Who are shorting?
There are many types of people who might get into short selling for one reason or another. The personality types of those who like to ‘go short' on the market range from serious and logical to flamboyant and given to making grand gestures. Let us have a look at some case studies of genuine shorting speculators and investors.
Amanda: A student looking to practice
First up, we have a 22-year-old university student, Amanda Carstairs. Amanda had a little money left over from her student loan and was wondering if there was some way she could simultaneously do some good with it and make her little bit of money into a slightly bigger bit of money! In either case, she is here to learn about short selling.
Amanda, despite being a geography student with an interest in getting into teaching or research, went to an economics lecture that she saw advertised. While she was there, mingling with other students during the refreshments break, she overheard a discussion between the guest speakers and a couple of the lecturers. This eavesdropped conversation gave her the first inkling about investing, and gave her a solid starting point. She used the information learned to do some research and soon found a company that she was confident would lose some market share in the near future. That first attempt made her enough money to improve her comfort and free up some time for drawing, something she loves to do, in between loan payments, and whetted her appetite for more. Amanda is still learning about the stock markets, and unashamedly picks the brains of the tutor she met at the lecture: he also happens to play the market from time to time. Amanda would be the first to admit that she does not fully understand how the shorting market works, but she is slowly picking it up as she goes.
Favourite shorting broker: Skilling
Edward: A history teacher with pessimistic outlook
Teacher, Edward Bishop, is 46 and a little weary from all his years in the classroom. He is currently the head of the history department and is said to be tipped for the next available headship: but if it doesn't happen in the next five years, it probably won't happen at all. Should the headship not materialise, Edward – known as Ted – wants to be able to retire at that point. His ex-wife got him interested in the shorting market when she told him about the first ever short-sell market: 17th Century Dutch tulip merchants who pushed the prices up to incredible heights: the cost of a house for a single bloom! The lure of his specialist subject, history, and the chance to perhaps make a little money was strong. He investigated a little and then invested a little and made a moderate return on his investment. He tries to play the market with only his capital, saving at least 90% of his earnings for that potential retirement.
Dylan: No need to work for a living, but need some excitement
Dylan Blythe is 32-years-old and something of a trust-fund baby with enough money to his name that he never really needs to work for a living. However, challenged by his grandmother, he went off to South America to dig wells and build homes. While there, he saw cocoa plantations and became interested in the commodity, given its fascinating trail from bean all the way through to finished high-quality dark chocolate. Along the way, this introduced him to the stock market along with other foodstuffs – which tend to be volatile, and precious and semi-precious metals like silver and gold, which are not. At first, Dylan was tempted to buy low and sell high, but good and careful advice from market experts saw him get into the shorting side of the game, dealing mainly in said foodstuffs. In his spare time, Dylan likes to windsurf, feeling truly alive when it is just him and his board using the wind to fly over the water.
William: The computer developer that's doing swing trading
d) Next up, we have William Ieva, who is just 26-years-old and a freelance games developer. The realisation of a childhood dream he had cherished from the moment he was given his first games console as an over-excited nine-year-old. He has produced a couple of good games, and has a healthy level of investment from patrons which keeping him working and eating. William's aim is to double his personal profits within a year or two in order to design and produce his dream game without losing overall control of the project to the money-men. William's investments tend to follow the technology markets and he has made some finely calculated purchases that have seen him get well on the way to achieving his goals. He has a good eye for recognising technology that will become important, rather than a momentary fad. However, William is also aware that quite a few shares might be overvalued and he is continuously looking at swing trading and shorting various tech-related shares where the value cannot be justified.
Jim: The average guy, speculating in what he knows about
Every list of personalities must have an everyman, and the average guy on this list is Mr Jim Weekes, everybody's Mr Average. Jim is a lovely man, who works in an office putting together deals on bulk stationery purchases for multinational companies where the paperclips are bought by the hundreds of thousand. Unsurprisingly, Jim invests in office supplies making calculated guesses as to which technologies might be a slow burn, and which might hold promise initially, only to fizzle out like a damp squib later on. Jim is happy to play the long game, waiting months or years for his short investment to come to fruition. He tends to leave it a little late to get out of the trade, waiting for the downturn that indicates the peak (or trough, as it were) has been passed, but so far has not lost much by doing this thanks to his careful choices.
Kanesha: Looking for opportunities
Something of a surprise on this list and many more, Kanesha, aged just 23, came up the hard way but is very bright, well aware of the opportunities around her and is determined to be a success. She may be young, but she has been looking after herself for more than ten years. She has managed her image carefully, commodifying her appearance and curating her social media rigorously. She volunteers for several charities – many in order to help young women who find themselves in an otherwise uncaring world – and plans to donate sizable sums to these charities once she is able to offer them more than time and a pittance. She is the recent go-to face for a eco-friendly, welcoming brand of skin-care products that she is set on using to gain serious celebrity status – she chose the skin-care concern as her vehicle for its clean image and excellent potential. She sings a little, models, and has done some television talk-show work. She is extremely smart and pays close attention to products and services offered by celebs, investigating those she senses might be overdone, and shorting them to take advantage of their souffle-like collapse within months of their release. Kanesha plans to make her first million within the next three years, and is already well on her way.
Ben: Planning to invest some inherited money
The logical guy who always follows the smart trades, and wants to learn more about anything he gets interested in, Ben Armstrong is 53-years-old, but something of a newbie when it comes to the stock market. He recently inherited a decent sum from his parents when they passed away, just months apart. Always a sensible and measured man, he invested a little of the money in a few things that he had always wanted to try, including horse-riding and photography, investing in a decent camera and a few lessons on how to use it. When he is researching something new, he takes it very seriously, jotting down notes and practising until he is completely comfortable, whether it is a hobby, form of investment, or new task at work. The financial advisor he consulted when he gained his inheritance told him a little about the stock market, and Ben became interested in shorting. He did his homework, found four trades that he thought would go short and invested in them: winning all four – that time! He is not always that lucky, but ends up ahead more often than not, thanks to his painstaking research and careful consideration of each investment before he commits to it.
Marlene: The strategic thinker
Architect, Marlene Wilson, 46, is a strategic thinker, with a plan for everything. As a child she was told that she was too serious and to have a little fun now and then, an admission that she shrugs over. She has fun, she says, she enjoys rock climbing, always looking for a challenging face to tackle. Despite this risky hobby, Marlene says she actually plays things safe: she never climbs without full kit and a trusted buddy on the other end of the belay, and she never invests without a very good idea of what might play out on the market over the next few days, weeks or months. Sometimes just days, she might trade gold intraday, with good opportunities to go up both short term and over time, with a low spread.
Henry: The entrepreneur with some time over
Being an entrepreneur is a pretty wide label and covers everything from the invention of gadgets to the latest cyber product to the next must have clothing item. Henry Carlton has made and lost fortunes, chasing dreams that did not pan out, and gaining the rainbow not once but twice. Henry has lots of time to spare, still flying high on his latest success that got his name noted down by the people at Forbes, and he likes to use it to spend some of his equally plentiful cash. He tends to play using his gut instincts and personal preferences, a strategy that is not recommended for everyone! In truth, he usually loses – but once or twice has won big enough to keep on trying.
Jeanette: The activist nurse
Finally, a world away from the jet set world of easy money and flashy ideas, Jeanette Johnson is a nurse. Jeanette, aged 39, does not quite make enough money to get by comfortably, but cannot take on a second job due to the long tiring shifts and unpredictability of being on call. She discovered trading as a useful stopgap, using her trading to back up her personal belief systems. Jeanette is an activist for environmental matters, and manages to combine her trading with her passion, going short on fossil fuels, oil companies, and big pharma all of which she feels are letting the whole world down by monetising absolutely everything. By making some money going short on oil companies and long on environmentally friendly companies and green technologies Jeanette feels some satisfaction in putting her money where her mouth is: and also making a little while doing so, which she sees as a win-win. Of the successful investments she makes, she donates 20% of her earnings to worthwhile causes, saves half of the rest of the gain, and puts the remaining 40% into her household to enjoy little treats, days out and short trips as she pleases.
These are just some of the examples of the people who go short on the market. There are many others: stay-at-home parents, sole traders, postmen, and many more. Today, the stock market is for every adult who has a little cash to spare and an interest in seeing how commodity prices fluctuate. What are you waiting for?