It’s a lonely life for a short-seller, says Bill Ackman.
He’s just one of 17 short-sellers in a sea of 8,431 hedge funds, according to Hedge Fund Research. And few are making money during this six-year-old bull market. Take Ackman’s billion-dollar bet against Herbalife. He’s still waiting for that bet to pan out, reports the New York Times. Even James Chanos, the king short-seller who outed Enron, is adding a fund to go long stocks.
Many people hate that they are betting on companies to lose. But short sellers say they’re an important part of the markets. Like Chanos, they can raise necessary alarms. Write the Times:
“People often don’t recognize the importance of short-selling in identifying fraud, deflating bubbles and being the buyers of last resort when stocks fall,” said Mr. Ackman, who for more than two years has publicly argued that the vitamin supplements company Herbalife is a pyramid scheme.
Long positions by hedge funds have reached a pre-crisis high as investors withdrew more than $1.3 billion from short-biased funds. But sooner rather than later, we suspect short sellers will have their rainy days and Eeyore will be satisfied. Until then:
“As one famous banker once said,” Mr. Chanos recalled, referring to a now famous 2007 comment from Charles O. Prince, then the executive of Citigroup, “it’s hard to stop dancing while the music is playing.”
Photo: JD Hancock via Flickr.