Why would people want to sell their assets and investments in a perceived incoming recession thereby making everyone's portfolio values go down? It seems rather counterintuitive as then everyone would be worse off making the recession longer. So isn't it more logical to just hold their portfolios at their inflated values and then start buying again until economic conditions are more favorable?
Is shorting illogical?
- Thread starter nxt7
- Start date
can begin from the start...?
But don't most troughs/dips in major indices correspond with recessions?
Without shorting, stocks tend to become more overvalued, since people can only sell stocks they've already bought. With naked shorting, people can bet on return to mean on the downside, thus depressing long-trends and allowing improvements on price discovery mechanisms in the market. General consensus seems to be it's a means to avoid too large bubbles as you provide tools to "invest"/bet to the downside as well.
Good question. We can't all know everything, and I know I know very little. This is the kind of stuff you read once, and then just remember it. Might be inaccurate, though sounds logical and markets generally seem more mean-reverting now than decades before.
Think of it as removing some of the pyramiding effects of stock-manias. However, if the market tanks too much, regulators might freeze shorts or start seizing assets. I don't think you get infinite money if stock goes to 0 either. It'll probably hurt too.. So shorting is more short-term, risikier and faster than long. Due to liquidity-reasons, most brokers probably offer shorts naked when offered upfront.
Btw, any logic can be made illogical.
Good question. We can't all know everything, and I know I know very little. This is the kind of stuff you read once, and then just remember it. Might be inaccurate, though sounds logical and markets generally seem more mean-reverting now than decades before.
Think of it as removing some of the pyramiding effects of stock-manias. However, if the market tanks too much, regulators might freeze shorts or start seizing assets. I don't think you get infinite money if stock goes to 0 either. It'll probably hurt too.. So shorting is more short-term, risikier and faster than long. Due to liquidity-reasons, most brokers probably offer shorts naked when offered upfront.
Btw, any logic can be made illogical.
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when people short they do not sell their assets, they sell borrowed assets
also , on the market every man for himself, so who cares for the other guy's portfolio or for the rest of the world for that matter, if one can make a profit shorting
and finally, all shorts must be covered eventually, so at some point buying will start
but there is a line of thought among some governments to forbid short selling or even selling at all, in period of falling markets,,, what can i say - communists
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why would I give an iota/damn about other people's portfolios losing value?
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