Short Selling, Part Five
Hi again. Recently in this blog, we’ve been covering the topic of short selling and all that it implies. We’ve gone over exactly what short selling is, who does it, what they hope to gain by doing so, and perhaps most importantly, what they stand to lose. Yet, apart from all of these concerns, short selling carries its own unique set of questions that don’t tend to come up in other discussions regarding the market.
Questions Of An Ethical Concern
Despite the degree to which short selling has become an accepted and standardized aspect of trading on the free market, it’s no secret that short sellers themselves aren’t really seen in such a positive light. The reason for this is that short selling itself is an inherently pessimistic process. You only stand to make a profit from short selling when the securities that you invest in do poorly.
Of course, if you only take part in short selling, it’s easy to see why others would regard you as someone who is hoping for the worst. Because most people have at least some investments that stand to profit from upwards movements in the market, you become some of their antithesis – when one of you makes a profit, the other one has to suffer. In other words, short sellers often find themselves set apart from the crowd when it comes to investing.
Bringing The Market Down
However, perhaps more importantly than this emotional impression of short selling, is the argument that short selling can actually have a detrimental effect on the overall status of the market. More than just being a practice founded in betting against one’s neighbour, it is often said that short selling actively works to bring down the market as a motivated force in itself. Next time around, we’re going to take a look at these accusations and see just what truth there is to them, if any.
See you next week for part 6 of Short Selling.
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008
Tags: Investing, market, profits, Short Selling, Stock Market
August 28th, 2008 at 11:51 am
sean ,
i find your articals great, and educational , i read all of them when i get time ,otherwise i save them — keep it up .
though , i would like to hear more on short selling , i know it is the reverse
of long , you can do well if you are on a roll here .
thanks , look foward to the next issue
terrence lane