What if I was short?

What if? Would I have had made money?

In my short span of being actively involved in the equity markets, my biggest influence has been my father. After he passed away, I have had the good fortune of meeting a lot of fantastic people in the investing community - people who have made millions, if not billions and have astonishingly high degree of humility.

I have also had the privilege to know a lot of people, people who are really really smart - who have always been bears and made money by going short.

Now, fundamentally if you really think about the odds of making money if you go short are astronomically low - in fact, more often than not it is really tough to short.

Here's why.

You see, when you short something, the maximum outcome you can possibly achieve is 100% - that too if you are very very lucky, there is a high chance that you cut your short once you reach your desired level - 10%? 20%? etc.

Whereas, when you go long, you have the whole universe waiting to be captured. I am not saying you will have a 10x outcome all the time, maybe you lose money there too, but at a basic fundamental level - your upside is open.

Why am I talking about this now?

Well, when you see stocks / indices correct 15-20% from peak levels, it is very natural to have this thought - What if I was short?

As much as this is hindsight bias, it is extremely difficult to have played the odds on a short and made meaningful money.

Speculation is a necessary evil in Capitalism. In the short term markets tend to behave like voting machines, but in the long term they are weighing machines - weighing machines that weigh earnings growth and valuations. Everything else is just noise.