Short selling Tuesday, February 23, 2021
It's a valuable strategic tool that allows you to profit on weak companies as well as strong ones, and in bad markets as well as good ones. But there is a caveat. You really have to understand what you're doing because, what you're betting against is a company that, quite often, is literally fighting for its survival. To maximise profits you need to get in when skies are blue, but then you need the storm clouds to arrive fairly quickly. Itís not easy. If you have any character flaws, you'll find them when you start short selling. - Keith Fitz-Gerald

I am not genetically engineered for shorting. The mania of markets can last quite a long time, and when you take into account the collateral needed, it doesnít appeal to me. - Bruce Berkowitz

When you are long on a stock, as it goes down in price, the position becomes a smaller portion of your portfolio. In shorting, it is the other way around: if the short goes against you, it is going to become a larger portion of your portfolio. When you short a stock, your loss potential is infinite; the maximum you can gain is double your value. So why will you take a bet where the maximum upside is a double and the maximum downside bankruptcy? - Monish Pabrai

Itís ruined a lot of people. Youíll see way more stocks that are dramatically overvalued than dramatically undervalued. Itís 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 itís not. A bubble plays on human nature. Nobody knows when itís going to pop, or how high it will go before it pops. - Warren Buffett
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