Replies to post #163432 on DD Support Board and Research Team

[bar1080]

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

[bar1080]

"C Munger: "It's dangerous to short stocks."

W. Buffett: "Charlie and I have agreed on around 100 stocks over the years that we thought were shorts or promotions. Had we acted on them, we might have lost all of our money, every though we were right just about every time. A bubble plays on human nature. Nobody knows when it's going to pop, or how high it will go before it pops.

A.W. Jones, which had a long-short model, developed the best-known hedge fund in the late 1950s and early 1960s. They were market neutral, but didn't stick with it. Something went wrong with A.W. Jones. A very high percentage of its spin-off funds bit the dust. There were suicides and people lost their fortunes and had to drive cabs.

Ben Graham didn't find shorting particularly successful. Quite a high percentage of his paired investments worked, but he lost a lot on the few he lost on.

I had a harrowing experience shorting a stock in 1954. I wouldn't have been wrong over 10 years, but I was very wrong after 10 weeks, which was the relevant period. My net worth was evaporating.

Shorting is just tough. You must bet small. You can't short the whole company. It takes just one to kill you. As it rises, it consumes more and more money."

Source: BRK Annual Meeting 2002 Tilson Notes
URL:
Time: April 2002

[swingingRichard]

I gave older daughter bad advice some years back to short Facebook and buy Goldman. How wrong was I

Not wrong at all based on the company biz. Very wrong based on the stupidity of the uneducated masses.

I looked at the GOOG IPO and said, fuc4 that. $80 is way too much for a company that has no product.