1/ Short Selling 101

With the markets continuing to rally, there has been more talk of “shorting” or “short selling” stocks.

But what does that mean and how does it work?

Here’s a quick educational primer: Short Selling 101

2/ When you believe a stock is going to rise in value, you are said to be “long” the stock (“bullish”). When you believe a stock is going to decline in value, you are said to be “short” the stock (“bearish”).

Short selling is simply how you bet on the decline in value.
3/ Imagine you read that Colombia is experiencing a very wet Summer.

You believe this will lead to a huge coffee harvest, flooding the market with coffee and driving down the price. You want to profit from this.

So you borrow a bag of coffee from Jimmy, your neighbor.
4/ You sell the bag of coffee to Paul, your other neighbor, for $20, the price of the bag at your market.

You now have $20 but you owe Jimmy a bag of coffee (you borrowed it, after all).

One month later, the price of coffee drops 50%. You buy a bag at the local store for $10.
5/ You walk over to Jimmy’s house, hand him the new bag of coffee, and give him $1 as interest on the borrowed bag.

So you sold a borrowed bag for $20 and then bought it back and returned it for $11 ($10 plus $1 interest).

You’ve made $9 profit on your coffee “short” position!
6/ Of course, if you had been wrong and the price of coffee had risen, you still would have had to “cover” your short by buying a bag and returning it to Jimmy. You would have lost money.

Because the price can rise infinitely (in theory), losses from short selling are uncapped.
7/ So this is a quick primer on the topic - Short Selling 101. I hope it was helpful!

Disclaimer: Only experienced traders and investors should think about short selling as a strategy. Given the uncapped losses, it is inherently a more risky strategy than going long.

More from Sahil Bloom

THREAD: With #silversqueeze trending on Twitter, it appears that this week's market spectacle may well be in the silver market.

A perfect moment for a thread on the Hunt Brothers and their alleged attempt to corner the silver market...


1/ First, let's set the stage.

The Hunt Brothers - Nelson Bunker Hunt, William Herbert Hunt, and Lamar Hunt - were the sons of Texas tycoon H.L. Hunt.

H.L. Hunt had amassed a billion-dollar fortune in the oil industry.

He died in 1974 and left that fortune to his family.


2/ After H.L.'s passing, the Hunt Brothers had taken over the family holdings and successfully managed to expand the Hunt empire.

By the late 1970s, the family's fortune was estimated to be ~$5 billion.

In the financial world, the Hunt name was as good as gold (or silver!).


3/ But the 1970s were a turbulent time in America.

Following the oil crisis of the early 1970s, the U.S. had entered a period of stagflation - a dire macroeconomic condition characterized by high inflation, low growth, and high unemployment.


4/ The Hunt Brothers - particularly Nelson Bunker and William Herbert - believed that the inflationary environment would persist and destroy the value of their family's holdings.

To hedge this risk, they turned to silver.

They began buying the metal at ~$3 per ounce in 1973.

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We know that elite institutions like the one Flier was in (partial) charge of rely on irrelevant status markers like private school education, whiteness, legacy, and ability to charm an old white guy at an interview.

Harvard's discriminatory policies are becoming increasingly well known, across the political spectrum (see, e.g., the recent lawsuit on discrimination against East Asian applications.)

It's refreshing to hear a senior administrator admits to personally opposing policies that attempt to remedy these basic flaws. These are flaws that harm his institution's ability to do cutting-edge research and to serve the public.

Harvard is being eclipsed by institutions that have different ideas about how to run a 21st Century institution. Stanford, for one; the UC system; the "public Ivys".
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