2094: Short Selling

2019-01-05T09:15:58Z

Mrspaceowl: grammar fix

{{comic
| number = 2094
| date = January 4, 2019
| title = Short Selling
| image = short_selling.png
| titletext = "I'm selling all my analogies at auction tomorrow, and that witch over there will give you 20 beans if you promise on pain of death to win them for her." "What if SEVERAL people promised witches they'd win, creating some kind of a ... squeeze? Gosh, you could make a lot of–" "Don't be silly! That probably never happens."
}}

==Explanation==
{{incomplete|Created by a SHORT WITCH. Please mention here why this explanation isn't complete. Do NOT delete this tag too soon.}}

{{w|Short (finance)|Shorting stocks}} (short selling stocks) is a stock market practice where someone takes a risk because they believe that a certain stock's price is going to drop. The risk-taker borrows stock to sell, believing that they will be able to buy the stock back later at a lower price and return it. If everything goes according to plan, the risk-taker will walk away with a profit. Of course, if things don't go according to plan, the risk-taker winds up losing money, because he has to buy back the stock for more than he sold it.

Cueball asks Ponytail to explain shorting stocks. Ponytail starts out with a fairy tale story that falls apart almost before she even starts.

Her story appears to begin by mixing up the story of {{w|Rapunzel|Rapunzel}} with {{w|Jack and the Beanstalk|Jack and the Beanstalk}}.

In one version of {{w|Rapunzel|Rapunzel}} a Father breaks into a witches garden to steal the Rapunzel plant for his pregnant wife. The Witch catches him and agrees to let him go and not punish him in exchange for the child.

In one version of the "{{w|Jack and the Beanstalk|Jack and the Beanstalk}}" fairy tale story, Jack sells a cow for magic beans. His mother, thinking the beans are fake, is angry with Jack. Jack plants the beans and a magic beanstalk grows up into the clouds. Jack climbs the beanstalk and explores the land above the clouds. He finds the home of a cruel giant and proceeds to steal from the giant. The giant discovers the theft and chases Jack back down the beanstalk. Jack reaches the bottom of the beanstalk first and cuts the beanstalk down. The giant falls to his death, and Jack uses his stolen wealth to take care of himself and his mother.

The combination of the two stories is similar to the story from the musical "{{w|Into the Woods|Into the Woods}}," in which a Father sneaks into the Witch's garden to steal vegetables, then trades his soon to be born child for the vegetables, but also steals beans in the process.

Ponytail's version starts with a father (not Jack) selling a child he hasn't had yet to a witch. Like short selling, the father is selling something he doesn't own. But unlike short selling, the father is selling something that doesn't exist yet. The child is sold for five magic beans, and the father thinks he will make a profit as he believes the child will only be worth two beans/love once born. The debt comes due, but the value of the child is now 200 beans/love.

The somewhat broken analogy breaks further when Ponytail says the father now is going to fight the witch instead of paying the witch with the child. There is no "fighting" if a short selling stock strategy fails. You simply lose money.

Our now definitely broken analogy breaks down even further (if possible) by sending the kid up the beanstalk to fight the giant - a giant that Ponytail says represents high interest rates. Interest rates have nothing to do with shorting stocks. (Technically they can, but the short seller would have / should have calculated that when determining if their investment strategy would work.)

Cueball comments that the analogy is rapidly losing its value to him. Ponytail fires back with the comment that he should have shorted her advice before asking for it, thus making a profit. The decreased helpfulness of her wisdom is analogous to the decreased value of a shorted stock price.

The title text is actually the most useful part of this comic when it comes to investment advice. The witch (the broker) is offering the father (short seller) 20 magic beans now if the father/short seller buys all of the analogies (stocks) later. However, multiple witches/stock brokers trick multiple people into this strategy. Since every father/seller now needs the same analogies/stocks, and multiple witches need the exact same complete set of analogies, a bidding war erupts and it's impossible to please all the witches. The "winner" pays a much higher price than expected (limiting how much of a win it really is). And the losers wind up either dead or enslaved (bankrupt).

==Transcript==
{{incomplete transcript|Do NOT delete this tag too soon.}}
:[Cueball and Ponytail are walking together, talking.]
:Cueball: I don't understand shorting stocks.
:Ponytail: It's like when you promise your firstborn to a witch for five magic beans.

:[Ponytail close up]
:Cueball (off-panel): Is that a common–
:Ponytail: She's a sucker, right? You know your awful kid will be worth one or two beans at ''best''.

:[Ponytail and Cueball stopped, facing each other]
:Ponytail: But then it turns out you ''love'' your kid, a love worth 200 beans! You can't afford that loss!
:Ponytail: There's only one way out:
:Ponytail: You gotta fight the witch.

:[Ponytail and Cueball stopped, facing each other]
:Ponytail: So you send your kid up the beanstalk to battle the giant, who represents interest rates.
:Cueball: This analogy is getting less helpful by the minute.
:Ponytail: If only you'd somehow shorted my wisdom before you asked.

{{comic discussion}}
[[Category:Comics featuring Cueball]]
[[Category:Comics featuring Ponytail]]

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2094: Short Selling