When Free Markets and Communism collide?
They can bouy the market. But I see a problem:
At some point, people will realize that stocks that are limit down are truly zombie money. There’s no way to get that money out—the account is frozen until the stock goes up a bit. This will most likely lead to waves of selling, causing limit after limit.
The government may restrict short sales, but it would cause a panic if closing sales on long positions are stopped out for any length of time.
I might need a bit of education here. Apologies for the ignorance in advance.
I understand: China has determined that “short selling” is now illegal. That is betting that a stock will drop is a win much the way betting “don’t come” in craps. You essentially invest in the downturn of the stock (or market).
But “selling” a stock at it’s current price is still legal. Right? If so, then investors looking to offset losses in segments of the markets are hedging by further investing in future losses to reduce their own liability for what they hold. Right? Then there is the foreign investor that is looking to jump in and gain on the economic collapse (like a Soros).
Here is the question. If they have made “short selling” illegal, is that not the same as making the sale of stock also illegal (as it pertains to the stock)? How soon before they forbid anyone from selling their own stocks outright? China is trying to FORCE the decline to stop but disallowing the value of any stock from falling. But if there are no sales of stock (new investor money), how does that “help”?
Thanks for any education you can provide.
I work at a large Midwestern University. I think I shall see fewer Maseratis, Porsches, and McLarens being driven by Chinese students on campus this fall.
If you forbid selling, why not legislate ever increasing stock prices. If you can FIND a buy, than you can sell - good luck with that.