Article: Reddit Hates Short Sellers, But the Stock Market Needs Them

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Reddit Hates Short Sellers, But the Stock Market Needs Them

Brandon Kochkodin, 23 June 2021

There’s something a little weird about short selling. Shorting—or betting that a stock’s price will fall—is a feature of finance that doesn’t have a close analogue in the real-world economy.

Buying a stock you like isn’t much different from purchasing a product that catches your eye. But if you’re walking through the local grocery store and see an item that sets your stomach turning—say, ketchup-flavored potato chips—you don’t stand in the aisle waving off other customers, telling them how bad it is. You don’t try to crush the bag. You just think, “Who in the world eats this … ” and go on your merry way without putting it in your cart. Continue reading “Article: Reddit Hates Short Sellers, But the Stock Market Needs Them”

Article: Market Manipulation Chatter Rises as Digital Art Scene Explodes

Article - Media, Publications

Market Manipulation Chatter Rises as Digital Art Scene Explodes

Brandon Kochkodin, 13 March 2021

A digital artwork by Beeple set auction records Thursday when it sold at Christie’s for a mind-bending $69 million. Twitter Inc. co-founder Jack Dorsey is auctioning the non-fungible token for the first tweet ever, “just setting up my twttr,” with the highest bid coming in at $2.5 million, so far. LeBron James highlights are fetching six figures.

If you were somehow unaware, digital assets are booming, with buyers paying up for so-called NFTs that give them exclusive ownership of electronic tchotchkes. Explanations for why, say, a GIF of a cat with a rainbow trail commands a king’s ransom aren’t hard to come by. The more prosaic theories say the price per pixel is surging as Bitcoin and other cryptocurrencies mint new millionaires every day and those newly rich digital natives look to spend in their adopted domain. And sure, it could be as simple as a good old mania around the latest shiny object that’s caught people’s attention.

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Article: Biggest Players In The Short-Selling Game Are Getting A Pass

Article - Media, Publications

Biggest Players In The Short-Selling Game Are Getting A Pass

ERIK SCHATZKER, BRANDON KOCHKODIN, 10 March 2021

It’s in the air again, on Reddit, in Congress, in the C-suite: Hedge funds that get rich off short-selling are the enemy. The odd thing is, the biggest players in the game are getting a pass.

Those would be the asset managers, pension plans and sovereign wealth funds that provide the vast majority of securities used to take bearish positions. Without the likes of BlackRock Inc. and State Street Corp., the California Public Employees’ Retirement System and the Kuwait Investment Authority filling such an elemental role, investors such as Gabe Plotkin, whose Melvin Capital Management became a piñata for day traders in the GameStop Corp. saga, wouldn’t have shares to sell short.

“Anytime we short a stock, we locate a borrow,” Plotkin said Feb. 18 at the House Financial Services Committee hearing on the GameStop short squeeze.

“Anytime we short a stock, we locate a borrow,” Plotkin said Feb. 18 at the House Financial Services Committee hearing on the GameStop short squeeze.

There’s plenty to choose from. As of mid-2020, some $24 trillion of stocks and bonds were available for such borrowing, with $1.2 trillion in shares—equal to a third of all hedge-fund assets—actually out on loan, according to the International Securities Lending Association.

It’s a situation that on the surface defies logic. Given the popular belief that short sellers create unjustified losses in some stocks, why would shareholders want to supply the ammunition for attacks against their investments? The explanation is fairly straight forward: By loaning out securities for a small fee plus interest, they can generate extra income that boosts returns. That’s key in an industry where fund managers are paid to beat benchmarks and especially valuable in a world of low yields.

The trade-off is simple: For investors with large, diversified portfolios, a single stock plummeting under the weight of a short-selling campaign has little impact over the long run. And in the nearer term, the greater the number of aggregate bets against a stock—the so-called short interest—the higher the fee a lender can charge.

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Article: SEC Data Show $359 Million of GameStop Shares Failed to Deliver

Article - Media

SEC Data Show $359 Million of GameStop Shares Failed to Deliver

Brandon Kochkodin, Bloomberg, 17 February 2017

  • GameStop surged more than 1,700% before curbs were implemented
  • More than 2 million shares failed to deliver at peak of mania

“Fails-to-deliver can occur for a number of reasons on both long and short sales,” reads a disclaimer on the SEC website. “Therefore, fails-to-deliver are not necessarily the result of short selling, and are not evidence of abusive short selling or ‘naked’ short selling.”

Comment: The SEC is full of shit and a RICO organization complicit in Class A felonies enabled by the Department of Justice and the Senate Banking Committee. For the slow learners, start with the Cartoons.