Short sellers are good for markets | Hacker News Reader

Short sellers are good for markets

economist.com

68 pointsgodelmachine87 comments

This article doesn't mention this, but short selling is a fundamental piece upon which many other financial instruments are built, because it allows hedging

If you take away short selling, you take away many other healthy components of functioning markets. You won't have functioning options markets for example, because market makers can't hedge their positions

I'd actually like to see more short selling. Especially in small biotech companies. It is either impossible or expensive to short these shares, so no one does it. Valuations can therefore be sustainably too high -- it's as if these stocks live in a world of lower gravity

Having an active short market would also enable all kinds of interesting options trading strategies, and I think smart math-minded people would have a field day

> If you take away short selling, you take away many other healthy components of functioning markets. You won't have functioning options markets for example, because market makers can't hedge their positions

I'd say this isn't actually true. You'd hedge your short deltas and let the long deltas ride, prefer to sell delta to flatten risk (in other words charge more when selling puts and pay less when buying calls to compensate for P&L variance), and expect put-call disparities to level out in a slightly different manner. You could also sell well-correlated futures to hedge, or just trade combos and pass the risk off to someone else.

Empirically, many of the hard to borrow names are the most well-traded in the options world. When people can't sell short, they buy puts and pass the risk off to a market-maker.

Specifically about what I said about put-call parity: In the status quo, if puts are more expensive than stocks, you generally sell a put, sell 100 shares of stock, and buy a call. In the hypothetical world where you can't sell short, if you don't already have long shares then you can't take advantage of the inefficiency. So, put implied vol would trade over, and large banks and other dealers who are already long stock would have an advantage over small shops that don't already have a long shares position.

The only real difference is that options markets would be less liquid, wider and less efficient.

I think my statement about not having functioning options markets was stronger than I intended. I just meant you'd have way less liquidity, sometimes so little liquidity that you might as well not have a market

Could you elaborate on your point about hard to borrow options being the most widely traded? I'm not a derivatives person but was at a biotech fund and briefly looked at those options markets, and the bid ask spreads were ridiculous for many names to the point where it was almost pointless to even put in an order. Liquidity was super light as well

I've seen this many times as an options market-maker: A short-seller fund can't get borrow (which is a requirement for short selling) on a name it's already short, so it can't add to the short position. Thus, they call a bank and buy put options. The bank makes a price that incorporates (charges for) the borrow risk, usually because (A) the bank has an easier time locating borrow and gets a better price, (B) the bank trader/desk has a larger tolerance for P&L swings and can thus take the other side of the trade and hedge the position slowly or not at all, or (C) the bank has better market access and can trade combos (synthetic shares) against a different institution that has stock or a better borrow rate.

As a general rule, there's options activity for names that are very volatile. This doesn't always show up on the open interest count, because many firms trade OTC contracts that don't have the same clearinghouse protections as exchange-listed option contracts.

Option bid/ask spread being wide don't necessarily mean that volatility itself is illiquid. There could be large size on both bid and offer, with every dealer under the sun making a market, but the carry rate spread is wide, and that widens the option price. For example, the put offer will be based on the short rate, and the put bid will be based on the long rate, so if these two rates are divergent (as is the case when a name is hard to borrow), then the spread will be wide even if both sides are priced with the same implied volatility.

BTW even if screens show little more than a 100-lot, a bank will make a price on a much larger block of options. You won't know where liquidity is without quoting dealers. An option market could show a bid/ask that's 2 dollars wide with 200 contracts on either side, but a market maker may make you a two-way price that's 30 cents wide for 10,000 contracts. Depends on a lot of factors (who's the client, what's the position, does the market maker know the name and have a view, what are the catalysts, why is the screen market so wide, etc)

Thanks, that makes sense

Do you have any experience with pre commercial biotech option markets, like making markets around binary events like Phase 2 trial results? I feel like the pricing of that volatility is quite inefficient but don't know enough about options math or market structure to really test that hypothesis

> The only real difference is that options markets would be less liquid, wider and less efficient

Which raises costs for new share issuances (by making underwriting riskier), convertible debt (by making it more expensive to hedge the stock component), certain other flavours of debt, acquisitions, et cetera.

And yet you'd still have a functioning option market, which is the point in question.

You don't have to hedge delta in short shares of the underlier in order to deal options. You can hedge out using your long shares, and then do the remainder in a correlated instrument or leave it without a hedge. For a pure market maker who simply buys and sells to earn spread, hedging is a means of managing P&L variance and protecting oneself against negative selection bias.

Similarly, you also don't have to hedge converts in options.

I'm not sure I understand your point about underwriting. Due to regulations, options don't start trading until several days after an IPO. Options on spinoffs tend to list more quickly, but are delayed as well. Secondary issuances have the advantage of already seeing where the market priced the stock, and are generally small, so there's no need to have a tight options market to hedge them.

> you'd still have a functioning option market

Most of the time. Professional options market makers would be degraded.

(As an aside, you'd also spawn systemic risks. Increased market-making risk favors small shops; access to inventory large. To bridge the gap, shorting would be replicated–more expensively, less transparently, and more riskily–through banks swapping their inventory to funds writing options. Add in your suggestion that hedging rely on historical correlations and you have a recipe for a preventable crisis.)

On underwriting, secondary issuances for seasoned issuers don't require options markets. But it reduces risk. That, in turn, reduces the cost of market access.

Australia's short-seeing ban "reduced trading activity, increased bid and ask spreads and increased intraday volatility" while providing "no evidence for lasting price support from the restrictions" [1]. It's a stupid idea that raises costs for everyone while sounding cute to the naive.

[1] https://epublications.bond.edu.au/cgi/viewcontent.cgi?refere...

Nothing against shorting but you can write puts and calls without being needing short selling. Calls are naturally written by people holding a stock who don't mind selling some and puts by people with cash who don't mind buying some stock.

> you can write puts and calls without being needing short selling

Put-call parity [1] makes option markets work. It lets anyone to manufacture a put from a call and a short, or a call from a put and a long. This ability to spin up options on demand is critical to options market making. (Source: former options market maker.)

Take away shorting and you vastly increase the risk of correcting option mispricing. Given how fundamental options are to other instruments, e.g. convertible debt, this would directly decrease funding options (and increase funding costs) to companies.

[1] https://en.m.wikipedia.org/wiki/Put–call_parity

Shorting a stock doesn't include the time element of options not to mention the relative lack of liquidity in derivatives as opposed to the equity.

Saying that, for most amateurs I'd recommend selling puts than shorting since shorting has unlimited downside risk.

Sometimes shorting against the box makes sense if you have the asset in another account and can't sell it there. You could short it in your primary account and then move the shares over which make take a few days locking in a sell price. When the shares arrive in your primary account it covers the short position.

Should be "buying puts" if you replicate a short.

It's not a clear-cut situation - in times of turmoil, when many traders are considering a short, the price of options will rise. If the situation then calms down and the price of the underlying decreases steadily, the drop in the option price due to lower volatility will offset a lot of the potential gain.

When expressing a trade using options one has a lot more parameters to deal with in order to formulate the risk-reward properly. I'd say it's exactly the sort of thing most amateurs shouldn't be doing.

Yeah, meant to say buying a put - thanks!

My biggest caution against shorting a stock VS a put is the potential loss. At least with a put your loss is capped.

Yes but you won't have those options markets unless market makers can hedge. You need a market maker to be on the other end of those trades, and from what I can tell, if market makers can't hedge then they either won't show up or will demand super wide bid ask spreads to make up for the delta risk

I'm not a derivatives trader but have explored investing in options when I was at a fund, and that was my experience looking at options for hard to borrow stocks. For market makers out there -- is that a fair assessment?

Betting against a team is different from trying to rig the game. An unfortunate side effect is that it incentives hedge funds to discredit legitimate companies.

that goes both ways though, hedge funds talk their book on the long and short side

The difference is that it is generally much easier to make money on the long rather than short side. Stocks generally tend to rise in value, which acts to passively eat away at the returns to shorting. And with shorting you have unlimited downside while your loss is capped with a long position

So if you are shorting you are fighting gravity and have to sometimes be more vocal to compensate for that. If it were easier to short stocks, maybe people could make money without being as vocally critical

Most hedge funds don't pump up their long positions... I'm not sure why, but they just don't.

Also if you buy puts you can limit your down side.

Something that the article did not mention: Short sellers reduce volatility and lead to smaller drops.

Why? Because having shorters guarantees that you will have a buyer for a stock that is falling. To exit a short trade you need to purchase shares. This helps prevent stocks from falling too low out of panic or undervaluation, benefiting people who are long the stock.

I'd say shorting reduces volatility but not for the reason you state. If prices fall too much stocks are bought by value investors rather than short covering typically. Short sellers help prevent prices going too high both by selling and debunking hype.

Only a short has the courage to buy in a real panic (like the 1987 crash). Value investors generally only play the long side. Market makers will withdraw from the market reducing liquidity in times of volatility.

Just because the price of something drops doesn't make it a "value stock" for value investors to buy.

Short selling is generally good.

The negative reputation comes mainly from the cases where short selling is used for market manipulation like coordinated bear raids. If the market regulators are awake, this should not be a reason to oppose short selling in general.

This is not true. Highly shorted stocks are some of the most volatile ones. Anyone can buy a stock that is falling, most stocks have little short interest (<10%) meaning volume when stock going up or down is most people buying or selling down their long position.

> Highly shorted stocks are some of the most volatile ones.

I'm not convinced by this argument.

* Is the volatility caused by short selling or does volatility attract short sellers?

* Is it possible that short selling is actually reducing the volatility of very volatile stock?

Australia banned short selling after financial crisis. The result was increased volatility in stocks, less trade and larger spreads.

Also if you look at the price graph for Tesla it's been kind of flat for the last 5 years with the price around $200-300 give or take.

This is true.

You can verify this yourself by owning a high growth, non-shortable, thinly traded stock (less than 200,000 shares traded a day). On a bad news release (such as earning) or just a bad sell off day such as Wednesday, you will how bad the slippage is on your protected stopped.

For example, you own XYZ and it was at $25 at the close on Friday. There was a bad release over the weekend and the price is going to be opened at $21 on Monday morning. You have your protected stop at $20. You would think you would get out at $20 give or take 10 cents for slippage. But when your received your filled report, you see it was filled at $17.

What happened is there is 0 buyer and everyone just want to get out. If there were short shorters, they would come in at market open to book some profits by buying back the share they have shorted.

What's good for markets is for there to be a variety of opinions about a stock. Long term opinions, short term opinions, positive opinions, negative opinions. Absolute values (TSLA is worth $500), relative values (TSLA should be worth more than GM).

What would be bad would be for us to censure certain expressions, so that we only hear certain ideas.

One reason I prefer trading indexes rather than individual stocks kind of for this reason. The market for the Dow is much healthier because there is more diversified participation. Individual stocks always seem to make me more nervous.

I understand why Musk don't like short sellers. They diminish his leverage.

Musk has heavily leveraged his TSLA holdings. 40% of his Tesla shares were collateral for loans as of year-end 2017. TSLA is down 19% from that point.

Leveraging holdings of heavily leveraged company is typical Musk high-risk gamble. Aiming for the stars even in finance using leverage as a rocket fuel. Musk is probably using this leverage to fund his other businesses. If TSLA tanks he may receive margin call and must sell part of his SpaceX stock to compensate.

edit: TSLA total debt to total equity ratio is 286.29 for the "Musk-Tesla Inc." that ratio is almost double.

So far I have read in various articles why monopolies, competition, rational actors, irrational actors (for overcoming crisis), long term investors, and short term sellers are good for the markets.

Are there any actors which are bad for the market?

People running pump and dump schemes, fraud, ponzi schemes, most ICOs, things the SEC exists to stop.

Shorts are good for price correction, but bad when they start trying to manipulate things in order to get a price correction (shorting a company and then killing the CEO for an extreme example).

This. One thing I have noticed is that when you have $billions in short interest in a stock, the manipulation is incredibly subtle, but also incredibly blatant at times.

For example, one can find many media articles that are almost certainly paid hit pieces against Tesla and Musk. When you have this much short interest, and news organizations that have contributors with financial interests aligned with the shorts, it is inevitable: https://insideevs.com/tesla-short-sellers-media-crusade/

I wish the SEC would begin to crack down on these abuses. Taking a short position against a stock is fine, but using your media connections to publish damaging and in many cases inaccurate stories is libel at best, and fraud at worse.

Those articles are literally just describing things that SolarCity, Tesla, and Musk actually did* (or in the cases of stated goals/promises, failed to do). How does that count as a "paid hit piece"?

If Tesla wanted to remain a media darling it could have done so very easily: just hit the goals it set for itself. Instead, quarter after quarter, it failed to meet those self-stated goals. Quarter after quarter, they embarked on various stunts to distract investors from its failure to meet its self-stated goals, like selling "flame throwers" and other nonsense. And yet, despite the many quarters of lies, Tesla still has enough media goodwill that a single quarter of two of actually meeting its self-stated goals could result in it becoming a media darling again.

Elon though...Doubling down on the pedophilia remarks and attempting to go to war with multiple government agencies when he was clearly in the wrong is a fast track to becoming a laughing stock, and he deserves the self-inflicted negative media attention he's seen these past 3 months.

> like selling "flame throwers" and other nonsense

AFAIK, Tesla never sold flamethrowers, another company (the boring company) did.

And they weren't flamethrowers, more gun-shaped blowtorches.

Cheaters are bad for the market. I.e. insider trading, because it destroys trust in the market.

Insider trading isn't necessarily bad for _the market_; it brings more information to the market faster, so prices more accurately reflect all factors. Compare for instance a hedge fund using satellite imagery to notice that a refinery has much less oil and trading on this information vs some exec at the oil refinery trading on that information. The former is completely accepted, because of the information it brings to the market, but its effect on the market is the same as that of the latter.

The big problem with insider information is that it generally represents a breach of fiduciary duty; essentially someone is improperly disclosing a corporate secret.

See https://en.wikipedia.org/wiki/Insider_trading#Arguments_for_.... Even Nobel prize winning economist Milton Friedman argued that insider trading should be legal.

I think this view is very naive because it doesn't take into account the perverse incentives legalising insider trading could create.

Insiders often also have power over the behaviour of a company, so for example a corporate leader might short his company's stock and then take actions to ruin the business. Or they might release plans for some action that would be seen negatively in the market, depress the stock price, buy, and then change the plans to ones that will attract investors and pocket the difference when the price goes back up. This doesn't improve market information, in fact it's disinformation because those selling on the first announcement were deceived, but how could you prove it?

Maybe they would get caught, maybe not, but legalising insider trading creates an incentive for these sorts of behaviour that would not exist otherwise.

>Insiders often also have power over the behaviour of a company, so for example a corporate leader might short his company's stock and then take actions to ruin the business. Or they might release plans for some action that would be seen negatively in the market, depress the stock price, buy, and then change the plans to ones that will attract investors and pocket the difference when the price goes back up.

Legalising insider trading wouldn't legalise such behaviour per se, as such behaviour would still constitute a breach of the leader's fiduciary duties. Look for instance at how Musk was prosecuted for doing that kind of thing; such prosecution was unrelated to insider trading laws, and could still occur without them.

Insider trading is definitely bad for the market because there would be no outside investing ever if insider trading was the mode that information came about.

Execs have not only access to 'current oil' stores, but basically everything about the company.

It'd be crazy to invest in a company where execs can do as they please, it would be utterly gamified and suppressive to the entire market.

With insider trading, the knowledge of insider traders would be priced in. If you're trying to just buy the market you'd get the same (maybe better?) returns. You'd only lose from insider trading if you were trying to outsmart the market, in which case you'd be at a disadvantage.

"With insider trading, the knowledge of insider traders would be priced in."

Yes and the price would be near 0 (i.e. 'priced in' crazy risk) because nobody is stupid enough to buy shares from those who have massive leverage over them.

Would you play poker against a guy who can look at your cards, but you can't look at his?

Investing is not just 'putting money in a productive vehicle' it's buying and selling based in information. What person would be stupid enough to trade with someone with a massive information advantage over them?

Nobody.

You'd have only Private Equity firms and execs owning shares, where the PE firms would have some kind of leverage.

There wouldn't be much of a market for equity, there certainly wouldn't be any 'publicly traded companies' because that would be pointless.

It would massively depress the market and lead to considerably less investment.

>Yes and the price would be near 0 (i.e. 'priced in' crazy risk) because nobody is stupid enough to buy shares from those who have massive leverage over them.

Even without insider trading laws, it would still be illegal for executives to do things that hurt the company in the name of their own financial gain, as this would be a breach of their fiduciary duty to the company. It's a separate issue to insider trading.

>There wouldn't be much of a market for equity, there certainly wouldn't be any 'publicly traded companies' because that would be pointless.

This is simply false, as evidenced by the size of other markets that lack insider trading laws, like real estate, commodities or cryptocurrency (or equities markets before insider trading regulations were introduced).

One - you would not knowingly trade with someone who has fundamentally more information than you, so there would be ver y little demand for equities that can be traded by insiders.

Two - there would be absolutely no way to prove in most cases, one way or the other if the 'insiders activity' was damaging or not for the company. For example, a bunch of insiders discover something disastrous and start selling cheap, sending a panic into the value of the stock. Is this 'bad for the company'? Or not? Then the 'problem' turns out to be not such a big deal, and they buy back on the cheap. Was this damaging to investors? Even if the insiders were acting legitimately, i.e. selling when something was wrong, buying when it was not ... it would 100% not be in the best interests of other investors - you see from this example that the very nature of 'insider information' makes 100% of trades by insiders 'not in the interests of other investors'.

"as evidenced by the size of other markets that lack insider trading laws, like real estate, commodities or cryptocurrency

This is wrong.

Real estate can generally be independently valued. That's why it's required by law in many countries to have 'independent' assessments of a home's value. Same can be done with commercial.

In commodities and currency there are no 'insiders'. There's nothing built into the price but the inherent value of the commodity itself. Corn is corn is corn. Insider trading would definitely apply to a big agri-business, but for corn futures, or USD or even Bitcoin - there literally are no 'insiders'.There are 'insiders' in companies, but a market does not have insiders. Just intelligent people researching, analyzing, with their fingers on the pulse.

Demand for stocks would dwindle to nothing without insider trading laws, that's why they exist in every developed market.

I think that leads to the fundamental question of whether the valuation of a company should be what it is or what people think it is. "What it is" sounds more nuanced, but I think "what people think it is" makes it a lot more approachable for everyday people.

I think you have formed a bit of a strawman argument here. Monopolies are never good for markets, pretty much but definition. Regulated monopolies, such as utility companies, are sometimes good for consumers though.

I don't exactly know what you mean by irrational actors are good for overcoming a market crisis, but I'd probably say that the market isn't functioning in a crisis and that irrational actors might put it back in a normal state, irrational actors are not good for functioning markets.

> Monopolies are never good for markets, pretty much but definition. Regulated monopolies, such as utility companies, are sometimes good for consumers though.

I actually have the exact opposite opinion, natural monopolies are good for the market while government granted monopolies are not.

Natural monopolies (i.e., ones not protected by fiat) gained their position through being the best in that space and there's nothing to stop competitors from overthrowing them if they lose their way while the opposite is far from true -- try to overthrow a gov't granted monopoly and you end up in court for patent (or whatever) infringement.

Natural monopolies in any sizable market don't stay natural. They get their fingers in government or use their relative size in a legal system that favors money to create unreasonable barriers to entry. Once they make it to #1 they no longer have to be the best. Same goes for markets run by a duopoly or any number of entities that cooperate in some way to lower competition.

You want utility companies to be a regulated monopoly because of their economies of scale. Consumers would be worse off with two small electric companies because their per unit of electrical price would be higher. Competition can't price away the fixed costs of building a power plant or stringing electrical wires all over town. However the monopoly has pricing power and needs the government regulation to prevent it from unfairly raising prices for consumers like they would to maximize profit without the regulation.

Natural monopolies are bad because they can use their market position to unfairly prevent new entrants to the market. For example, Amazon may buy all of a key supplier's product and prevent the upstart from even having a chance because they can't buy any of that product. The monopoly can raise prices to whatever level they want, despite what the market would dictate because the consumer doesn't have another alternative.

Hmmm....not sure about natural monopolies...think Amazon or Bloomberg...

if you want to buy and people are selling thats good. If you want to sell and people are buying, thats good. Buying or selling with low transaction fees is good. Being able to do so quickly is good. Obviously if an individual loses money that's bad for the individual, but the health of the market is about liquidity. Being stuck in a position where you cannot buy or cannot sell, especially if there are people out there who would if they could, is the worst situation for the market.

I don't believe monopolies are good, except that having a monopoly might be better than having no market at all. All the rest are just people participating in normal market activity.

> Are there any actors which are bad for the market?

I mean, this is a somewhat flippant answer, but anyone engaged in massive fraud: P&Ds, Madoffs, Enrons, etc.

> By seeking out overvalued assets, short-sellers help rein in animal spirits and prevent bubbles from forming.

Suddenly this article takes an unexpectedly spiritual turn. What are these "animal spirits" and how do they influence markets? It's reminiscent of the Animal Spirit Guide that helped Chakotay in Star Trek Voyager[0]

[0] http://memory-alpha.wikia.com/wiki/The_Cloud_(episode)

It is a phrase popularized by the most famous economist of the 20th century, John Maynard Keynes.

https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)

Short selling is vital. Everyone can say that the emperor is naked, so such allegations can be made without anyone noticing. When someone however dares to bet a large sum of money that emperor is naked people will pay more close attention and reflect.

Fair, efficient markets require investors with a rational mindset. Short sellers can give people a wake up call.

https://alphaarchitect.com/2017/12/18/academic-research-insi...

Shorting a stock is like renting a car for a year - then selling the car, and still paying rent. At the end of the year, you buy an identical car for a lot less, and give it back to the car rental company. Cars are fungible in this example.

> Shorting a stock is like renting a car for a year

only if stock goes down. Stocks moves up too, in that case the analogy doesnt work.

The analogy still works - you would just extend the car rental. And yes, sometimes short sellers do lose money on this transaction.

I always thought that the price of a car always go down.

Not always, but you're right it's uncommon for cars to appreciate in value. And yes it does stretch the analogy pretty thin.

This article does not address the core issue with today's short sellers. They target companies that are dependent on financing and use fear uncertainty and doubt to ruin the company's reputation. They corrupt journalists, analysts, regulators, law enforcement, and ratings agencies... They work with known criminals and recruit saboteurs. Details in this link

https://teslamotorsclub.com/tmc/threads/elon-musk-vs-short-s...

The real problem is not short sellers: it's borrowing people's stocks for shorting without their knowledge. When you think you own a stock, you don't own it, as the ownerahip lies with the custody institution (unless you have a stock certificate).

Is short selling banned in australia?

Short selling is fine. https://www.bwts.com.au/index.cfm/resources/ask-colin/569-wh...

Naked short selling is banned in Australia, as it should be everywhere.

This article is not readable even in incognito mode, where it claims that I've read my share of articles this month. Tried the 'web' option which also had no effect.

Archive seems to work https://web.archive.org/web/20181013150132/https://www.econo...

This looked great, but the page turns all white after it loads the javascript. The link from JamieF1 is the only one that works for me so far: https://news.ycombinator.com/item?id=18208660

a) Try a different network

b) Get a subscription to The Economist

Why should a a highly-paid engineer spend a few dollars, when they can spend the time-equivalent of dozens of dollars to not pay?

I'd pay some tiny amount for a single article, but I don't want a full subscription if I don't read the Economist otherwise. Also, I don't want dozens of subscriptions for different sites.

I'd like a system when some tiny amount would be deducted automatically from my account every time I read an article on different sites.

> I'd like a system when some tiny amount would be deducted automatically from my account every time I read an article on different sites.

Figure out how to make that work in the market and you can be a _very_ highly-paid engineer.

This sounds like the same situation as the music industry, bundling in an album 12 songs you don't want, along with the 2 you do want.

Or newspapers, where you pay for the 4 sections you won't read, along with the 2 you do read. Or streaming services, paying for the thousands of shows you won't watch, along with the dozen you do watch.

It's probably simpler and cheaper to just clear all your cookies for economist.com and any subdomains.

Cookies are not preserved in incognito mode; this suggestion does not work.

Note that it is possible for sites to detect incognito mode... https://gist.github.com/jherax/a81c8c132d09cc354a0e2cb911841...

(You are correct though: my suggestion still doesn't work, for other reasons!)

We need someone to post a paywall-bypass link. I don’t have the means or the knowledge to find such a link.

Here you go: https://outline.com/https://www.economist.com/finance-and-ec...

Note the FAQ [1] explicitly says comments like this asking how to read a paywalled article are ok:

> Are paywalls ok?

> It's ok to post stories from sites with paywalls that have workarounds.

> In comments, it's ok to ask how to read an article and to help other users do so. But please don't post complaints about paywalls. Those are off topic.

[1] https://news.ycombinator.com/newsfaq.html

and you definitely have a right to read their content without paying.

That being said, though I agree the economist is allowed to charge whatever it wants for us to read their articles, I don't think their pay walled articles should be allowed in HN, as only a minor portion of the reader base would be able to access the content legally.

Short sellers are incentivized to create false rumors and sabotage a a company's reputation. That's not really good.

By your logic, people who are long are incentivized to create false rumors to pump up a company’s reputation.

In practice, it is far, far more common for bad actors to run the pump and dump than to short and issue fake news. The latter is rare enough that we don't have a word for it. The former is common enough to be called "pump and dump". There's a good reason why shorting is not a common scam technique: your gains are capped at 100% and your risk is unlimited. On the long side, it's the opposite. A pump-and-dump has unlimited upside and the you can only lose 100%.

The short version is called short and distort. I'd like to see stats on which is more common.

I was an investment professional from 2001 to 2009 and I never heard anyone say "short and distort".

https://books.google.com/ngrams/graph?content=%22pump+and+du...

"Ngram not found: short and distort"

Perhaps it's a newer term. Now "short and distort" is around, for instance prominently as section 3 in the wikipedia article on "pump and dump" [0], and investopedia [1] also describe it.

[0] https://en.wikipedia.org/wiki/Pump_and_dump [1] https://www.investopedia.com/terms/s/shortanddistort.asp

It's true that longs and shorts could both benefit from spreading false rumors. But shorts have an expiration date which can cause them to be much more incentivized to drive a rapid price change.

Just remember that many people shorted Netflix early to their detriment.

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