Slope of Hope Blog Posts

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Rich Man’s Panic (2 of 3)

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During these three-day weekends, I’ll sometimes lean on my Panic Prosperity and Progress book for an interesting morsel of content for my readers. Part 1 can be found here. Enjoy:

The key to this plan was to create a “short squeeze.” For those unacquainted with short-selling, it works like this: in regular stock investing, a person buys a stock at a given price with the hope that the price will rise and, in doing so, generate a profit. Thus the old adage, “Buy low, sell high.”

Conversely, a short-seller seeks to turn this goal on its head: “Sell high, buy low.” The pursuit of profit is the same, but the timing is reversed: a person sells a stock at a price he believes is high and, in the future, he hopes to buy the stock back at a lower price.

There are certain risks to shorting stocks, though, in contrast to standard long positions. If a person buys a stock, that stock is his forever. There is nothing that can be done to take it away, unless the company itself is purchased (which typically involves a premium and is an agreeable outcome to the shareholder in such a case).

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