Game Over, by Kevin Duffy

Shorting stocks is not nefarious, and given the central bank-fueled fun and games that have gone on in financial markets for these many years, shorts should be more prevalent. From Kevin Duffy at lewrockwell.com:

It’s a big club, and you ain’t in it.”  – George Carlin

The GameStop frenzy has struck a nerve with so many because it represents a morality play: David vs. Goliath, outsiders vs. insiders, the downtrodden upending the corrupt financial elites.  To many long-time critics of bailouts, the Reddit crowd who made out like bandits signifies the beginning of a long-awaited populist revolt.  To the young and tech savvy, this is the passing of the old guard which offers a glimpse of the future.

Lost in all of the hysteria and spin is the real struggle taking place on Wall Street, that between bulls and bears.  After 12 years of nonstop Federal Reserve-abetted asset inflation, the bulls have been winning so often, their ranks have swelled while those of the bearish community have dwindled.  The short seller, that most extreme expression of skepticism, has nearly gone extinct.  It was he who the Reddit crowd targeted and whose grave they’re now dancing on.

Table 1: Bear funds, a dying breed

Markets are cyclical, but memories are short.  How many celebrating in stock forums like WallStreetBets remember the 2008 meltdown or dot-com bubble bursting?  As Jim Grant warned, “The only permanent truth in finance is that people get bullish at the top and bearish at the bottom.”  Kicking someone while they’re down is

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2 responses to “Game Over, by Kevin Duffy

  1. The author offers various defenses of short selling, including this one: “We’ve lost sight of the fact that the financial markets exist to efficiently allocate capital.”

    Yes, that is why they exist, but they haven’t actually performed that function for decades. They are a money laundering operation for the wealthy and nothing more. Capitalism of course relies utterly on capital formation. So explain to me the four-figure P/E for Tesla? Explain why the government picking winners and losers (mom and pops closed for no real reason while Amazon and Walmart roar). Explain why stawks are at all time highs while so is real unemployment? This system does not require capital markets for capital formation, it requires it only for nefarious purposes.

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    • It’s called “the Fed put.” Nobody has gotten rich short selling. The results over the past 12 years are so poor, the category is no longer tracked by performance monitors like Hedge Fund Research (HFR).

      Elon Musk hates short sellers. His mission was to destroy them… and he succeeded. None of this happens without the Fed wind at his back.

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