Stock market is a "fully-fledged epic bubble" and will burst
Discussion
mike74 said:
NowWatchThisDrive said:
Are you one of those people who thinks short selling should be banned?
Are you one of those people who believe that institutional short sellers are purely taking a calculated gamble on predicting the future value of a particular share price based entirely on their research and analysis... and they in no way whatsoever have the ability to manipulate the price of a particular stock downward, especially when they act in unison with one another and other elements within the stock market?NowWatchThisDrive said:
I'm not saying it never happens, but if you have some hard evidence of actual manipulation happening that's currently being overlooked - rather than boilerplate ramblings likely based on a misunderstanding of how markets actually work - I'm sure the regulator would like to see it. As a formerly active short seller in my professional life (or "parasite" if you prefer), I certainly would.
Interesting. Very good, a poster with authoritative knowledge.
Were you still in your professional life, at the time of the Aston Martin Lagonda flotation ?
You can guess my car passion and might be interested in this topic. I started it when the IPO was just a rumour.
Topic still very active (particularly now, for reasons you will know).
https://www.pistonheads.com/gassing/topic.asp?h=0&...
Was this share an absolute gift for you to short?
The pre-float hype nonsense was so obvious, for AML enthusiasts to spot.
The recipe for you must have been just perfect. £4.3 billion market cap at IPO, ridiculous for a business which has hardly ever made a profit in 100 years, no capital raise at IPO, private equity was the main IPO seller, huge debt, recently introduced models not popular with existing owners (who had previously been the main new car repeat buyers). The share price could only go one way.
Did not realise how extreme that would be though. Now down about 95% from IPO !! Might that be a time record for the London Stock Market?
I only bought a few shares, simply to obtain a souvenir certificate, now framed on my garage wall.
NowWatchThisDrive said:
I'm not saying it never happens, but if you have some hard evidence of actual manipulation happening that's currently being overlooked - rather than boilerplate ramblings likely based on a misunderstanding of how markets actually work - I'm sure the regulator would like to see it. As a formerly active short seller in my professional life (or "parasite" if you prefer), I certainly would.
By "the regulator" I'm guessing you're referring specifically to the FCA... Which as anyone will tell you generally has all the bite of a toothless hamster. I suspect if I could gain inside access to the institutional short sellers I actually could do a better job of uncovering firm evidence of manipulation than the FCA is capable, or more likely willing, of doing.
I don't know how long ago your former professional life as a parasitic short seller was but I can tell you trading technology has come a long way in recent years with all manner of buy/sell algorithms and methods enabling undetectable trades.
For you to suggest that institutional short sellers really are just taking calculated gambles based on their research and analysis and have no ability whatsoever to manipulate and influence stock prices is laughable, you're either a liar or hopelessly naive.
mike74 said:
Are you one of those people who believe that institutional short sellers are purely taking a calculated gamble on predicting the future value of a particular share price based entirely on their research and analysis... and they in no way whatsoever have the ability to manipulate the price of a particular stock downward, especially when they act in unison with one another and other elements within the stock market?
Are you one of those people who believe that institutional holders are purely taking a calculated gamble on predicting the future value of a particular share price based entirely on their research and analysis... and they in no way whatsoever have the ability to manipulate the price of a particular stock upward, especially when they act in unison with one another and other elements within the stock market?Jon39 said:
Interesting. Very good, a poster with authoritative knowledge.
Were you still in your professional life, at the time of the Aston Martin Lagonda flotation ?
You can guess my car passion and might be interested in this topic. I started it when the IPO was just a rumour.
Topic still very active (particularly now, for reasons you will know).
https://www.pistonheads.com/gassing/topic.asp?h=0&...
Was this share an absolute gift for you to short?
The pre-float hype nonsense was so obvious, for AML enthusiasts to spot.
The recipe for you must have been just perfect. £4.3 billion market cap at IPO, ridiculous for a business which has hardly ever made a profit in 100 years, no capital raise at IPO, private equity was the main IPO seller, huge debt, recently introduced models not popular with existing owners (who had previously been the main new car repeat buyers). The share price could only go one way.
Did not realise how extreme that would be though. Now down about 95% from IPO !! Might that be a time record for the London Stock Market?
I only bought a few shares, simply to obtain a souvenir certificate, now framed on my garage wall.
I'd probably be driving an Aston now if I'd gone for those two... next time maybe!!
Short selling is essential for an orderly market. Regulation is there to punish illegal trading activity whether in the short or long side.
Retail punters never moan when a price gets manipulated up, just down.
. Despite the fact that it's the ramping to overvalue that opens the need and opportunity for shorting back to fair value.
The fair value for AML, for the other poster, was zero. It was a junk stock with a filthy listing designed to line the pockets of the then management. It was a business that was going to go to zero whether anyone shorted it or not as it was a pile of o eri flayed, asset stripped, mismanaged crap that had been loaded up with debt it could never repay. And those to blame have retired with the billions they sucked out of it, nearly wiping out all the workers' pensions. But no, it's the fault of a few short sales.
You can't short for direct profit a well run or fair valued business. You can short for direct profit, unhealthy, inefficient, overpriced or badly run toxic junk. And sick dogs in pain should always be put out of their misery.
Retail punters never moan when a price gets manipulated up, just down.
. Despite the fact that it's the ramping to overvalue that opens the need and opportunity for shorting back to fair value. The fair value for AML, for the other poster, was zero. It was a junk stock with a filthy listing designed to line the pockets of the then management. It was a business that was going to go to zero whether anyone shorted it or not as it was a pile of o eri flayed, asset stripped, mismanaged crap that had been loaded up with debt it could never repay. And those to blame have retired with the billions they sucked out of it, nearly wiping out all the workers' pensions. But no, it's the fault of a few short sales.
You can't short for direct profit a well run or fair valued business. You can short for direct profit, unhealthy, inefficient, overpriced or badly run toxic junk. And sick dogs in pain should always be put out of their misery.
DonkeyApple said:
Short selling is essential for an orderly market. Regulation is there to punish illegal trading activity whether in the short or long side.
Retail punters never moan when a price gets manipulated up, just down.. Despite the fact that it's the ramping to overvalue that opens the need and opportunity for shorting back to fair value.
The fair value for AML, for the other poster, was zero. It was a junk stock with a filthy listing designed to line the pockets of the then management. It was a business that was going to go to zero whether anyone shorted it or not as it was a pile of o eri flayed, asset stripped, mismanaged crap that had been loaded up with debt it could never repay. And those to blame have retired with the billions they sucked out of it, nearly wiping out all the workers' pensions. But no, it's the fault of a few short sales.
You can't short for direct profit a well run or fair valued business. You can short for direct profit, unhealthy, inefficient, overpriced or badly run toxic junk. And sick dogs in pain should always be put out of their misery.
Retail punters never moan when a price gets manipulated up, just down.
. Despite the fact that it's the ramping to overvalue that opens the need and opportunity for shorting back to fair value. The fair value for AML, for the other poster, was zero. It was a junk stock with a filthy listing designed to line the pockets of the then management. It was a business that was going to go to zero whether anyone shorted it or not as it was a pile of o eri flayed, asset stripped, mismanaged crap that had been loaded up with debt it could never repay. And those to blame have retired with the billions they sucked out of it, nearly wiping out all the workers' pensions. But no, it's the fault of a few short sales.
You can't short for direct profit a well run or fair valued business. You can short for direct profit, unhealthy, inefficient, overpriced or badly run toxic junk. And sick dogs in pain should always be put out of their misery.
The biggest beneficiary was (better not name I suppose) a private equity firm from (well) overseas.
One management person did make a great deal of pre-IPO hype announcements. Did OK by the time of dismissal.
I think one has to hand it to the PE firm, because they might be the only investor in 100 years, to have left that firm with a profit.
You might be interested in the long list of rescuers.
https://www.pistonheads.com/gassing/topic.asp?h=0&...
Even Ford spent a fortune saving the Company and had to give up (much to the benefit of AML though).
Have you ever heard of another business, still going after 109 years, when it has almost never made any profit?
Pure passion.
mike74 said:
By "the regulator" I'm guessing you're referring specifically to the FCA... Which as anyone will tell you generally has all the bite of a toothless hamster.
I suspect if I could gain inside access to the institutional short sellers I actually could do a better job of uncovering firm evidence of manipulation than the FCA is capable, or more likely willing, of doing.
I don't know how long ago your former professional life as a parasitic short seller was but I can tell you trading technology has come a long way in recent years with all manner of buy/sell algorithms and methods enabling undetectable trades.
For you to suggest that institutional short sellers really are just taking calculated gambles based on their research and analysis and have no ability whatsoever to manipulate and influence stock prices is laughable, you're either a liar or hopelessly naive.
As I said before, I'm not suggesting for a moment that it can't or doesn't happen. But you seem to be under the impression that every short seller is up to their neck in it, and I can categorically say that isn't the case.I suspect if I could gain inside access to the institutional short sellers I actually could do a better job of uncovering firm evidence of manipulation than the FCA is capable, or more likely willing, of doing.
I don't know how long ago your former professional life as a parasitic short seller was but I can tell you trading technology has come a long way in recent years with all manner of buy/sell algorithms and methods enabling undetectable trades.
For you to suggest that institutional short sellers really are just taking calculated gambles based on their research and analysis and have no ability whatsoever to manipulate and influence stock prices is laughable, you're either a liar or hopelessly naive.
Since you mention it, my experience encompasses recent years pretty well, and entails close familiarity with execution algorithms, market microstructure and institutional trading technology in general. So feel free to go into as much detail as you like on specifically how these things facilitate the behaviour you're describing.
If you're going to accuse me of being a liar again, then just save us the both the time and don't bother replying, because I won't be.
egomeister said:
mike74 said:
Are you one of those people who believe that institutional short sellers are purely taking a calculated gamble on predicting the future value of a particular share price based entirely on their research and analysis... and they in no way whatsoever have the ability to manipulate the price of a particular stock downward, especially when they act in unison with one another and other elements within the stock market?
Are you one of those people who believe that institutional holders are purely taking a calculated gamble on predicting the future value of a particular share price based entirely on their research and analysis... and they in no way whatsoever have the ability to manipulate the price of a particular stock upward, especially when they act in unison with one another and other elements within the stock market?The market is the market.
Trade accordingly.
NowWatchThisDrive said:
I'm not saying it never happens, but if you have some hard evidence of actual manipulation happening that's currently being overlooked - rather than boilerplate ramblings likely based on a misunderstanding of how markets actually work - I'm sure the regulator would like to see it. As a formerly active short seller in my professional life (or "parasite" if you prefer), I certainly would.
Do you have a view on the paper gold and silver markets? Is that a form of manipulation/price suppression?Scootersp said:
NowWatchThisDrive said:
I'm not saying it never happens, but if you have some hard evidence of actual manipulation happening that's currently being overlooked - rather than boilerplate ramblings likely based on a misunderstanding of how markets actually work - I'm sure the regulator would like to see it. As a formerly active short seller in my professional life (or "parasite" if you prefer), I certainly would.
Do you have a view on the paper gold and silver markets? Is that a form of manipulation/price suppression?That market lost all credibility.
Physical is always priced differently to paper. Some people have tried to take delivery of physical from paper and they were refused.
Scootersp said:
NowWatchThisDrive said:
I'm not saying it never happens, but if you have some hard evidence of actual manipulation happening that's currently being overlooked - rather than boilerplate ramblings likely based on a misunderstanding of how markets actually work - I'm sure the regulator would like to see it. As a formerly active short seller in my professional life (or "parasite" if you prefer), I certainly would.
Do you have a view on the paper gold and silver markets? Is that a form of manipulation/price suppression?Banks' trading desks aren't really going to have much interest in, or exposure to, whatever small fry punting their bank's retail customers might be engaged in. They're trading in size with sophisticated institutional counterparties - asset managers and hedge funds - who are just as informed as themselves (often more so, in fact).
A lot is mentioned about Shorting but I wonder how many people have actively pursued it. It is one of the most cliched area's of the market, the problem is that it is neither trading nor is it investing nor is it strictly speculating, it is an activity all by itself. To be short is counter intuitive and requires a certain type of thinking and it is no good to just have that train of thought but one must also be able to hold an opposing view to theirs to ensure that all scenarios are accounted for as much as they possibly can.
I was short Autonomy in 2010 and they issued a profit warning, the shares dropped and I was in the money, the CFO came out and talked the shares up a bit. After a small rally, I closed the position for a small but decent profit. A friend who was much better at accounts etc, firmly held the view that Autonomy was a sham, he fully believed that eventually the market would see this and at every uptick added to his position, in those days the margin requirement was 5%. For the next year or so, nothing, it just bounced around and on and off we spoke about it but I had my own issues so didn't think much. In August 2011 as I was being whipsawed by the European debt crisis, he in theory should have been sitting pretty but HP came in and Autonomy opened 60%+ up and he lost 250K at the open, his broker margin called him and sold his portfolio to cover. I could write chapter and verse on lack of risk management, thesis and how you can be right but still be wrong. His thesis was sound and that's proven by a recent court ruling, when I saw that a few weeks ago, I was really sad as the guy was never the same again, back to "scarring".
I shorted Michael Page in 2015 and made a bit but I have come to the conclusion that shorting individual companies is an ego thing, to prove a point because objectively the time and effort needed in a bull market to make money shorting could be applied better elsewhere. I am at present short the S+P however I have an equal long position and I'm only short since I really do think over the next 6 or 9 months it will trend down.
The thing to remember about shorting individual stocks is that someone silly might come in, my son was full sure Peloton would fall from around $100, I traded it last year with tight stops to the downside and did well but he saw my logic about shorting it because say Amazon went mad and decided to pay $150 per share, if one is short, you wake up to a very big headache.
I haven't looked recently but last time I did, I found no guaranteed stops were available on specific shares and that tells you something.
I was short Autonomy in 2010 and they issued a profit warning, the shares dropped and I was in the money, the CFO came out and talked the shares up a bit. After a small rally, I closed the position for a small but decent profit. A friend who was much better at accounts etc, firmly held the view that Autonomy was a sham, he fully believed that eventually the market would see this and at every uptick added to his position, in those days the margin requirement was 5%. For the next year or so, nothing, it just bounced around and on and off we spoke about it but I had my own issues so didn't think much. In August 2011 as I was being whipsawed by the European debt crisis, he in theory should have been sitting pretty but HP came in and Autonomy opened 60%+ up and he lost 250K at the open, his broker margin called him and sold his portfolio to cover. I could write chapter and verse on lack of risk management, thesis and how you can be right but still be wrong. His thesis was sound and that's proven by a recent court ruling, when I saw that a few weeks ago, I was really sad as the guy was never the same again, back to "scarring".
I shorted Michael Page in 2015 and made a bit but I have come to the conclusion that shorting individual companies is an ego thing, to prove a point because objectively the time and effort needed in a bull market to make money shorting could be applied better elsewhere. I am at present short the S+P however I have an equal long position and I'm only short since I really do think over the next 6 or 9 months it will trend down.
The thing to remember about shorting individual stocks is that someone silly might come in, my son was full sure Peloton would fall from around $100, I traded it last year with tight stops to the downside and did well but he saw my logic about shorting it because say Amazon went mad and decided to pay $150 per share, if one is short, you wake up to a very big headache.
I haven't looked recently but last time I did, I found no guaranteed stops were available on specific shares and that tells you something.
Digga said:
Banks have never punted investments to retail customers that their own traders are busy shorting. Ever.
FSA was a force to be reckoned with. Which is why they had to change the name to FCA. Obvs.
Context has to play a role though. Firstly, retail is pretty much long only. Even within retail trading houses the bulk of clients only go long. Conversely, the remit of a bank's prop desk is to make returns and will typically be wholly agnostic to direction. You also have to consider that most institutional shorting is actually just hedging of far larger long positions in portfolios. FSA was a force to be reckoned with. Which is why they had to change the name to FCA. Obvs.
What the retail market mostly gets emotional about is when they've placed a leveraged bet on a price rising and it starts to fall. Someone needs to take the blame. It wouldn't be normal to accept that the punter got the bet wrong. It's been made wrong by someone else. This is where the 'devil' must be fabricated.
Right now there will be retail punters who fervently believe that their stocks are down because of shorters. They won't consider global fundamentals.
You also have the issue that because retail punters have a tendency to be drawn to the crappiest, most toxic stocks they will tend to encounter pure shorters who have decided that the company is a dog and that the price will be going down once the retail buying ferver abates due to there being no fundamental reason for it to have gone up. Then, within that group there are of course the activist shorters who will seek to trigger what they believe to be the inevitable through PR. And within that group there will be some bent players who take the risk of breaching regulations, typically they locate their funds where regulators have little control.
The big Tesla short rage by punters a few years back was an interesting event. The company was a cash depleted dog at the time that was only staving off C11 due to various governments making payments to incentivise sales which could be pulled at any time. And on social media you had an individual who was blaming shorters for terrible management decisions while comically being the largest single lender of stock that was facilitating the massive shorting. But he couldn't call in the lens as he had assigned those rights to a lender in exchange for loans to keep himself afloat.
But right now there will be short positions on companies like BP or SSE yet no retail investor is complaining or caring at all. They do only care when it's on a spiv stock they've bet too much on and are sitting long and wrong. And half the time it's not even the shorting that's pushing their price down but their fellow punters getting margined out due to having bet too deep and run out of variation margin. Something you can overtly see in crypto at the moment where much of the downward pressure is coming from margined long positions being force closed.
Digga said:
Banks have never punted investments to retail customers that their own traders are busy shorting. Ever.
FSA was a force to be reckoned with. Which is why they had to change the name to FCA. Obvs.
Doesn’t that just fall under caveat emptor?FSA was a force to be reckoned with. Which is why they had to change the name to FCA. Obvs.
When a bank punts something your way, you do your own DD?
DaveA8 said:
A lot is mentioned about Shorting but I wonder how many people have actively pursued it. It is one of the most cliched area's of the market, the problem is that it is neither trading nor is it investing nor is it strictly speculating, it is an activity all by itself. To be short is counter intuitive and requires a certain type of thinking and it is no good to just have that train of thought but one must also be able to hold an opposing view to theirs to ensure that all scenarios are accounted for as much as they possibly can.
I was short Autonomy in 2010 and they issued a profit warning, the shares dropped and I was in the money, the CFO came out and talked the shares up a bit. After a small rally, I closed the position for a small but decent profit. A friend who was much better at accounts etc, firmly held the view that Autonomy was a sham, he fully believed that eventually the market would see this and at every uptick added to his position, in those days the margin requirement was 5%. For the next year or so, nothing, it just bounced around and on and off we spoke about it but I had my own issues so didn't think much. In August 2011 as I was being whipsawed by the European debt crisis, he in theory should have been sitting pretty but HP came in and Autonomy opened 60%+ up and he lost 250K at the open, his broker margin called him and sold his portfolio to cover. I could write chapter and verse on lack of risk management, thesis and how you can be right but still be wrong. His thesis was sound and that's proven by a recent court ruling, when I saw that a few weeks ago, I was really sad as the guy was never the same again, back to "scarring".
I shorted Michael Page in 2015 and made a bit but I have come to the conclusion that shorting individual companies is an ego thing, to prove a point because objectively the time and effort needed in a bull market to make money shorting could be applied better elsewhere. I am at present short the S+P however I have an equal long position and I'm only short since I really do think over the next 6 or 9 months it will trend down.
The thing to remember about shorting individual stocks is that someone silly might come in, my son was full sure Peloton would fall from around $100, I traded it last year with tight stops to the downside and did well but he saw my logic about shorting it because say Amazon went mad and decided to pay $150 per share, if one is short, you wake up to a very big headache.
I haven't looked recently but last time I did, I found no guaranteed stops were available on specific shares and that tells you something.
Interesting and scary!I was short Autonomy in 2010 and they issued a profit warning, the shares dropped and I was in the money, the CFO came out and talked the shares up a bit. After a small rally, I closed the position for a small but decent profit. A friend who was much better at accounts etc, firmly held the view that Autonomy was a sham, he fully believed that eventually the market would see this and at every uptick added to his position, in those days the margin requirement was 5%. For the next year or so, nothing, it just bounced around and on and off we spoke about it but I had my own issues so didn't think much. In August 2011 as I was being whipsawed by the European debt crisis, he in theory should have been sitting pretty but HP came in and Autonomy opened 60%+ up and he lost 250K at the open, his broker margin called him and sold his portfolio to cover. I could write chapter and verse on lack of risk management, thesis and how you can be right but still be wrong. His thesis was sound and that's proven by a recent court ruling, when I saw that a few weeks ago, I was really sad as the guy was never the same again, back to "scarring".
I shorted Michael Page in 2015 and made a bit but I have come to the conclusion that shorting individual companies is an ego thing, to prove a point because objectively the time and effort needed in a bull market to make money shorting could be applied better elsewhere. I am at present short the S+P however I have an equal long position and I'm only short since I really do think over the next 6 or 9 months it will trend down.
The thing to remember about shorting individual stocks is that someone silly might come in, my son was full sure Peloton would fall from around $100, I traded it last year with tight stops to the downside and did well but he saw my logic about shorting it because say Amazon went mad and decided to pay $150 per share, if one is short, you wake up to a very big headache.
I haven't looked recently but last time I did, I found no guaranteed stops were available on specific shares and that tells you something.
I watch quite a few inverse tracker ETF and some variants with multipliers, for nvidia, Tesla, etc.
The pricing of these instruments is hard to follow on a good day.
To value and take account of shorts must be harder still.
I prefer to just be cash or long. Simple. You don’t need to make mega money, just avoid the big dips.
Mr Whippy said:
Doesn’t that just fall under caveat emptor?
When a bank punts something your way, you do your own DD?
I'm also not sure that Beryl on the financial planning desk of the Taunton high street branch has a hot line the prop desk in London either? When a bank punts something your way, you do your own DD?
Even within the institutional operations there will be desks that seek to buy while other desks will be selling for completely different reasons.
Of one considers just the simple case of Meta. If you're wanting to make money now then arguably you'd be shorting the price. They're just an old advertising business that looks to promote non essential tat to the precise demographic being impacted the most by current inflation. However, if you're running a long term portfolio then you'd be looking at whether Meta's bet on billions of people wanting to go and live in a fantasy world where they can pretend to be special and important and if you felt Meta were going to be big winners and had a mandate to invest cash now into the market then you'd be a buyer. The person running the short position could be sitting opposite the person running the long position and you could even have a prop trader next to both of them who is scalping the flow of both of them. And not one of them gives a fig what the other is up to as it's wholly irrelevant. Just as Beryl in Taunton having a client who is buying Meta is also of no relevance to anyone. The only connection being that all of this is happening under the same parent company.
DonkeyApple said:
And not one of them gives a fig what the other is up to as it's wholly irrelevant. Just as Beryl in Taunton having a client who is buying Meta is also of no relevance to anyone. The only connection being that all of this is happening under the same parent company.
I’ve not read The Big Short but I’ve watched the film, and at the end it appears some institutions had teams on both sides of the bet.I’m unsure how accurate it is to what occurred, but I’d be surprised to see such unbalanced sentiment in big value trades, to not end up moving the price accordingly and changing the market.
More likely for everyone trying to manipulate it up, another team might be manipulating it down, and so on.
Indeed it makes me think how awesome true free markets really are.
The fly in the ointment is central banks messing with its self-correcting mechanisms.
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