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Monday, July 22, 2002, 9:38 a.m. The Dow Jones Industrial Average is down 284.52 points to 7734.74. I push on a glass door and enter into a small lobby. This is the downtown Charles Schwab office, located on the corner of Fifth Avenue and A Street. Sitting behind a circular counter is Warren, the receptionist. He looks to be in his mid-30s, with dark hair and a ruddy, clean-shaven face.

Set next to a bank of windows facing A Street are five chairs and an end table. Against the opposite wall, inside semi-private cubicles, are two computers. A man stands in front of each computer, or, more precisely, crouches in front of each computer. Two keyboards click-click-click as the pair retrieves stock quotes. Sometimes in unison, sometimes alternating, the men exhale an “Oh” or an “Ah,” followed by another gush of keyboard clicks.

“How long have you been in the market?”

“About ten years.” Speaking is Jeff Spreter, 23, five foot ten, 175 pounds, with recently trimmed brown hair, dressed in a white cotton T-shirt and jeans.

“Did you see this coming?” “This” being the recent 2500-point drop in the Dow.

“I kind of saw it falling apart, but not to this extent.”

Spreter lives in Coronado and graduated from San Diego State this year. “How much money have you lost?” Might as well get right to it.

“Probably 15 [thousand dollars].” Spreter does not flinch.

Mere collateral damage. “Do you ever think about what you might have done with that money?”

“Not really. It was paper money — it really didn’t exist.”

Spreter tells me he’s studying for law school. I flee from the topic. “Have you changed your plans about vacations or purchases?”

“Not really.”

“Was there one particular stock that trashed you more than others?”

Spreter laughs. “Oh, yeah, Enron and Global Crossing.” Now we both laugh. “I bought them at $8…”

Enron is selling for 9 cents today, down from $90.75. Global Crossing is bid 5 cents, down from $64.25. “Have you ever taken classes about the stock market?”

“Yeah, I’m a finance major. I just graduated.”

Okay, here we are: free, qualified advice. “What’s your take? How long is this slide going to last?”

“There’s psychological support, maybe, at 7500, 6800.”

I do not feel comforted. “How much money do you have in the market today?”

“About $20,000.”

“So, being young, you’re not worried?”

“I make $400 a year on GE dividends, so I’m not too worried.”

I hate young people. “Where would the market have to go before you started to sweat?”

“Oh, 6500, 6800. That would be ugly.”

It’s 9:58 a.m. and the Dow is down 232 points.

A short — five-foot, six-inch, say — 35-year-old man with curly red hair, horn-rimmed glasses, and an expression of eternal displeasure, is huffing and puffing in front of a computer monitor. He makes a loud grunt, throws up his hands, and stomps out the front door.

I catch up, introduce myself, and ask, “How long have you been in the market?”

The man answers using a stage whisper, so no one can overhear, yet everyone will understand he is saying something important. “Twelve years.”

“Did you see this coming?”


“Have you been selling short and making money?”

The short guy nods his head, looks over his shoulder to see if anyone is coming out of the Schwab office. I figure the guy for a short seller. Typically, a short seller borrows, say, 100 shares of Microsoft from his broker, betting that Microsoft will drop, let’s say, $10. He then sells those shares on the open market. Let’s say Microsoft cooperates and drops $10. Then the short seller buys 100 shares on the open market and uses them to replace the stock he borrowed from the broker. He pockets the difference between the price at which he sold and the price at which he bought, minus commissions, interest, and every other fee the broker can dream up.

Short selling is one of those legal but culturally disapproved of activities, like selling tobacco to retarded, pregnant teenage girls. You’ll never see a newspaper headline scream, “Dow Down 500 Points, Great Day for Short Sellers.” When the market is going up, you’ll never see interviews with short sellers who have lost their homes and life savings. There is a cultural bias, one pushed hard by the stock market–industrial complex, to root for the home team, home team being defined as a stock market going up.

But if you believe, and a lot of people do, that the stock market is casino gambling all the way down to the fat house edge, then being a short seller is just another way to play the game. Here’s the weird part: even knowing this, short sellers, in the backs of their minds, believe they’re doing something wrong. And so, short sellers, like gamblers everywhere, speak in whispers and look over their shoulders. In fact, short sellers, as a rule, look like this fellow, they look like they’re doing something illegal.

I say softly, so as not to ruffle delicate psyche feathers, “You’ve been selling short. You must be having a good time?”

“I’m having a good time.”

I detect not a single nuance of pleasure in his voice. “When did you recognize that the fall was coming?”

“About two years ago.”

“You’ve been selling short this whole time?”


Again, not a flicker of satisfaction in his voice. “Can you give me a hazy figure of your winnings? Have you made $1000 or $100,000?”

“I don’t think that’s relevant.”

“What is more relevant?” The short, short seller’s face freezes in an expression of outrage. No gambler will tell the truth about his winnings or losings. Indeed, it is a terrible breach of etiquette to solicit personal information. I hurry forward. “I take it you don’t worry about the stock market?”

“Not at all.”

“Do you worry it might go up?”

“No, I’m in cash now.”

I should mention that short sellers tend to be smart, which doesn’t mean they can predict the future better than anyone else, only that they can talk about the future better than most. We’ll come back to the short seller after a while.

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