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Shorting ANYTHING is wrong absent inside info or

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bar1080   Monday, 12/09/19 11:15:14 AM
Re: integral post# 163432
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Shorting ANYTHING is wrong absent inside info or for well considered hedging purposes.

Here's Buffett's opinion of shorting"

Q. Warren, what do you think of short selling?

A. "It's an interesting item to study. It's ruined a lot of people. You can go broke doing it.

You'll see way more stocks that are dramatically overvalued than dramatically undervalued. It's common for promoters to cause a stock to become valued at 5-10 times its true value, but rare to find a stock trading at 10-20% of its true value. So you might think short selling is easy, but it's not. Often stocks are overvalued because there is a promoter or a crook behind it. They can often bootstrap into value by using the shares of their overvalued stock. For example, it it's worth $10 and is trading at $100, they might be able to build value to $50. Then, Wall Street says, "Hey! Look at all that value creation!" and the game goes on. [As a short seller,] you could run out of money before the promoter runs out of ideas."

Everything we've ever thought about shorting worked out eventually, but it's very painful. It's a whole lot easier to make money on the long side. You can't make big money shorting because the risk of big losses means you can't make big bets.

[Munger: "Being short and seeing a promoter take the stock up is very irritating. It's not worth it to have that much irritation in your life."]

We would never short anyway because we're too big.

Source: BRK Annual Meeting 2001 Tilson Notes
URL:
Time: April 2001


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