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THE MARKET WHISPERER 23 9

Crises always provided the best
opportunities.

The History of Shorts

The first known incident of shorting is attributed to a Dutch trader named
Isaac Le Maire, who in 1609 sold “more shares than he owned” in VOC, a
Dutch company. By this act, he did something unique in the capital markets
of that time.

This deal also led to the first regulatory law in history prohibiting
execution of shorts for a brief period of two years. Since then and to date,
short sellers have drawn the ire and fire of regulators, politicians and the
general public. Short sellers were blamed for the infamous collapse of
the first-ever “public stock” company in history, the East India Company.
They were also blamed for the crash of the Dutch tulip market in the
seventeenth century, for the Great Crash of 1929, for the fall of the British
Pound in 1992 when George Soros, the world-famous Hungarian investor,
sold £10 billion and profited by billions overnight. Short sellers were also
blamed for the Dot-Com Crisis of 2000, and even for the Sub-Prime Crash
of 2008. Napoleon called short sellers “the enemy of the people,” President
Herbert Hoover denounced them, and FBI head J. Edgar Hoover opened an
investigation against them. That’s a lot of people opposed to short selling!

Short sellers have never been liked by either the public or legislators,
since they are known for profiting from other people’s losses. No one likes
to hear about financial success stories when he or she is on the losing
end, and everyone needs a scapegoat upon which to heap the woes of the
world. On the other hand, shorters, as they are known, gained the blessing
of famous investors such as Warren Buffet, who support their positive
influences on the capital market. Shorters can be credited with one simple
fact: when they find a bubble, they will do all they can to expose and