, because only the biggest - i.e., the most moneyed, hence the most liquid, hence best reactive to risk, hence most stable - firms can survive. you may not like it morally, but two centuries of corporate history leave little to gainsay empirically about this notion.

gher-shyu3i 6y ago
Because we already have systems that are already superior and much more stable, we don't have to endure any artificial shocks due to inherent instabilities in the system (caused in large due to interest and other immoral practices). The 2008 crash was just one manifestation of what happens when the system is taken to its logical conclusion, it all comes crumbling down eventually because it is not sustainable. We saw it these past two weeks with GME, however, the big players stepped in to put a stop to it because they can't allow the market to play by their own rules (because they're unstable). I have no issues with businesses going under because they can't compete, that's how a free market operates. I have issues with lending money with interest and other predatory practices, such as shorting, because they destroy economies and/or exploit one class, causing the lender to gain an unfair and immoral advantage simply because he has money. Gain wealth, but do it morally and without exploiting others. I'm all for that.