Shorting is not easy. Book#36

Having learned about David Einhorn and his success I had high expectations for this book Fooling Some of the People All of the Time: A Long Short (and Now Complete) Story. So I got to it in mid 2015.

I didn’t know he was so much into shorting things but what I learned here is that you really need a tough skin to succeed in this game. A few years ago Einhorn shorted an overpriced and fraudulent company called Allied. But what he quickly learned is that, even if you tell the truth, the system is not necessarily ready to hear it.

Einhorn has clearly done very well shorting companies. But if shorting a fraudulent company leads to 5+ years of stress, headaches and thousands of hours of your time devoted to it, then is the return really worth it? I had the same feeling when reading the book Confidence Game: How Hedge Fund Manager Bill Ackman Called Wall Street’s Bluff on MBIA, but back then Bill Ackman played with CDS and the risk reward at its max was 600:1. I guess that these kind of odds make the pain associated with the trade a bit more bearable.

Michael Lewis, also wrote about fraud, wrong incentives, too big to fail, walls street’s greed, and the exaggerated power of rating agencies. I personaly found that his book “The Big Short” was probably easier to read. But like other reviewers have said before me, I understand why David Einhorn wrote this. He sat on a loosing position for more than 5 years. He was exasperated by the abuse he got for it. He got vindicated in the end. This book was his catharsis.

My purpose in life is independence, fulfilment and a better understanding of how the world works. Like Charlie Munger, I believe in the discipline of mastering the best that other people have ever figured out. And like Sir Isaac Newton, I believe in our ability to see further than any others before us by acknowledging that we are standing on the shoulders of giants. With this blog I hope to keep track of my learning about investing, business, decision making, entrepreneurship and self development while inspiring others to do the same. For the moment the format of this blog will be one post for each book that has influenced me, but I expect it to evolve over time. Join my Journey. John.