Some of these traders apparently believe they can set off another "short squeeze" as they did with GameStop Corp. shares last month. In a short squeeze, rising prices force short sellers, who have bet against an asset, into buying to cover their losses. That, in turn, drives the price up further.

It isn't clear, however, that hedge funds, big banks and other big institutions are short selling large quantities of silver.

Combined with January's buying frenzy in stocks widely favored by short sellers, this seems to be the latest chapter in a swelling narrative about the evils of shorting.

As Tesla Inc. Chief Executive Elon Musk tweeted last week:

Why do people hate short selling, and short sellers, so much? What drives them to spew profanities and death threats at short sellers and even to order dozens of pizzas to be delivered to one short's home after midnight to wake him up in the wee hours of the morning?

Sure, short sellers root for the prices of the assets they're betting against to go down. But short sellers also bring better hygiene to the financial markets by spotting and attacking companies with faulty business models, bad management or fishy accounting.

Yet demonizing them is as old as short selling itself.

In 17th century Holland, shorting was viewed as unfair, because for a short seller to gain, someone else must lose. Put another way, a short seller makes a fortune from other people's misfortune. That, the Dutch believed, created an incentive for short sellers to spread rumors or lies to trash a company's stock. No wonder commentators at the time often argued that short-selling was anti-Christian. That's the same reason many today regard it as un-American.

Trading in shares of the Dutch East India Co. began in Amsterdam in 1602, and by 1609 investors had already begged the government to ban shorting, which they called a "dirty scheme." One of their complaints was that the number of shares sold far exceeded the number of shares outstanding -- essentially identical to the recent outrage over the volume of short selling in GameStop and other stocks. Such prohibitions on short-selling came and went repeatedly in the 17th century.

As one 17th century critic complained: "The seller, so to speak, sells nothing but wind and the buyer receives only wind."

It's no great leap from trading wind to breaking wind, so puns on flatulence and excrement were a common way to mock short sellers.

Here's a porcelain plate that was made in China and exported to the Netherlands, probably in the late 1720s. It shows a harlequin clown squatting uncomfortably as he dances on what could be a gameboard. This plate was part of a large set, all with designs that mocked wind trading. 

Because The Wall Street Journal is a family publication, I will translate the wording on the plate as "Poop Action in Wind Trading." (Actien, in Dutch, denoted both "shares" and "action.")

Short sellers were a particular target for the public's wrath and mockery after 1720, when the first global stock-trading bubble burst. After all, the short sellers had been right to bet against such overvalued stocks as the South Sea Co., the Mississippi Co. and the West India Co.

Nobody likes hearing "I told you so."

In Britain, too, short sellers were reviled. In the aftermath of the South Sea Bubble, the law known as Sir John Barnard's Act was passed in 1733 to regulate stock trading. It included a provision intended to ban short selling — which, in the end, barely deterred it.

On Apr. 10, 1792, before the New York Stock Exchange was even formally established, the New York state legislature tried to prohibit short selling by demanding that any seller of a stock must "be in actual possession of the certificate":

It didn't work. Neither did a Pennsylvania law, enacted in 1841, that made short selling a misdemeanor punishable by a minimum fine of $100 (more than $3,000 in today's money). In the 1880s and 1890s, Illinois, Massachusetts, Missouri and South Carolina were among the numerous other states that attempted to eradicate short selling, economist Henry Crosby Emery wrote in 1896.

Those efforts didn't work either.

There's one sure way to eliminate short selling for good: eliminate overvalued assets. Unfortunately, to do that, you would have to change human nature first.

Be well and invest well,

Jason

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Here are some of the best things I found over the past week outside The Wall Street Journal:

• Blogger Packy McCormick with one of the sharpest takes I've seen on GameStop, WallStreetBets and Robinhood (includes some cusswords)
• Blogger Dave Nadig with a great long read on the same topic, touching on market plumbing, gamification and momentum feeding on itself
• A brief modern history of short squeezes (and how they tend to resolve) by investor Ben Mackovak
• The WallStreetBets effort to beat big hedge funds earned at least $100 million in a week for this big hedge fund, reckons analyst Eric Balchunas
• It's okay to be bored and even confused while investing, says Morningstar's Jeff Ptak
• A compilation of Sequoia Fund annual reports from 1974-82, when it was run by the great Bill Ruane and Rick Cunniff (h/t Joe Koster) 
• At today's low yields, can bonds still hedge the risks of stocks and other volatile assets? Investment firm D.E. Shaw looks into it (h/t Phil Huber)

Here are some of the best things I found recently in The Wall Street Journal:

• Meet Keith Gill, the guy who unleashed WallStreetBets on GameStop and almost broke the market, by Julia Verlaine and Gunjan Banerji
• Maybe Keith Gill's fiery intensity comes from nearly breaking the 4-minute mile as a runner, by Julia, Gunjan, Josh Robinson and Ben Cohen
• The founder of WallStreetBets, looking at the tone and achievements of the movement, has some regrets, shows Akane Otani
• Apollo Global Management CEO Leon Black will step down after review of his ties to disgraced financier Jeffrey Epstein, reports Miriam Gottfried
• During the pandemic, nobody wants to handle cash. Harriet Torry explores whether that is likely to last
• The remarkable physics of how dogs shake themselves dry, by contributor Helen Czerski
• Brace yourselves, pizza lovers: Detroit-style pie is a thing, explain Mike Colias and Annie Gasparro

“I can’t tell you how to get rich quickly. I can only tell you how to get poor quickly: by trying to get rich quickly.”

— André Kostolany