Short sellers sell stock they have borrowed, hoping to buy it back later when its price has fallen.
Sentiment: NEGATIVE
The trend of the market is up, not down. Shorting stocks puts you against that trend and thus makes it more difficult to make money.
I'll always understand the Schadenfreude aspect to short-selling. I get that no one will always like it. I'm also convinced to the deepest part of my bones that short-selling plays the role of real-time financial watchdog. It's one of the few checks and balances in the market.
By incentivizing Wall Street players to sniff out inefficient or corrupt companies and bet against them, short-selling acts as a sort of policing system; legal short-sellers have been instrumental in helping expose firms like Enron and WorldCom.
Short-sellers perform a useful function in the market as conduits of negative information, and shorts often complain that they are discriminated against by regulators.
It's almost sickening now that the regulators 'on the beat' while the biggest credit collapse in modern financial history unfolded are now patting themselves on the back for their 'brave' stance on short-selling!
I do not use short selling. The fund has not shorted a stock since the 2002 to 2003 time frame. At that time I did short three stocks, on which I broke even on two and made money on one of them. The experience taught me that I was not going to be using short selling going forward for a slew of reasons.
While short sellers probably will never be popular on Wall Street, they often are the ones wearing the white hats when it comes to looking for and identifying the bad guys!
If you're running a business for the long term, the last thing you should be doing is borrowing money to buy back stock.
Companies typically borrow money at less than their return on equity and therefore compound their return at the expense of lenders.
I had a few stocks, but stocks took a dive. I never sell my stocks.
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