[HN Gopher] Last Sane Man on Wall Street
___________________________________________________________________
Last Sane Man on Wall Street
Author : kamaal
Score : 80 points
Date : 2023-01-27 09:34 UTC (1 days ago)
(HTM) web link (nymag.com)
(TXT) w3m dump (nymag.com)
| vishnugupta wrote:
| Ah such a shame the article just missed one of the most explosive
| reports [1] by Hindenburg Research. It's shaken up the richest
| man in India and the BJP government as a consequence. The story
| even made it to HN's front page.
|
| [1] https://hindenburgresearch.com/?p=2376
| NickC25 wrote:
| Adani lost like $20 billion USD in one day due to that. That's
| insane.
|
| Having read Bloomberg articles about Hindenburg's position, I
| completely get why he's short - Adani is engaging in fraud.
| curiousgal wrote:
| I am going to play the "Devil"'s advocate here, let's suppose
| that the report is true and that the company has committed all
| sorts of fraud. What would happen to the mass of people it
| employs it it were to go under? I just don't believe that
| entire families should suffer because the CEO has been lying to
| investors.
| shapefrog wrote:
| If my criminal fraudulent enterprise collapsing means no more
| private school for timmy and jane my children, I should be
| permitted to perpetuate my fraud on others?
| skybrian wrote:
| If the underlying businesses are valuable then after
| bankruptcy, the stockholders lose, but the businesses should
| continue to operate under new owners. This happens all the
| time. (Hertz is one example.)
|
| It doesn't happen when the whole business was a confidence
| game, like FTX.
| spaceman_2020 wrote:
| The reaction of both the Adani group and BJP's supporters to
| this report has been absurd. Adani trotting out the national
| flag in the background to respond to the complaints, and BJP
| supporters equating it with an "attack on India". A poor,
| immature look. Not something mature markets do.
| mavelikara wrote:
| "Patriotism is the last refuge of the scoundrel." - Samuel
| Johnson
| skybrian wrote:
| Yeah, it missed it because the article is from a year ago.
| vishnugupta wrote:
| aargh! My internal calendar's year is still in 2022 :-|
| ckardat123 wrote:
| If anyone is interested, here's a chart of Nikola insider stock
| trades graphed alongside the price of $NKLA:
| https://www.quiverquant.com/insiders/NKLA
|
| Here's a chart of Riot insider stock trades graphed alongside the
| price of $RIOT: https://www.quiverquant.com/insiders/RIOT
| lend000 wrote:
| Nice demonstration of how insiders don't know shit about longer
| term price movements of their own stock, especially when driven
| by the macro environment. The only way insiders could
| theoretically make money using an unfair edge is trading
| intraday earnings releases with leverage (which only a few
| people are in a position to know about, and which the SEC is
| very good at detecting nowadays).
| shapefrog wrote:
| > Nice demonstration of how insiders don't know shit about
| longer term price movements of their own stock
|
| if insiders done know shit about their own stock - what
| chance does twitter investing newsletter writter have
|
| > especially when driven by the macro environment
|
| The headwind / tailwind of the macro environment is really
| the biggest factor - this should be the #1 lesson for anyone
| investing anything.
| paulpauper wrote:
| Insiders will buy a little stock to make a much larger
| position go up in value (paper wealth) due to positive press
| and as a gesture of confidence. And then sell the inflated
| stock or borrow against it later. Or hedge it
| chollida1 wrote:
| How are you assuming insiders hedge their stock?
| polio wrote:
| I love short sellers. They serve a vital moral purpose in
| financial markets, as the article describes. Here's hoping the
| new rate regime will serve them better.
| draw_down wrote:
| [dead]
| wakahiu wrote:
| https://archive.ph/2022.01.24-140647/https://nymag.com/intel...
| paulpauper wrote:
| _Then, on June 9, 2020, Anderson came across a tweet from Milton.
| His truck company, Nikola, had gone public on NASDAQ five days
| before: "I've wanted to say this my whole adult life; $NKLA is
| now worth more than Ford and [Fiat Chrysler]. Nipping on the
| heels of GM ..."_
|
| Given that Ford and GM trade at very low multiple and have not
| done much in a long time, even decades, this is not that
| undoable.
|
| I think the survivorship bias with shorting is huge. So many
| people and firms try and fail. The risks seem to be glossed over
| by the article. Seeing a few big winners like Nikola one may be
| under mistaken impression this is a good strategy.
|
| Having a big win is seldom enough to beat the market. If you
| allocate 5% of your capital for a short and it goes bankrupt, you
| only increased your total capital by 5%. Making the historical
| 10% average (including dividends) with an index fund is less
| risky and more consistent, probably.
| bbor wrote:
| I hope it's not too rude for HN to say that you're missing the
| whole point of the article.
|
| 1. Presumably that discussion took place pre-FTX.
|
| 2. I don't think he said "1000% in a day", just in general.
|
| 3. The article goes into repeated, extensive detail about how
| short selling is financially dubious and extremely risky.
|
| 4. It goes into his childhood because it's a profile piece.
|
| I mean this with no offense, only because I've been there many
| times: did you feel personally attacked by this guys takes on
| crypto/stocks/our world at large?
| paulpauper wrote:
| Good points, agree. Short selling needs to be weighed with
| risks vs. reward. Unlimited downside is a major risk. Would
| not recommend it.
| 2020aj wrote:
| The full article indeed discusses these shortcomings and does
| not make it appear that short selling is more effective. It
| portrays it almost as a form of activism
| berkle4455 wrote:
| I'm confused how/why activist short-selling is legal but pump-
| and-dump scams are illegal. Isn't it basically the same? Short
| sellers often get it wrong or blatantly distribute FUD.
|
| Hindenburg has proven to be well-researched and legit though.
| ProjectArcturis wrote:
| If you libel a company, that's illegal. If you publish
| unflattering but true things, that's perfectly fine.
| NickC25 wrote:
| Shorting and pump-and-dumps are not one and the same, that's
| why one's illegal and the other isn't.
|
| Doing a bunch of research, publishing it and saying "I'm
| shorting this stock because of the research I've done, here are
| the market conditions that would perpetuate the drop I
| anticipate it will" is completely legal and helps keep markets
| from believing their own hype too much.
|
| Pump and dumps are sort of the opposite of that. there's
| usually very little legitimate research and it's stuff that
| serious investors don't touch.
| kgwgk wrote:
| Short-selling is not "basically" market manipulation - but it
| can be:
|
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3198384A
| pkkm wrote:
| > Short sellers often (...) blatantly distribute FUD.
|
| I'm going to call a [citation needed] on that. It's already
| very illegal to spread false information in order to profit
| from short-selling. In fact, I'd say that shorts are overly
| scrutinized in comparison to longs. Both are important for
| price discovery and both have the potential to cause a
| misallocation of capital if they spread false information in
| favor of their position, yet people seem to have a positivity
| bias that makes them more willing to forgive someone who spoke
| positively of an overhyped stock than someone who spoke
| negatively of a good stock.
|
| Given short-sellers' importance in exposing "creative
| accounting" and excessive hype, I worry that the current
| popular sentiment against them will discourage further shorting
| even more than the financial incentives already do (a long has
| an unbounded upside with the downside capped at 100%, while a
| short has an unbounded downside with the upside capped at
| 100%).
| cokecramer wrote:
| [dead]
| ryan93 wrote:
| You are not confused you just do not like it. Hindenburg is
| well within their first amendment rights. And they are putting
| their money where their mouth is!
| spaceman_2020 wrote:
| There's a strong argument to be made that short selling helps
| in price discovery.
| [deleted]
| tristor wrote:
| Fascinating article, and it sounds like this guy isn't just
| making money doing this but is actively working to expose bad
| actors in the marketplace. I applaud his work, and I hope to see
| more of this in the future. There's a lot of just crazy
| fraudulent stuff happening in the market over the last decade,
| and I'm hoping with the music slowing down, that we'll see a lot
| of the frauds fall over.
| gsatic wrote:
| And that leads to - why not let the govt make money exposing
| bad actors? Why should the tax payer fund the cops?
| drewcoo wrote:
| Because the government has a monopoly on violence.
|
| https://en.wikipedia.org/wiki/Monopoly_on_violence
| jjtheblunt wrote:
| I've thought about this, and wonder if the often discussed
| "right to bear arms" is intended to prevent the government
| from having such a monopoly, by which i mean is that what
| people are discussing and disagreeing over, wrt the 2nd
| amendment?
| yamtaddle wrote:
| Worth considering that the original idea was the US would
| have practically no standing army (a navy, maybe, but not
| so much an army). The freedom-protecting bits didn't
| _necessarily_ mean (only) from our own government, and
| there 's a reason the word "militia" occurs--the idea was
| that much of our military might, were we attacked, would
| come from citizen militias.
|
| Further, the right to bear arms means nothing as far as
| the legality of use of force. The so-called monopoly
| (which basically always has exceptions, anyway--it's a
| tool for understanding the role of government, not a law
| of nature) is on the _legal_ use of force--it 's not as
| if folks don't illegally use force all the time, so
| clearly there's no monopoly on the ability to use force,
| but on the ability to use force legally.
| bko wrote:
| That's the idea behind asset forfeiture. In theory, cops pull
| over bad guy, confiscate his car, use proceeds to fund their
| department and catch more bad guys all while saving tax payer
| money. In reality it leads to a lot of corruption and abuse.
|
| https://en.wikipedia.org/wiki/Asset_forfeiture
| filoleg wrote:
| > why not let the govt make money exposing bad actors?Why
| should the tax payer fund the cops?
|
| Do you mind elaborating? Just trying to figure out what you
| meant there.
|
| Are you talking literally about police funding and how it
| could have been better used for funding SEC? Or are you
| talking about it in a more metaphorical sense, and
| questioning why random tax payers are doing the job of
| catching instances of malicious insider trading instead of
| SEC doing that?
|
| If it is the latter, then there is one solid incentive -
| whistleblowers get a reward between 10-30% of the monetary
| sanctions recovered on that case by SEC, as long as the case
| was successful and led to over $1mil recovered[0].
|
| 0. https://www.sec.gov/whistleblower/frequently-asked-
| questions
| luckylion wrote:
| They're not making money "exposing bad actors", they're
| making money by betting that exposing the bad actors will
| move investors to sell and stay away from those bad actors
| within some period of time. But that's not a given outcome,
| and the government shouldn't speculate with taxes.
| ajb wrote:
| We've tried profit making cops, it leads to corruption:
|
| https://en.m.wikipedia.org/wiki/Jonathan_Wild
|
| https://www.bbc.co.uk/news/blogs-echochambers-29228851
| mprime1 wrote:
| If you find this interesting, check out 'King of Stonks' (on
| Netflix). It's a fun critique of corporate greed and capitalism
| gone wild. The story centers around an activist short seller who
| could be inspired by the stories in this article.
|
| (German series but the dubbing is good)
| dilyevsky wrote:
| Heh in 2020 short sellers were devil's incarnate and now they
| publish puff pieces about them. As often happens there are two
| sides to everything but I for one am looking forward to a more
| healthy investing environment (yeah right like that's going to
| happen).
| paulgb wrote:
| That seems to have been a momentary blip coinciding with when
| retail investors momentarily forgot that stocks could go
| anywhere but up.
|
| The Big Short (2015) and The China Hustle (2017) both portrayed
| short sellers as the heroes, for example.
| joki777 wrote:
| [dead]
___________________________________________________________________
(page generated 2023-01-28 23:01 UTC)