The other day, I felt blue, and I wrote about it. Today, I feel emotionally better, and I will tell you why—I am conflicted in a good and thoughtful way.
A couple of weeks back, I wrote several pieces about shorting markets. For those who were here and don’t remember, and for those who were not here for my writing, I simply said that I don’t short markets because I am ethically opposed to the concept. I made my argument, and I felt then as I do now, my reasons are sound, but yesterday, I discussed this with a long-time trader who said shorting markets had its ethical place. His argument can be summed up in one proper noun—Enron.
His thinking is that some companies are clearly corrupt, and one way to expose them is to short them. “If enough traders short the stock, it will eventually force the shareholders to examine the fundamentals. It will force the company’s demise,” he said. Enron is the example he cited. Understand, this trader’s business is analyzing the fundamentals of companies, so he can recognize companies that “cook the books,” and are running on fumes. He says some companies work just to deceive, and so when he finds one, he shorts that company knowing time and the lack of light are the only things keeping the company afloat.
Here is my conflict. I oppose shorting markets, but I applaud his ethical stance, and, if I am to be honest about this, I have to say I agree. In his world, delivering a blow to existing shareholders is simply collateral damage in a war against corruption. Although he did not say it specifically, I inferred from his words that all investors in a company should understand the fundamentals of that company, and if they continue to hold stock in a company such as Enron, at a time when the corruption is coming to light, well …
I know many of you read this column to learn about trading, and your expectation is that I will give you specific information about trading and markets. But in my world, discussing my inner conflicts regarding trading, as well as focusing on the ethics of trading, is helping you learn about trading. Like it or not, ethics are part of the fabric that weaves society together, and whether you see it or not, ethical behavior threads its way through the markets we trade, enough so that the markets, although tattered and torn at times, remain more than intact; they remain tradable.
And the trader who brought me a bit of inner conflict yesterday? I respect him, as I respect any hard-working trader who plays the game within the rules, and no matter what I “feel,” shorting markets is playing the game within the rules. Trading, like life, is not black and white, shades of gray color the cloth of both, and sometimes, as in war, the right place is on the side of good, even though the act itself may pull on the fiber of who you are.
