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One of the most powerful people in the world literally saying "Short selling should be illegal.": https://mobile.twitter.com/elonmusk/status/120178148963916185

One of the most powerful people in the world literally saying "Short selling should be illegal.": https://mobile.twitter.com/elonmusk/status/1201781489639161856 https://mobile.twitter.com/elonmusk/status/12017814896391618...

bidirectional 6y ago
Yes, hard to take Musk seriously given where his incentives lie.
markus92 6y ago
Also owner of some of the most-shorted stock out there.
magicalhippo 6y ago
I took programming and not finance during uni, so I know nothing regarding this. From what I've gathered, the point of the market, in theory, is to determine the correct price of a stock. For some value of correct. Obviously I'm not thinking of spreading false rumors after taking up a short position or similar, but merely wanting to profit from identifying a potential price mismatch doesn't seem inherently wrong to me. Am I missing something? Is it the lending part that's problematic?
- smabie 6y ago
  I don't think you're missing anything, most just people fundamentally don't understand the markets and like to say all kinds of inane things. Moreover if short selling was banned, people would just express the same view by selling a equity swap.
travmatt 6y ago
One of the people in the world most vulnerable to short selling is against it.* Short selling is still an essential part of markets and price discovery, it’s not really that hard to understand why Elon is against it.
- Retric 6y ago
  Short selling doesn’t actually help with price discovery as it can artificially inflate or deflate the stock price in ways that buying and selling doesn’t. Knowing something is 55.54$ not 55.55$ isn’t nearly as important as knowing it’s around 55$ not 155$, thus if anything short selling is harmful to price discovery.
  - travmatt 6y ago
    Economic research[0] disagrees with you. “”” We show that stock prices are more accurate when short sellers are more active. First, in a large panel of NYSE-listed stocks, intraday informational efficiency of prices improves with greater shorting flow. Second, at monthly and annual horizons, more shorting flow accelerates the incorporation of public information into prices. Third, greater shorting flow reduces post-earnings-announcement drift for negative earnings surprises. Fourth, short sellers change their trading around extreme return events in a way that aids price discovery and reduces divergence from fundamental values. These results are robust to various econometric specifications, and their magnitude is economically meaningful. “”” [0]https://marginalrevolution.com/marginalrevolution/2021/01/short-selling-and-the-price-discovery-process.html https://marginalrevolution.com/marginalrevolution/2021/01/sh...
    - Retric 6y ago
      I was making a different point, yes on most days it’s a net positive. But, it’s also introducing new black swan events like a short squeeze where the price becomes wildly disconnected from the underlying economic reality. It’s often argued that a small increase on most days is more important than large but rare inaccuracies, however it’s a question of how you’re measuring things. If you use a direct average vs square root of the sum of inaccuracies squared etc.
      - travmatt 6y ago
        I don’t think the stock market has correlated with underlying economic realities in a long time, and I don’t think short selling is the cause of that. Additionally, I’d think that the small constant corrections of short sellers helps avoid most large cost corrections later.
Aunche 6y ago
Musk is a memer. Bashing short selling is just a way to get him free PR. He also said that Tesla's stock price is too high.
oh_sigh 6y ago
This guy also accuses random heroes of being pedophiles on his twitter.
fractionalhare 6y ago
I would be wary of using someone's power to support their claims. Especially after the last four years of American politics...
- woopwoop 6y ago
  Oh I didn't mean to. If anything I was trying to say that this nonsense can't be so easily dismissed as idle talk.

bidirectional 6y ago

Yes, hard to take Musk seriously given where his incentives lie.

markus92 6y ago

Also owner of some of the most-shorted stock out there.

magicalhippo 6y ago

I took programming and not finance during uni, so I know nothing regarding this. From what I've gathered, the point of the market, in theory, is to determine the correct price of a stock. For some value of correct. Obviously I'm not thinking of spreading false rumors after taking up a short position or similar, but merely wanting to profit from identifying a potential price mismatch doesn't seem inherently wrong to me. Am I missing something? Is it the lending part that's problematic?

smabie 6y ago
I don't think you're missing anything, most just people fundamentally don't understand the markets and like to say all kinds of inane things. Moreover if short selling was banned, people would just express the same view by selling a equity swap.

travmatt 6y ago

One of the people in the world most vulnerable to short selling is against it.* Short selling is still an essential part of markets and price discovery, it’s not really that hard to understand why Elon is against it.

Retric 6y ago
Short selling doesn’t actually help with price discovery as it can artificially inflate or deflate the stock price in ways that buying and selling doesn’t. Knowing something is 55.54$ not 55.55$ isn’t nearly as important as knowing it’s around 55$ not 155$, thus if anything short selling is harmful to price discovery.
- travmatt 6y ago
  Economic research[0] disagrees with you. “”” We show that stock prices are more accurate when short sellers are more active. First, in a large panel of NYSE-listed stocks, intraday informational efficiency of prices improves with greater shorting flow. Second, at monthly and annual horizons, more shorting flow accelerates the incorporation of public information into prices. Third, greater shorting flow reduces post-earnings-announcement drift for negative earnings surprises. Fourth, short sellers change their trading around extreme return events in a way that aids price discovery and reduces divergence from fundamental values. These results are robust to various econometric specifications, and their magnitude is economically meaningful. “”” [0]https://marginalrevolution.com/marginalrevolution/2021/01/short-selling-and-the-price-discovery-process.html https://marginalrevolution.com/marginalrevolution/2021/01/sh...
  - Retric 6y ago
    I was making a different point, yes on most days it’s a net positive. But, it’s also introducing new black swan events like a short squeeze where the price becomes wildly disconnected from the underlying economic reality. It’s often argued that a small increase on most days is more important than large but rare inaccuracies, however it’s a question of how you’re measuring things. If you use a direct average vs square root of the sum of inaccuracies squared etc.
    - travmatt 6y ago
      I don’t think the stock market has correlated with underlying economic realities in a long time, and I don’t think short selling is the cause of that. Additionally, I’d think that the small constant corrections of short sellers helps avoid most large cost corrections later.

Aunche 6y ago

Musk is a memer. Bashing short selling is just a way to get him free PR. He also said that Tesla's stock price is too high.

oh_sigh 6y ago

This guy also accuses random heroes of being pedophiles on his twitter.

fractionalhare 6y ago

I would be wary of using someone's power to support their claims. Especially after the last four years of American politics...

woopwoop 6y ago
Oh I didn't mean to. If anything I was trying to say that this nonsense can't be so easily dismissed as idle talk.