Private Investor Army Thwarts Short Sell Speculators
Published / Last Updated on 01/02/2021
The GameStop and Silver Bullion private investor ‘Army’ that is thwarting Wall Street.
Short Selling Explained
Hedge Funds are betting on shares falling – i.e. they are selling a stock that they do not yet own (they’ve borrowed it), driving the price down and then buying it later in the day for a cheaper price. Net position on the same day, they sold and bought the same stock in the same day – net position at the end of the day is that they did not own the stock at the start of the day and they do not own the stock at the end of the day but they made a profit by selling for a higher price than they bought it later in the day.
Beating the Speculators
Hedge funds and speculators were profiting from selling off GameStop stock (that they didn’t own yet) in the hope that prices fall and they buy it later in the day at a cheaper prices. What the ‘private investors army’ are doing is buying the stock (that the hedge funds have already short sold) – to drive the price back up, not down and thus forcing Hedge funds also to have to buy stock, now AT A HIGHER PRICE to stop even greater investment losses (i.e. they have already sold and being forced to buy the stock later at a higher price). There were then restrictions and bans on private investors buying GameStop shares on some platforms to the outcry of the private investors army.
Ban Short Selling
Short selling, in our opinion, is a manipulation of markets and indeed can be used as an indirect way of forcing sharing prices down not just for profit but also to make companies easier to take over. It does not represent normal trading conditions for a particular company and its real share price value. It is gaming a system which distorts markets and mainstream investor returns.
In times of crisis, e.g. the Credit Crunch (2008) and the Brexit Vote (2016), many governments around the World temporarily banned short selling to bring stability back into markets. It would be so much easier to ban short selling outright.
