Japanese pension fund stops lending stocks to short sellers.

Discussion in 'Off Topic' started by gooki, Dec 7, 2019.

  1. gooki

    gooki Active Member

    Japan's public pension fund, one of the largest institutional investors in the world, has stirred a international debate with its decision to stop lending shares for negative bets on stocks.

    Will other large financial institutions follow suit?

    https://asia.nikkei.com/Business/Ma...sk-Japan-fund-move-fuels-short-selling-debate

     
  2. What's wrong with shorting? It balances against unreasonable (or shady) stock promotions (manipulations) and provides opportunities for astute individuals (and institutions) that smell a rat.

    I am not referring to TSLA specifically, but many, many examples in the markets where this has happened. And it works both ways. If the shorts are wrong, then the longs will benefit in the end. Just look at what happened after the TSLA qtr 3 report.

    I have been investing/trading in the markets for a long time. Don't short often, but when day trading have found it easier to make a few bucks during a sudden market down swing (and all the stars and moon line up), and then buy back before the end of the day. Works best with highly liquid stocks. This is more of an opportunity for the small guy, as institutions will move a stock, whereas individuals with small trades can just follow the momentum.

    And with options, it gets even more complicated. Are you suggesting that people can't hedge their bets with Put options (shorting)? Even BobW here does this with his long positions in TSLA.

    Trying to control or restrain the market could have a lot of unintended consequences, and I would not want to change something that has been in place since near day 1 of stock markets and has worked very well over time.

    Having said that, I do see the merit of a large institution like a pension fund not lending money to short selling funds, but the same applies to some shady long funds as well. But that is more of a financial decision not based on any emotion or morals. It should not be about "stewardship". That could actually be called a form of unfair manipulation. But that is another long discussion, and beyond the scope and understanding of most of this forum's participants.
     
  3. gooki

    gooki Active Member

    My issues are anything beyond buying and selling creates a perverse incentive to manipulate the market without repercussions.

    If you smell a rat you are free to sell your shares. If you are not a share holder you are free to publish your knowledge.
     
  4. Doesn't sound like you have much experience with stock trading. Long and short selling is needed for balanced and stable markets.

    What Elon Musk (and others) don't like is short selling marauders. They can cause a lot of stock movement shock with their news announcements and spin on what may be happening with a company. But they can be held accountable if they are wrong about they say (sued), and can lose big themselves also if the stock moves against them. But the same also holds true for stock promoters (incl CEOs) when they make false statements to boost a stock. That's what happened to Elon when he claimed he had enough investors to take the company private at $420/share.

    In the end, the markets decide what a stock is worth, incl short sellers. But everyone needs to do their own due diligence besides just deciding who you want to believe. The latter lemming strategy might work for a while, but also can leave you very vulnerable if you don't understand what is really happening.

    I always recommend investors watch closely the income statements and balance sheets. The changes each qtr and year end irregularities need to be well understood. I am actually very conservative with my investing/trading and wouldn't even touch a stock like TSLA except in a day trade or short swing trade. What gives me pause and great caution is their book value currently at 28.52 per share, while the stock hit over $357 today. By contrast, GM's book value is 27.76 while their stock is just over $35. So you can see why short sellers are so very interested in TSLA and will pounce on any weakness. It is priced for perfection and high growth, and if Elon doesn't deliver, look out below.

    I much prefer the conservative approach. Much easier ways to make money (consistently) without having to gamble. Unfortunately, that is exactly what a lot of individual "investors" do, and often lose a lot of hard earned money,... and then like to blame others or circumstances instead of their own foolish decisions.
     
  5. gooki

    gooki Active Member

    By whom? There appears to be no legal repercussions for short sellers publicising lies in an effort to drive down stock value. Any lies are just passed of as opinion, and nothing happens.

    The perversion of short selling is it can be self fulfilling. By initiating the short selling and spreading false information they can effectively increase the cost of credit to a company, that in turn reduces profit, that in turn increased the cost of credit that in turn reduces profit... This is the death spiral shorts hope for.

    I disagree.

    Do you know of any peer reviewed scientific research papers on this?

    Full disclosure I've worked for a company that was targeted by short sellers (not in the auto industry). It's a distraction for the board and executives, when their energy is better spent elsewhere.
     
  6. My responses above are in bold. Again, your posts just show complete ignorance of how markets work. I was responding to try and educate you, but am obviously not getting through. So probably best we just end this discussion.
     

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