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Matt Levine has another article that does a great job of summing up short sellers [1] (see "Short selling, etc."). I used to work on a product that tracked sho

Matt Levine has another article that does a great job of summing up short sellers [1] (see "Short selling, etc."). I used to work on a product that tracked short sellers, so I had to read a lot of press releases and interviews and etc. from short sellers. I definitely agree with Matt Levine's summary here: > "One thing I will say for short sellers is that many of them really do believe their (standard, correct) claims about their role in financial markets: that they make markets more efficient, deflate bubbles, root out fraud and delusion, and generally make the world better with their unpopular and negative activity. They see it as a noble but misunderstood calling." And in quite a few cases, they're not wrong - I mean, Jim Chanos is probably most well-known for his short position in Enron. Say what you want about Bill Ackman, but Herbalife does kinda seem like a pyramid scheme. It's really interesting, and while the financial benefits are obviously there it does seem like quite a few of them really just enjoy calling bullshit and exposing people/corporations for it. I don't doubt they would probably also do really well as investigative journalists. 1: https://www.bloomberg.com/view/articles/2018-09-12/banks-do-the-trades-they-want-to-do https://www.bloomberg.com/view/articles/2018-09-12/banks-do-...

soneca 8y ago
The episode "Drug Short" [0] of Netflix's show "Dirty Money" paints a very heroic and society-benefiting (is that a word?) picture of short-sellers, in particular Fahmi Quadir. Well, I bought it! :) I was rooting for her during the episode. [0] https://www.imdb.com/title/tt7909184/?ref_=ttep_ep3 https://www.imdb.com/title/tt7909184/?ref_=ttep_ep3 [1] https://www.forbes.com/profile/fahmi-quadir/ https://www.forbes.com/profile/fahmi-quadir/
AnthonyMouse 8y ago
> they make markets more efficient, deflate bubbles, root out fraud and delusion, and generally make the world better with their unpopular and negative activity. This is true when they're shorting Enron or some other fraudulent entity. The issue is that you can short any high risk high reward play and make money if they fail. But then enough shorting can cause them to fail, because it makes it more difficult to raise money by selling new shares or using shares as collateral. And causing a large undertaking to fail when it otherwise wouldn't have is obviously not efficient. It also increases volatility because on one side the existence of the shorts makes the company more likely to fail, but if the company succeeds anyway or even just stays the course then there could be a "short squeeze" as the shorts have to buy back the shares they owe when no one is really interested in selling, so the share price skyrockets. It's not exactly a moderating influence.
- bb2018 8y ago
  Could you provide an example where this was the case? I'm not familiar with any companies with a sound business model that were hurt by shorts.
  - AnthonyMouse 8y ago
    Choose any company that was shorted and nearly succeeded but didn't. Are you questioning the mechanism by which it operates? If you raise borrowing costs for a company it hurts them and the ones already at the margin may fold.
    - freddie_mercury 8y ago
      So you can't provide a single example of a company whose downfall was due to shorts? If it was that common, seems like it would have been easy for you to just list a few dozen examples instead of handwave it away.
      - AnthonyMouse 8y ago
        > So you can't provide a single example of a company whose downfall was due to shorts? How is someone supposed to prove that in a specific case? It would be the case for a company that failed by a specific margin whose total borrowing costs were increased by more than that margin. Which requires speculating what their share price would have been in the alternative, calculating the resulting effect on their contemporary borrowing cost (which data is available where?), then evaluating their entire business to determine how much additional capital they would have needed to survive. It would take hours to calculate and be subject to unlimited debate about the reasons and margins by which they failed. But if you really want an example based on pure speculation, Kodak. They made their share of mistakes but if it had been easier for them to raise funding to compete in digital markets once they changed course they might not have ended in bankruptcy. And I still haven't heard any argument as to the flaw in the general principle.
        8y ago
liftbigweights 8y ago
Another levine article and another top comment praising him. There seems to be odd pattern with certain types of articles. > They see it as a noble but misunderstood calling. No. That's what they claim. That's the PR that short sellers sell. Shorts like the longs love money and are in it for the money. Nothing noble or sinister. Nothing good or bad. Just money. And that's what stock markets should be. > Say what you want about Bill Ackman, but Herbalife does kinda seem like a pyramid scheme. Too bad Icahn and others with a larger bank accounts believed otherwise. > I don't doubt they would probably also do really well as investigative journalists. Almost every short seller loses money. Ackman lost money on his HLF short.

soneca 8y ago

The episode "Drug Short" [0] of Netflix's show "Dirty Money" paints a very heroic and society-benefiting (is that a word?) picture of short-sellers, in particular Fahmi Quadir. Well, I bought it! :) I was rooting for her during the episode. [0] https://www.imdb.com/title/tt7909184/?ref_=ttep_ep3 https://www.imdb.com/title/tt7909184/?ref_=ttep_ep3 [1] https://www.forbes.com/profile/fahmi-quadir/ https://www.forbes.com/profile/fahmi-quadir/

AnthonyMouse 8y ago

> they make markets more efficient, deflate bubbles, root out fraud and delusion, and generally make the world better with their unpopular and negative activity. This is true when they're shorting Enron or some other fraudulent entity. The issue is that you can short any high risk high reward play and make money if they fail. But then enough shorting can cause them to fail, because it makes it more difficult to raise money by selling new shares or using shares as collateral. And causing a large undertaking to fail when it otherwise wouldn't have is obviously not efficient. It also increases volatility because on one side the existence of the shorts makes the company more likely to fail, but if the company succeeds anyway or even just stays the course then there could be a "short squeeze" as the shorts have to buy back the shares they owe when no one is really interested in selling, so the share price skyrockets. It's not exactly a moderating influence.

bb2018 8y ago
Could you provide an example where this was the case? I'm not familiar with any companies with a sound business model that were hurt by shorts.
- AnthonyMouse 8y ago
  Choose any company that was shorted and nearly succeeded but didn't. Are you questioning the mechanism by which it operates? If you raise borrowing costs for a company it hurts them and the ones already at the margin may fold.
  - freddie_mercury 8y ago
    So you can't provide a single example of a company whose downfall was due to shorts? If it was that common, seems like it would have been easy for you to just list a few dozen examples instead of handwave it away.
    - AnthonyMouse 8y ago
      > So you can't provide a single example of a company whose downfall was due to shorts? How is someone supposed to prove that in a specific case? It would be the case for a company that failed by a specific margin whose total borrowing costs were increased by more than that margin. Which requires speculating what their share price would have been in the alternative, calculating the resulting effect on their contemporary borrowing cost (which data is available where?), then evaluating their entire business to determine how much additional capital they would have needed to survive. It would take hours to calculate and be subject to unlimited debate about the reasons and margins by which they failed. But if you really want an example based on pure speculation, Kodak. They made their share of mistakes but if it had been easier for them to raise funding to compete in digital markets once they changed course they might not have ended in bankruptcy. And I still haven't heard any argument as to the flaw in the general principle.
      - 8y ago

liftbigweights 8y ago

Another levine article and another top comment praising him. There seems to be odd pattern with certain types of articles. > They see it as a noble but misunderstood calling. No. That's what they claim. That's the PR that short sellers sell. Shorts like the longs love money and are in it for the money. Nothing noble or sinister. Nothing good or bad. Just money. And that's what stock markets should be. > Say what you want about Bill Ackman, but Herbalife does kinda seem like a pyramid scheme. Too bad Icahn and others with a larger bank accounts believed otherwise. > I don't doubt they would probably also do really well as investigative journalists. Almost every short seller loses money. Ackman lost money on his HLF short.