Translated by Andrew Vanburen from: 沽空非發國難財 不宜全面禁止 (中文翻譯, 請閱讀下面)
SHORT SELLING is an easy target for blame in a bear market.
But the practice serves a useful and healthy function in China’s capital markets and should not be banned outright.
We all know -- and feel -- that capital markets are sinking left and right the world over.
Investors are seeing their life savings slip into the abyss and there seems to be no light at the end of the tunnel in many stock exchanges across the globe.
Are there any safe harbors left out there? And if so, where?
The best harbingers of better things to come may actually lie in those lying lowest, the sectors and counters that have lost the most.
Shares clinging to the absolute bottom of the market are for some the best opportunities going forward.
We well recall that despite “public criticism,” it was the speculative short-selling crowd that foretold the softening of the manufacturing sector.
But I believe a ban on short selling, while ostensibly conceived of good intentions, is actually a dangerous attempt to “play God” and grossly interferes with the natural process and evolution of the capital markets.
First of all, it is necessary to understand two things that have occurred that may not be totally causal.
During the approach of a cataclysmic storm, when the horizon is already darkened with ominous thunderheads, all take to worrying, fretting and even panicking.
But during this anxious time, it might be that the only beneficiary is the small shop owner hawking away the best umbrellas, and he can make a pretty penny.
Yes, the small mom and pop shop runs up the prices on the umbrellas and can actually score quite a windfall profit as lightning bolts begin to trace dire designs across the blackening firmament.
But we should also keep in mind that the shopkeeper did not cause the storm, nor should he or she be in any way blamed for the terrible tempest to come. Instead, others should emulate the actions of the resourceful umbrella purveyor and look for similar opportunities to make hay while the sun doesn’t shine.
Also, even if the shopkeeper didn’t exist, and his store was a simple apartment without umbrellas for sale, the rains would still come all the same. And after the deluge, those with the good umbrellas will be drier for the experience than those without, and lucky owners will have a product ready for repeated deployment the next time the skies open up.
So this begs the question: If the shopkeeper doesn’t exist, will the rains still arrive? Of course they will.
And by the same token, if short sellers don’t exist, will the market still fall? The answer is also: of course it will.
Until last year, China’s A-share markets had a short sale mechanism in place.
But I believe the institution helped temper outright selling pressure over the past three years and shortened the extended declines by its balancing act -- its dialectical function, if you will.
No Place for Malicious Short Sales
Greenlight Capital President David Einhorn – one of the best known short-sellers in today’s marketplace -- describes his hedge fund as “long-short value oriented.”
He has made a fortune for himself and his clients by borrowing a stock for a designated period and then selling it, with the intention of repurchasing the shares at a lower price down the road – i.e. textbook short selling.
He must be doing something right, because his results mimic the early returns of a Ponzi schemer.
His fund, which he began in 1996 with one million usd, has historically generated an over 22% year-on-year net profit for investors.
His short-selling positions have been prominent in Lehman Brothers -- among other heavyweights – which went kaput in spectacular fashion in 2008.
And just last year, he was among a dozen ex-directors of another financial group -- New Century -- that dished out nearly 100 mln usd to settle a laundry list of lawsuits against the firm, which first filed for bankruptcy in the pre-Crash days of 2007.
But some good for the general non-clientele public does come from Einhorn’s windfalls.
As per his pledge in the self-authored book Fooling Some of the People All of the Time, his Greenlight Capital donated half its profit share from their short position on Allied Capital in 2009 (nearly 7 mln usd to a children’s charity organization as well as -- rather ironically -- the Project On Government Oversight (POGO) and the Center for Public Integrity (CPI).
Therefore, not only trickle-down dividends can find their way into charitable causes, but short-selling does serve its purpose in any market – perhaps even more so when the chips are down.
美國長短倉基金經理David Einhorn，就是此道表表者。他發現聯合資本(Allied Capital)帳目上屢次減值不足，又濫用政府資助中小企的配對貸款，谷大生意、盈利，然後配股派息。可是監管機構愛理不理，惟有自己造淡，再公告天下。當中與公司拳來腳往，相當精采，有興趣可參閱Einhorn著作Fooling Some of the People All of the Time。最終經過六年纏鬥，聯合資本爆廠被收購，Einhorn則將七球美金利潤，捐予慈善機構。○七年照辦煮碗，狙殺雷曼兄弟，馬到功成，一年之內連根拔起。
固然也有散布流言、惡意中傷的沽空者，但就算是實牙實齒，沽空造假的公司，都極易被挾死，何況是攻擊堅實的股份？自然會被市場收拾。整體而言，沽空者有其貢獻，所以一如另一財經書名所言：Don't Blame the Shorts。
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