Call me crazy, but I also think that short selling should be illegal. If you want integrity in the market, people should only be able to get in or out.
Slippery slope there, BIG.
Day traders provide liquidity. They perform the same service that arbitrageurs (arbs) provide in commodity markets. They stand ready to buy at a tick below market, and sell at a tick above, and do it any time, under any circumstances. There's benefit to the whole market there.
Regarding short sales: A short seller could be gambling. Or they could be hedging....locking in a selling price on shares that aren't theirs yet.
Consider my own situation about 15 months ago. You have some stock grants vesting in a few months, but they aren't yours yet. You plan to sell them to finance your health insurance premiums between now and when you qualify for Medicare. Today's price will cover you totally. But who knows what the price will be when they vest?
A ban on short selling would legally prohibit a transaction that benefits everybody.
Also, just curious....if you would outlaw short sales, would you also outlaw put options? If so, you outlaw a source of stability. What about calls? If so, you outlaw a great source of income for people who own stock....including but not limited to lots and lots of retirees.
Probably difficult to outlaw outright but taxing profits highly and writing off losses lightly (or not at all) could be an answer.
Simultaneously tax profits heavily and minimize or eliminate writeoffs for losses? Translation: If you win, we're going to take most of your winnings. But if you lose, well, that's on you.
Not much upside, but a lot of downside.
Given that proposition, why would anybody buy at all? It keeps people out of the market altogether, and undermines the fundamental advantages of every 401k and IRA that isn't in cash or bonds.
I can't think of a better way to both (1) deny the masses access to the greatest long-term money-making machine in the history of man, and (2) bollux up liquidity, and make it difficult or impossible for those who do own shares for the long haul (as you wish them to do) to convert holdings to cash....because, again, who would they sell to? Who would buy at all under that risk / reward proposition?
Put another way, that just killed the whole concept of a stock market.
My own personal opinion is that the bottom is still out there. However, anyone having free cash in abundance might jump in at these prices and be OK w/ it because when it truly starts to go up it's gonna rocket IMHO. But who knows when that will be? Like I said, nobody knows nothing and that rocket could take off over any really positive news on the virus front (i.e. #'s going down, immunization approved, etc etc etc.) All of the monetary and fiscal policy angles now are to "just make it tolerable until we get past the next 60-90 days of virus spreading." If the virus remains hugely impactful and there's an enduring economic shutdown through the summer months, all bets are off.
