Kass: Blame Game Is Dishonest

"There is a certain measure of the moralist in short sellers. As detectives on Wall Street, they enjoy revealing the emperor without his clothes."

-- Kathryn F. Staley, The Art of Short Selling

Perhaps, it is as one of the hedge fund industry's icons told me years ago, "The value of a large investment organization is greatly over-exaggerated." It might also be that the above examples of "dip buying" represented an error in judgment and/or intransigence on the part of these great investors. Or, perhaps their outsized losses (both in dollars and on a percentage basis) were simply a function of poor analysis and then denial.

Whatever the reason, I can only talk from my own experience. Above all, when I invest, I try to be honest with myself, I critically test others' views (and the market's prevailing bias), I weigh changing fundamentals, and I attempt to employ a rigorous loss discipline.

As I wrote earlier, there are several common threads in the commentary of the chastened investors in Fannie Mae, Freddie Mac, Ambac and MBIA -- and that list can be extended Citigroup (C Quote), Wachovia (WB Quote), Radian Group (RDN Quote), PMI Group (PMI Quote), MGIC Investment (MTG Quote) and other financial stocks held in the portfolios of the Dremans, Pzenas, Millers and Whitmans out there -- as a large amount of money has been lost in these stocks, and the short selling community has become their scapegoat.

"This vast right-wing conspiracy has been conspiring against my husband since the day he announced for President."

-- Hillary Clinton

From my perch, considering the depths of the current economic problems, to blame the substantial share price declines in financial stocks on a short-selling conspiracy is as silly as the above quote from Senator Clinton.

I run a hedge fund dedicated to short selling. My goal is to deliver absolute returns in any market or economic cycle. Sometimes I achieve success; sometimes I meet with failure. I and other dedicated short sellers represent a small minority (estimated at less than $5 billion) within a hedge fund universe that approaches $3 trillion in assets under management and a mutual fund industry that exceeds $10 trillion in size.