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Wall St Bets, Keynes, BaFin, Fink and climate change shorts

Written by Ulf Erlandsson

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Given the last week’s flurry of short selling stories, from Wall Street Bets and Gamestop to Wirecard and BaFin, spiced with flow machine Larry Fink and BlackRock, we discuss the societal value of short sellers.

We further elaborate on how this applies in bond markets and its potential usefulness for climate change mitigation. A broader debate has arisen, and around goes a discussion about hedge funds’ short positions being economically destructive.

In many ways, it seems a Main Street vs Wall Street debate, where short positions and their hedge fund masters often are seen as being on the side of the latter. The question is whether this is true and as such it makes sense to reverse the question in terms of whether short sellers add any broader economic value: we would argue that they do.

However, we also acknowledge that short selling is a dangerous gamble: in the same way traders land in a ‘gamble for survival’, so do companies and their managements.

Companies will fight short sellers especially in desperate situations: the optionality of fight or flight is reduced when there is nowhere to fly because the corporate jet has been impounded.

About the author

Ulf Erlandsson

Ulf Erlandsson

Founder, Board member

Dr Ulf Erlandsson founded the Anthropocene Fixed Income Institute and was its first CEO. A pioneer of climate-focused fixed income portfolio management, he was named Environmental Finance’s Bond Personality of the Year 2022.

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