short interest peer perspective, page-18

OK shorting then. IMO there are a few technical factors that you need to consider, they are the rules set by ASIC.

First is that the short that are reported are not your average trader.

Only short sales above $100k actually need to be reported anything under this is not reported to ASX / ASIC.

To make a short sale you actually have to pay interest to lending entity, dividends if they arise to lender (otherwise it skews the price) and fees to ASX.

So the short reports relate to the top end of town only really.

Also consider the lender, they have a large position in the company and they will get the shares back after the short seller has finished with them at which point they still want SP to be worth something as they own the things.

I dont expect that MS would lend out the shares at say 1.25 to hedge funds that drop the price, buy them back to return without the assumption that they will increase in value at some point.

They would be unlikely, still holding 7% of the company to lend them (the shares) if their holding stock will be screwed SP wise in the long term.

So shorting is a shorter term play than investing long.

Retail investors also do not need to short sell when they have CFD's that can be used to protect investment.

Why short?

In one case you have large holders who want to hedge their risk in holding a stock. Well OK you can see that is reasonable.

But what about the use of short selling to accumulate stock from holders who cannot offset their risk and need to sell to protect their capital?

That IMO is another story because they are using a legitimate practice design for protection of their asset to fleece someone else, usually a smaller investor, of their asset.

Not so cool. This is the area of manipulation by a big player (lets face it who else has the cash to do it) of a small player whom has the right to invest and expect that others with more power are playing by the rules.

So IMO the second case is clearly the strong taking advantage of the weaker kids.

No one likes a greedy bully but here they are a fact of life.

Just be thankful we only have naked short selling in certain circumstances.

ie. I buy LYC this morning I do not really own it until the transfer of title has taken place in a few days. I can sell it that afternoon on market. I have just engaged in naked short selling.

Thats my thoughts in a nutshell.

Take it easy, that includes you instos and hedgeies out there. ;)