What is ethical and what is not in financial markets? (Excluding government involvment except for fractional reserve banking)
Short selling for example means you borrow a stock from a broker and then sell it. But the stock is not yours nor the broker’s, yet both of you are risking the property of the third person who is the real owner of the stock. This is immoral. Don’t you think?
I think if there’s real borrowing - if the broker really does have the stock on hand, and he really does loan it to you, then I don’t see a problem
“Naked” short selling, however, is counterfeiting - in “naked” short selling, not only is “the stock neither yours or your brokers,” it doesn’t even exist.
There are apparently corporate elections where more votes are returned than stocks even exist - because brokers have effectively counterfeited stocks (and the voting rights that come with them) via naked short selling.
I, for one, think this should be illegal and brokers who engage in it jailed (or at very least forced to forfeit any proceeds and be banned from brokering).
I don’t think that short selling is any more immoral than getting a home loan from a bank, and probably less so.
The short seller owes the lender of the stock the price of the stock at the time that they return it plus any dividends that are paid by the company that issued the stock while it was borrowed. If the price of the stock goes up, the short seller will have to return it to the lender at some point (cover their short) along with the difference between the price at which they shorted it and the price at which they covered their short. If the price goes down, they return the stock to the lender and earn the differrence between the lower stock price and the price at which they shorted it.
I believe highly regulated markets are a greater temptation to be non-ethical, as actors in these markets use the violent force of government for gains as compared to the humble forecaster. Markets convey knowledge at different rates for different folks. In the interventionist market the grafters at the top get the chief dividends. In the free market this knowledge seeps through voluntary action, making the first to come first to servers more divided among more folks. The free market has a more moral distribution of funds and goods.
Does the investor in the OP above have a choice in brokers? I work in a casino and hear some folks get outrageously upset that the house is taking them. I want to respond, well know you can’t plead temporary insanity here, who the hell made you invest in gambling anyway?
I believe the stock market is a gamble, just a State sanctioned one. I have to wonder if there would be any safe investments under the bust of the monetary unit phase?