Short Selling America

I don’t know whether I should start saying the disclaimer first, that I am not a financial expert or advisor or linked to any securities and exchanges. The following scenarios are just for illustration.

I was going to talk about the title of this Note itself.

Am I referring to the phenomenon of “Short Sales” in America?

Am I saying that there is a process of selling America short?

For the uninitiated and not-so-stock savvy citizens, first of all I will try to educate you about short selling.

Scenario 1.

You have money, you want to buy some company stocks.

Let us take Toyota Motor Corp for example.

This may be easy as I came through this myself. Many years ago, I was putting my retirement contributions (called IRA) from my salary in a company which manages the employees’ IRAs. It was just growing slowly- may be 1% per year. So, that is not a great growth right?

I decided to buy a “good performing” company’s share and felt that Toyota is a great company.

Went and bought 20 shares. After two months, there was a recall due to unintended acceleration of Toyota cars and the stock price went down. That means my retirement contribution went down in money value. If I had put 1000, it is now 500. Lost money right there.

Scenario 2.

It was in September 2000. Exactly one year before the “9-11”

I learned the tricks of “day trading”. I had a small computer, and a dial up connection with AOL.

I signed up with a stock trading company called Datek which allowed me to sell and buy stocks with low commission from my computer in real time with streaming quotes. I usually come home from work for lunch and then sit in front of my computer, check stocks and see new companies listed in NASDAQ and place the order. I can see the orders executed in real time. I had 5000 in hand, bought and sold stocks. Life was fun.

At that time, everyone talked about stocks. You go to work, or birthday parties, it is all stock market talk.

Then I heard about the short sales.

I did not know what it was. A friend told me, “You don’t just buy, you have to sell”.

I said, “I don’t want to sell at a loss”.

He said, “I mean you have to sell Short”.

 “You mean stock?”

He said, (rather angrily as if I don’t know jack) “Shorting means you sell the stock before owning the stock”.

“Wow… How can they allow that? Is it legal?”

Then he told me about the Short sales.

You assume a stock to be reduced in value, or bet on price going down.

So basically you sell other people’s stock at high price and buy the stock back as it goes down in value.

Example:

Company  A stock price today is 120, you short sell 100 shares at 120 , meaning that you get the money(borrowed stock) 12,000. Next day the stock goes down in price to 110. You then buy it paying 11,000 and gain 1000 bucks profit minus commission.

The rest was history.

Till… the Stock market bubble burst.

Then came 911 to enhance the misery. Everyone lost money.

Fast forward to 2016 in the USA.

There was a guy who used few words to express his thoughts through a social media App called Twitter.

He had many followers. No one took him seriously.

But things changed soon.

In 2017, he became the President of the most powerful country.

He tweeted his emotions about everything. People, incidents and companies.

He heard that Toyota is opening factory in Mexico. In order to appease his electorate, he tweeted that he is going to impose taxes for Toyota cars imported from outside, unless they start the factories in the USA.

An unexpected tweet, but not too unexpected outcome.

Toyota price went down in next day’s trading.

This was just beginning.

Then he tweeted that Delta Airlines to blame for the problems in air travel.

Delta stock price went down.

If you had paid attention to the beginning of this note you understand the new horizon.

If you follow the companies president tweets (treats) badly about, you can sell them short.

-          And… make a profit from their misery. But that has to be fast, before the word gets out.

      That is where the smart tech guys come in.

One guy made a Bot, a self-executing program which will analyze companies mentioned in the tweets and depending upon the unfavorable tweet, it will run algorithms to decide which company stock needs to sell short. 

They call it Trump Dump Bot or something.

And they have made money.

As the President opens his mouth and air his malice, money is being made.

I know lot of people out there watching eagerly to make a profit as the president is selling America short.