The “market” as originally envisioned was a place for capital formation. Companies either formed or grew by the issuance of shares to investors. Original issue or secondary offerings.
Then along came some bright lights who decided to get around the “income” angle by making the sales of stock a capital item to get around the confiscatory ordinary income tax rates. IMO, if one sells stocks that had been purchased from a company as part of an IPO or a secondary offering, that is a capital item. However, when stocks get traded daily from one to another, those transactions have nothing to do with capital formation, rather, they are just an exotic form of gambling.
Selling stock short is therefore nothing to do with capital formation, it is a bet against someone who feels their stock is fairly valued.
Brokerage house will fight the outlawing of this procedure as they make money lending stock to someone to sell. As we see in the GME example, some have been lax on ensuring they have the actual shares in their possession to sell short, a requirement but apparently not enforced till some debacle like this happens.
Heap on top of all this the amount of worthless money sloshing about the system, deficit spending beyond the max, the the market is teetering on its head as it spins out out of controls. When it crashes, which it has to do by hyper inflation or over supply of worthless stocks, the Capital system will get the blame when the actual nemesis is greed coupled with a desire to get something for nothing.
I disagree. The ability to sell stock short is a part of price discovery, which is vital to the way capital markets operate.
It is no different that someone who owns 1000 oz of silver deciding that it is better to own gold and trading all that silver for gold.
An occasional short squeeze is something that has to happen in order to keep markets honest.
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Personally, I have never shorted a stock and will probably live my entire life without doing that. The reasons are simple -- I have the opportunity for unlimited losses in a short but the potential gain is limited to the price of the shares on the day I short. IMHO this is a stupid investment to make.
When it crashes, which it has to do by hyper inflation or over supply of worthless stocks, the Capital system will get the blame when the actual nemesis is greed coupled with a desire to get something for nothing.
Frankly, I expected the System to fail years ago.