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How the hell did short selling become a social justice boogeyman? The narrative in the article -- that people truly feel sympathetic with the garbage companies

• Kocrachon 6y ago
  Because a bunch of people don't understand how the market work. like all these people who think they're buying GME stock is going to save GameStop, cuz they somehow think that GameStop get some of the money from their stock purchases... So yeah I really don't know what the heck is going on in people's minds right now.
  • calyth2018 6y ago
    Why does anyone want to save GameStop? They're pretty notorious for shit CS and shit trade-in prices. Or is this just people who are at the generation where they don't actually remember GameStop's actual practices and wax nostalgic about it?
    • mortehu 6y ago
      Re trade-ins, should GameStop even be allowed to buy back games after selling them to you? That's like short selling.
      • mweberxyz 6y ago
        It's just normal selling. If I borrow a game from my friend in order to sell it to GameStop, anticipating the re-sale price will be lower then the trade in price, so I can give the game back to my friend and take a profit -- would be like short selling.
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        • mortehu 6y ago
          That's a specific type of shorting. In financial markets you can also enter swap agreements, or sell futures or call options. The key is that GameStop seeks to profit from price depreciation. Just for fun we could imagine GameStop seeks to buy back every game it sells, and that games don't intrinsically decay because they're digital and the packaging is worth zero. Come to think of it, if games are pre-ordered it's even closer to what could reasonably be considered a short.
  • hntrader 6y ago
    They can get some of the money, indirectly, through an offering. The price on the secondary market drastically changes a listed company's fundraising prospects.
    • mlrtime 6y ago
      But they haven't and insiders have not sold due to SEC grey area laws.
      • hntrader 6y ago
        They can still raise at elevated prices, GME is still up more than 10x. AMC did so, dumping their at the market offering at the top.
  • MegaButts 6y ago
    They don't think they'll save GameStop and almost nobody cares. They just want to see hedge funds lose money, and they've already lost billions so many have already objectively succeeded. They also love to see Jim Cramer have meltdowns, which is almost every day now. If you want to hate on /r/wsb that's fine (there are many legitimate reasons to hate that subreddit), but don't pretend to understand something you clearly don't.
    • klmadfejno 6y ago
      Jim Cramer must hate it when people watch his show
    • kminehart 6y ago
      Here's my hot take: they're victims of a pump-and-dump, only instead of enticed by the promise of a get-rich-quick scheme, they're experiencing groupthink while people encouraging and controlling this narrative are running away to the bank.
      • MegaButts 6y ago
        There is definitely a ton of shilling on /r/wsb and people outside thinking there is any single collective entity are ridiculously wrong. Some people are pushing pump and dumps to make money. Some are ignorantly following along. Some genuinely treat it like a gambling addiction and enjoy it. The GME thing though is unique, and there really is a narrative to hurt hedgies (in addition to all of the above).
      • jjoonathan 6y ago
        Yep. One hedge fund lost billions while a dozen more who could spare the effort to model these pumps made away with every penny the "rebels" spent!
    • throwaway5752 6y ago
      Yes, those are very bad investing reasons. And while it feels like a game, they are investing with real money. It's not just entertainment. They will end up making different hedge funds richer, and will only end up poorer and more resentful in the end.
• navait 6y ago
  A lot of people get angry when you bet against success.
  • bidirectional 6y ago
    Which is ludicrous. Success is not a uniform good, nothing wrong with shorting Enron stock or bonds issued by the Third Reich.
    • KMag 6y ago
      Also nothing wrong with bringing an irrationally high price down to something more rational... ordinary citizens that are sellers get hurt, but citizens who are ordinary buyers are helped. The company is hurt if it wants to do a secondary stock offering, but is helped if it wants to do a stock buyback. Also, short selling increases the amount of money going into the dividend pool. If some stock has 140% short interest and issues 10 million dollars in dividends, short sellers have to pony up 14 million dollars, and the long position holders share those 24 million dollars. Disclosure: never sold short, but I am in the financial services industry. I do not speak for my employer.
• notyourday 6y ago
  > How the hell did short selling become a social justice boogeyman? It so happened that most of the short sellers are the members of the 'special rules for us' club - the same club that has been ripping off and living off the regular investors for decades. The actual targets of this are the likes of analysts, fund CEOs, etc on CNBC/Fox Business and their lawyers, accountants and politicians.
  • xadhominemx 6y ago
    How have short sellers been ripping off regular investors?
    • notyourday 6y ago
      > How have short sellers been ripping off regular investors? Not short sellers. The set of people who have been ripping off regular investors happen to encompass the majority of short sellers. Think the organized pump and dump that happen on CNBC every day. Those are the real target of the retail rage. They just can't articulate it well and since short sellers bet against the typical retail bet and since most of short sellers are the members of the 'special rules for us' group, short sellers are the target. P.S. I'm short GME.
• JMTQp8lwXL 6y ago
  Prematurely causing companies to go under puts thousands of people out of work. Kind of like how the Fed keeps interest rates low so zombie corporations can keep rolling over the debt --keeping many people employed-- stopping Wall Street from tanking businesses helps middle class people keep their jobs, so the thinking goes.
  • mobjack 6y ago
    Shorting stocks doesn't cause businesses to tank. What determines the success of a company like GameStop is whether people go to their stores and spend enough money to cover business expenses. It has nothing to do with the price of the stock.
    • thebean11 6y ago
      That's an oversimplification. A low stock price affects a lot of things, including a company's ability to raise capital.
      • popcorncowboy 6y ago
        You're right, but shorts don't _cause_ a stock to be low (in normal/retail circumstances). They're a bet on a stock being overvalued to begin with. - yes, shorting involves selling stock which nominally pushes prices lower, etc etc hat tip illegal S&D
        • thebean11 6y ago
          I kinda disagree, shorting messes with the supply/demand curve by "creating" more shares. If person A has a share, then B borrows it to short and sells it to person C, now both A and C are effectively holding the same share. Put another way, two people have had their demands met by a single share, increasing supply.
          • popcorncowboy 6y ago
            Only if A sells naked shorts, which is illegal. In ordinary circumstances A and C do not and cannot hold the same share. A only holds a claim against B to return the same number of shares as were borrowed.
• smnrchrds 6y ago
  I don't get it either. But it seems that a majority, or at least a large vocal minority of people believe you should either support corporations or do not support them, but you should never do anything against them. Example: when you write a comment criticizing a company or their policies, you get tons of replies saying "well, if you don't like them, don't use them. Don't go around badmouthing them." In the eyes of many, you should either help corporations or ignore them. Anything else is considered unethical, unconscionable, "bitching", etc.
• vkou 6y ago
  It's simple. Short sellers want the price of stocks to go down, which makes them bad people, because everyone currently invested in the market wants stock prices to go up. People who haven't yet invested in the market don't want prices to go up until they do, but nobody asks for their opinion. Also, due to the poor state of financial education, people think that a low stock price means a company will go out of business.
  • robjan 6y ago
    Almost every working person is invested in the stock market through various pension and retirement plans. To put things very simplistically, if the stock market goes down, people aren't going to be able to retire.
    • vkou 6y ago
      Almost every working person is buying stock - for decades - until they retire. This means that for the majority of their life, they benefit from lower stock prices. You also get a much better annual return on your investment, through dividends, when you buy under-priced stock. Shorting deflates bubbles, before they pop. It puts the brakes on irrational markets. Working people suffer quite a bit when bubbles pop, because there are knock-on effects to employment. Also, for most Americans, their biggest 'investment' is their home [1], with stock ownership being a distant second. That doesn't mean that we should pursue a public policy intended to drive housing costs into the stratosphere [2]. Investing into the stock market through your working life is a bet on capitalism continuing to work. Short sellers aren't going to destroy capitalism. [1] Actually, their biggest investment is their job, but again, for some reason, policies that advocate for raising the price of labor to the moon aren't very popular. [2] Yet, here we are, in a world where a toolshed with no running water in a coastal metro area goes for a million dollars...
      • exolymph 6y ago
        I would not presume that 401k-type investors at large grok the idea of net-buying years versus net-selling years.
• 015a 6y ago
  It feels like its part of the broader, somewhat global, rebellion against the financial economy; all the domains of finance which have become disconnected from the real markets and real economy, which more-often-than-not only exist for banks to make money off each other, and to crash both the real and financial economies when they screw up. Arguably, it started back in 2008 with the global recession, which was, again arguably, totally the result of missteps and corruption in the financial economy. By the end of that, practically no one was held accountable for what happened. and we entered an insane decade+ long bull market inflated by our sovereigns printing money rarely to support Americans, but rather American companies and our financial markets. This bull market coincides with a massive rise in cryptocurrency, which also represents a rebellion against established financial markets and the meddling of both sovereigns and financial corporations in the financial stability of the average citizen. Then, you reach short-interest, which historically serves some minuscule, though non-zero, amount of utility for the real economy, and has come under legitimate fire as being another tool which puts our economy at risk. I think the problem with short selling is best summed up by the end of the Big Short, as the main characters are sitting on steps of an abandoned bank, having made billions of dollars profiting off of the destruction of the American economy. The strange thing about markets, and economics in general, is that they are self-fulfilling prophesies. If enough people want a stock to drop, if they want a company to suffer by having a financial interest in it suffering; it will. This is different from simply selling a stock, which in-some-way causes the price to drop, because it changes the narrative from "I don't think it will go up" to "I think it will go down". By selling a stock, you're removing your stake; by short-selling, you're increasing your stake in a negative direction (and moreover, short interest is almost always leveraged, which compounds the problem). In other words, I think the increasing zeitgeist surrounding the perception of our financial markets as being unable to serve the interests of the real economy, and more importantly the average American, is an unusually accurate response to a real problem, and it follows that it would become a social justice issue. The government needs to take this seriously; again, economies are self-fulfilling prophesies. Crisis often start not because there is a crisis, but because people believe there's a crisis.
  • michaelbrave 6y ago
    This is correct I feel. The other part of the attitude is that the financial sector doesn't actually provide any value to anyone except the financial sector, it's seen a wealth horde for those who manipulate systems causing far reaching consequences. It's not respected and often not understood by the people. Short selling is seen as especially malicious as it causes a preemptive destruction of something in a time when everything is getting destroyed anyway, and doing so to make those who are already rich richer when people are literally starving due to unemployment isn't a good look.
• currymj 6y ago
  this just happens from time to time, it's part of mass psychology for whatever reason. people just have a moral intuition that short selling is bad. Read about Clarence Saunders and the Great Piggly-Wiggly Corner of 1923. Similar story, populist Main Street guy going up against the short sellers. Except in the 1920s.