This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Kass: In Defense of Short Selling

Other times (more often than the above condition), individual securities or sectors are embraced by market participants and levitated to unimaginable valuations, which also creates an opportunity on the short side.

Mainly, it seems to me that opportunities to challenge biases are much more pronounced and more easily identifiable on the short side, no matter what the market conditions are, mainly because those searching for such weaknesses are substantially in the minority. And few are comfortable with the short side, which makes for an inefficient market.

Investors want to look on the bright side. Individual and institutional investors and corporate managements are invariably biased and bullish. How else to explain that nearly every money manager interviewed in the media is constructive? As well, consider whether you have ever witnessed a media interview with a corporate executive who was bearish on the future of his company. In my numerous appearances on CNBC, I have rarely (if ever) encountered such an animal. When is the last time you saw a downbeat CEO on Jim Cramer's "Mad Money?"

Warren Buffett put this more eloquently in his description of corporate truth telling in a letter to Berkshire Hathaway (BRK.A - Get Report)/ (BRK.B - Get Report) shareholders in the late 1980s. In explaining his absence of an interface with management, he wrote that "corporate managers lie like ministers of finance on the eve of devaluation."

As always, Buffett was ahead of the times.

That said, poor management, frauds and eroding company or industry trends always will be in fashion, regardless of market conditions. This occurs despite the appearance of short selling as a mug's game or as a losing proposition based on the headwind of longer-term positive historic trends in equity returns.

Finally, more than any time in history, it can be argued that the secular headwinds (e.g., fiscal imbalances, structural unemployment, debt-laden private and public sector balance sheets, etc.) to worldwide economic growth represent powerful gusts that challenge a smooth and self-sustaining trajectory of global economic growth.

These factors (and others) are likely to lead to a more tentative and inconsistent growth backdrop in which corporate managers will likely find it more difficult (than in the past) to navigate the currents.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Real Money
Try it NOW

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums


Chart of I:DJI
DOW 17,734.86 -63.63 -0.36%
S&P 500 2,084.41 -5.70 -0.27%
NASDAQ 5,112.0060 -15.5190 -0.30%

Our Tweets

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs