Much easier said than done and analysis in the past shows that banning shorts doesn’t much affect prices in a multi trillion dollar stock market.
You’re absolutely right. Short sellers, though clear contributors to big selloffs, perform important functions in helping the markets to operate efficiently. Yes, they can contribute to major selloffs but they also operate as a kind of brake on markets from overheating on the upside. For every executed short sale, there’s a buyer at that price. It’s basic economics that price is where the buyer and seller meet. The short seller helps to create a market at a given price point that might otherwise be unavailable if only ‘longs’ were allowed to sell. And, of course, shorts can get squeezed and contribute to major spikes on the upside as well.
“Much easier said than done and analysis in the past shows that banning shorts doesn’t much affect prices in a multi trillion dollar stock market.”
Agree. I can’t speak for the British Pound and Soros, but what’s happening here is simply the market catching up to events on the ground and also realizing that the ‘new-normal’ after Coronavirus (hopefully) passes will be FAR DIFFERENT than the pre-Coronavirus days, with entire sectors of our economy set back to zero (such as cruise lines and possibly air travel and hotels) and having to try to claw its way back into viability.
Yep, what you said.
I also think shorting may speed up the eventual bottoming process.
People don’t realize that shorts can easily lose money, too.
And I think short-selling a currency, like Soros did, is different than short selling a stock. He was basically saying that the UK had a foolhardy currency policy, and put his money where his mouth was.