Business Monitor
The short sell T
he latter is called selling short. If a city trader tells you he is short of tobacco, he’s not trying to ponce a cigarette.
Rather he has set up a short contract on, say, Imperial Brands. If such a contract has just unwound he’s likely to have a smug smile. If you answer him, be sure to refer to the above company as Imps. If you are selling short you are referred to as a bear. If you are selling long it means the opposite and you are called a bull.
The classic way a short sale is represented is as follows: you borrow stock from a broker, sell it to a customer expecting the price to fall; when it does you buy the stock at the market price and return it to the broker having pocketed your gains. So bears are not popular. They are perceived as totally self-centred, taking personal gains without pushing businesses forward or creating wealth that grows steadily. It is not as if short sellers are an essential component of the investment world. They bring nothing to the party but they take away plenty.
Number of elements
So, when the Reddit gang came along, everyone was delighted. Little guys get together and. destroy the short sellers? Where do I sign! You will know that saying that if something looks too good to be true, then it almost certainly is. There are a number of elements of that in the current minor slice of lunacy. First up comes the ‘bigger fool’ delusion. This says that there is out there always someone you can sell to. Remember it is a stock market, i.e. you need a buyer and a seller for it to function. So, the bigger fool is you. Then there’s the self-belief problem. If you’re in a room full of other people with the same aims and approach and it’s working, you start to believe that, yes, you are obviously one of the geniuses in the world. Everyone in that room is giving each other the gee-up and the momentum carries you all forward... until it doesn’t, at which point you’ll be hunting behind the settee cushions for money to buy a bag of chips. (I’m describing someone I know there).
The sudden, dramatic price rise in Game Stop was a bubble | 72 | March 2021 Verge of acceptance
It is highly likely that the private investor is going to go for Bitcoin. Elon Musk has started boosting them and he’s got tens of millions of social media followers. Musk says that Bitcoin is on the verge of acceptance by conventional institutions i.e. banks, insurance companies, stock brokers etc. It’s inventor, Satoshi Nakamoto, is considered in mathematical circles as a genius. In “Bitcoin a peer-to-peer electronic cash system,” Nakamoto explained the whole thing in nine pages. Hence that genius tag.
An investment vehicle
Bitcoin has been around since 2008 and it is perceived very much as an investment vehicle not much different to shares. Nakamoto doesn’t see it that way at all as far as anyone knows what he thinks (he appears to be a hermit). There are precious few shops be they physical or online where you can spend bitcoins and unless you’re buying a house or a Bentley your change will be in dollars after haggling over the exchange rate. It has its fans and detractors. Among the latter is Larry Fink, CEO of Blackrock the world’s biggest asset manager. He called it ‘an index of money laundering’. Ouch! He has mellowed somewhat in recent years. Note too that early adopters of Bitcoin included drug dealers on the Silk Road.
I like the idea of a system for peer2peer payments that cost neither party a penny. I don’t like any sense that a payment is being sent down a dodgy route, in either direction. How do I know?
The Reddit gang also has plenty of members at Robinhood. I saw a smart one-liner about them: ‘if you’re going to call yourselves Robinhood, look after the folks in Sherwood Forest and don’t run away the minute the Sheriff of Nottingham calls’. If the whole issue of short selling interests you, let me recommend reading ‘the Silver Bears’ by Paul Erdman, first published 1974. I believe it is still in print. Whatever, it’s a good read about an unpromising subject.
www.printwearandpromotion.co.uk
The short sell
How can a failing games store business suddenly become synonymous with making big bucks? Can the little guy (in investment and general financial terms at least) take on Wall Street and not take a bath on day one? Above all, how do you make money out of backing a share to fall? Marketing expert, Paul Clapham, reports.
that anyone could have recognised, but too many people didn’t, because they didn’t want to. Next up is supposed to be silver, i.e. the precious metal. Watch this space.
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