4 ms·
Chairs aren't a fungible commodity and chairs depreciate, which are the two reasons you can't short chairs. If chairs were fungible and didn't depreciate, then
by hntrader 6y ago
Chairs aren't a fungible commodity and chairs depreciate, which are the two reasons you can't short chairs.
If chairs were fungible and didn't depreciate, then they would be shortable just like stocks, but you wouldn't be able to keep it yourself, you'd need to loan it out to be short-sold by someone else.
- lupire 6y agoThe concept of a commodity fails when it's controlled by a cartel or can't be produced in sufficient volume to meet demand, as seen with oil and short squeezes.
- hntrader 6y agoI'm not attempting to make a value judgement about one commodity vs another, I'm just outlining what is the necessary and sufficient condition for something to be short-able, which I think is widely misunderstood (I say this because of Elon's tweets that "we can't short cars"). Cars, chairs, etc, can't be shorted, since they aren't fungible. This reason is mostly a practical one. If people really wanted to short cars, despite the fact that they aren't fungible, they would be able to, they just need to prepare the necessary legal paperwork. Nobody does this because it would be extremely annoying to do so, and for very little benefit. Things that are fungible can be shorted easily with minimal legal legwork. Stocks are fungible and therefore can be shorted. Now regarding the supply of a commodity that's available to short, in the case of stocks that's determined by the executive team and board when there's a need to raise funds. I wouldn't exactly call that a cartel. They're just doing what they think is best for their business (i.e., issuing new stock when the company needs funds and they don't wish to raise through debt).