You can first try to understand what the phrase means to begin with. Short selling against the box is like an act of short selling all the securities which you already own but it does not close out the existing long positions. It results in a neutral position where the profits and losses are equal and net to zero. I can put it in an example for you. Supposedly you own 50 shares of a company and it can be any company and you request your broker to sell short 50 shares of that particular company. This way you will conduct a short sale against the box and you will have a long position in one account and the short position in another account. This is pretty much a restricted practice and most people don't like to indulge in it often
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Is shorting the box legit?
- Thread starter kmiklas
- Start date
So you're asking if it's possible that a big chunk of the market is shorting against the box to establish positions and they'll take away half the box when the balloon goes up? It would be apparent in the public reporting for a big chunk of the market if they were doing this. So your hypothesis would need to figure out who could do this without it being revealed, what percentage of the market these players make up, and what their propensity is to do this (i.e. pensions funds probably wouldn't be engaging in this).
More broadly, my question would be what is different between today and 2008 from an inflation perspective, putting yourself in the shoes of someone in 2008 with no hindsight? It seemed more certain then than it does now that runaway inflation was just on the horizon, but it never came. And going even further back, you and I would have come to the same conclusion about Japan in 1991. It's been 30 years if those conditions there now, and still no hyperinflation, actually the opposite. So the working hypothesis itself might benefit from at least some historical perspective based on modern large economies instead of the somewhat less comparable 1930s Germany/Zimbabwe/Venezuela that inflation hawks like to jump to. Heck, even looking closely at the 1970s U.S. economy there isn't much in common with today.
More broadly, my question would be what is different between today and 2008 from an inflation perspective, putting yourself in the shoes of someone in 2008 with no hindsight? It seemed more certain then than it does now that runaway inflation was just on the horizon, but it never came. And going even further back, you and I would have come to the same conclusion about Japan in 1991. It's been 30 years if those conditions there now, and still no hyperinflation, actually the opposite. So the working hypothesis itself might benefit from at least some historical perspective based on modern large economies instead of the somewhat less comparable 1930s Germany/Zimbabwe/Venezuela that inflation hawks like to jump to. Heck, even looking closely at the 1970s U.S. economy there isn't much in common with today.
You don't need runaway inflation to destroy a society. Just another 5 to 10 years of the same what we had until now. Stagnant wages and 4-6% inflation (that's the real inflation we have been witnessing year after year, not the outdated definition of inflation). Too many people have reached a point of being unable to earn enough for their own living.
So you're asking if it's possible that a big chunk of the market is shorting against the box to establish positions and they'll take away half the box when the balloon goes up? It would be apparent in the public reporting for a big chunk of the market if they were doing this. So your hypothesis would need to figure out who could do this without it being revealed, what percentage of the market these players make up, and what their propensity is to do this (i.e. pensions funds probably wouldn't be engaging in this).
More broadly, my question would be what is different between today and 2008 from an inflation perspective, putting yourself in the shoes of someone in 2008 with no hindsight? It seemed more certain then than it does now that runaway inflation was just on the horizon, but it never came. And going even further back, you and I would have come to the same conclusion about Japan in 1991. It's been 30 years if those conditions there now, and still no hyperinflation, actually the opposite. So the working hypothesis itself might benefit from at least some historical perspective based on modern large economies instead of the somewhat less comparable 1930s Germany/Zimbabwe/Venezuela that inflation hawks like to jump to. Heck, even looking closely at the 1970s U.S. economy there isn't much in common with today.
That's a discussion for another thread, unless there is some trading to be done on that thesis?You don't need runaway inflation to destroy a society. Just another 5 to 10 years of the same what we had until now. Stagnant wages and 4-6% inflation (that's the real inflation we have been witnessing year after year, not the outdated definition of inflation). Too many people have reached a point of being unable to earn enough for their own living.
You joker. How is trading done on the basis of your example of Weimar republic inflation?
The thread discusses ideas what to do when Fed starts tapering. The point on real inflation is directly related to that, in fact its a lot more relevant than your bla. We all can see there is no runaway inflation and most likely there won't be. But that's not what is skinning the cat. It's the annual increases in the cost of products and services vs stagnant wage growth that is killing the middle class. Soon or already now average folks can't survive anymore without government handouts. That's absolutely related to how the fed and treasury will behave.
The thread discusses ideas what to do when Fed starts tapering. The point on real inflation is directly related to that, in fact its a lot more relevant than your bla. We all can see there is no runaway inflation and most likely there won't be. But that's not what is skinning the cat. It's the annual increases in the cost of products and services vs stagnant wage growth that is killing the middle class. Soon or already now average folks can't survive anymore without government handouts. That's absolutely related to how the fed and treasury will behave.
That's a discussion for another thread, unless there is some trading to be done on that thesis?
OK, but again I'm left wondering, what's the investment thesis?You joker. How is trading done on the basis of your example of Weimar republic inflation?
The thread discusses ideas what to do when Fed starts tapering. The point on real inflation is directly related to that, in fact its a lot more relevant than your bla. We all can see there is no runaway inflation and most likely there won't be. But that's not what is skinning the cat. It's the annual increases in the cost of products and services vs stagnant wage growth that is killing the middle class. Soon or already now average folks can't survive anymore without government handouts. That's absolutely related to how the fed and treasury will behave.
Mine is that there is no greater chance of runaway inflation now than at any other time in the past 30 years, therefore changing trading or investment thesis to reflect runaway inflation might not be wise.
I'm sure you have a thesis based on your belief, you just haven't articulated it at all. Is the Fed not going to taper because they're going to stop believing the BLS inflation numbers? Is Treasury going to do....what exactly? How do whatever actions you think are going to happen impact trading and investing? This is a friendly conversation, I'm genuinely curious of your thoughts on the practical impacts of your read on inflation?
I think even moderate increases of inflation are not gonna happen for similar reasons than post 2008. People can't afford inflation. They are broke. Either government handouts will continue or people just can't pay that much more for stuff that increases 3,4,5% each year while their wages don't. That was my point I have been trying to make. I thought it was obvious, and yes, I am equally interested in a friendly conversation which is why I did not find your reply to move posts of others into different threads not all that conducive to a friendly conversation.
OK, but again I'm left wondering, what's the investment thesis?
Mine is that there is no greater chance of runaway inflation now than at any other time in the past 30 years, therefore changing trading or investment thesis to reflect runaway inflation might not be wise.
I'm sure you have a thesis based on your belief, you just haven't articulated it at all. Is the Fed not going to taper because they're going to stop believing the BLS inflation numbers? Is Treasury going to do....what exactly? How do whatever actions you think are going to happen impact trading and investing? This is a friendly conversation, I'm genuinely curious of your thoughts on the practical impacts of your read on inflation?
If real inflation differs substantively from BLS calculated inflation is a topic for another thread.I think even moderate increases of inflation are not gonna happen for similar reasons than post 2008. People can't afford inflation. They are broke. Either government handouts will continue or people just can't pay that much more for stuff that increases 3,4,5% each year while their wages don't. That was my point I have been trying to make. I thought it was obvious, and yes, I am equally interested in a friendly conversation which is why I did not find your reply to move posts of others into different threads not all that conducive to a friendly conversation.
It sounds like we have a similar thesis then, no inflation adjusted changes to what we're doing trading or investing?
I think it greatly influences my trading/investing and particularly timing. My pnl is completely dependent on how I am positioned with changing inflation readings and expectations, short term yields, and the shape of the curve.
So far I go with the fed, I expect inflation to top out and consider this spike short term. But if it does not settle back down by July/August then this will be a complete game changer.
So far I go with the fed, I expect inflation to top out and consider this spike short term. But if it does not settle back down by July/August then this will be a complete game changer.
If real inflation differs substantively from BLS calculated inflation is a topic for another thread.
It sounds like we have a similar thesis then, no inflation adjusted changes to what we're doing trading or investing?
So you're asking if it's possible that a big chunk of the market is shorting against the box to establish positions and they'll take away half the box when the balloon goes up? It would be apparent in the public reporting for a big chunk of the market if they were doing this. So your hypothesis would need to figure out who could do this without it being revealed, what percentage of the market these players make up, and what their propensity is to do this (i.e. pensions funds probably wouldn't be engaging in this).
More broadly, my question would be what is different between today and 2008 from an inflation perspective, putting yourself in the shoes of someone in 2008 with no hindsight? It seemed more certain then than it does now that runaway inflation was just on the horizon, but it never came. And going even further back, you and I would have come to the same conclusion about Japan in 1991. It's been 30 years if those conditions there now, and still no hyperinflation, actually the opposite. So the working hypothesis itself might benefit from at least some historical perspective based on modern large economies instead of the somewhat less comparable 1930s Germany/Zimbabwe/Venezuela that inflation hawks like to jump to. Heck, even looking closely at the 1970s U.S. economy there isn't much in common with today.
why do you think there won’t be significant inflation?