Instead of writing an opinion piece that will likely influence a few people, why doesn't this guy use his exemplary knowledge of Facebook and the stock market for profit? Why not keep this information to himself and short $fb or sell the information to an institutional investor?
My guess is that his "knowledge" is worth more as an article that he got paid $25 for writing than it is in actual practice.
You can divide "Wall Street" into two camps, buy-side and sell-side. Sell-side makes its money on commissions on trades. They publish a lot of analysis as a loss-leader to attract new trading business. The buy-side makes its money by owning stuff that appreciates in value. When you hear any sort of stock advice, first figure out which side it's coming from, then you can put it in context.
You're commenting on a piece from Barron's -a widely regarded financial newspaper since 1921- not something from a blogmill.
So the better question is this: why do any of the professional journalists covering finance and capital markets do it when they could be participants instead? Maybe they like reporting more. It's kind of like asking why aren't all astronomers astronauts?
Because participating the stock market isn't risk free.
Even if you are 100% correct (an impossibility) that a stock ought to be valued at a certain price, there is no guarantee that you can place your orders at the right time in order to make a profit on it minus transaction costs.
There's a common saying that goes loosely: 'the market can stay irrational longer than you can stay solvent'.
So given that likelihood, its not surprising that some choose to take a guaranteed payday by writing an article, instead of going forth and rolling the dice.
He's already shorted the market and is now executing the short-sell version of a pump-and-dump ... or maybe he's actually ethical and doesn't trade in the companies he analyzes. How would we know the difference?
> Instead of writing an opinion piece that will likely influence a few people, why doesn't this guy use his exemplary knowledge of Facebook and the stock market for profit? Why not keep this information to himself and short $fb or sell the information to an institutional investor?
Couldn't the same be said for anyone giving financial advice.
(Note, this isn't necessarily a defense of those who do. :)
First and foremost, eric: it is in his best interest to inform everyone about his opinion. If more follow, his short option can only bring more profits.
Second of all, being right in opinion about market is the best damn PR you can imagine. After all, its all about profits. If you "guessed" market good enough in the past, you more likely attract rich investors going forward.
So as much as this guy can short the stock for $5MM himself and keep his mouth shut, it is much smarter to short it for the same amount, wait for others to join helping his position to grow, and if hes right on his bet, attract investors with $50MM in the future.
My guess is that his "knowledge" is worth more as an article that he got paid $25 for writing than it is in actual practice.