The Art of Short Selling (A Marketplace Book)

Rating:
Summary: A Skeptics guide to Fundamental Analysis
Review: I came across this book years ago in a bookstore, browsed through it, and put it away. Being caught up in the study of technical analysis at the time, I clearly wasn't ready at the time to find value (pun intended) in Staley's fundamental approach to the market. This time, however, I'm listening to her.

With a bit more experience, I can appreciate 3 of the many lessons _The Art of Short Selling_ teaches:

1) Fundamentals drive market action...eventually
2) It is often a costly mistake to short a stock simply because it apepars overvalued. A catalyst of some sort is needed to encourage massive selling.
3) Markets can ignore negative fundamentals for significantly extended periods of time--giving the astute trader ample time to sell at a profit, or even turn and sell short. Positive fundamentals are more rapidly incorporated into stock prices, but significant inefficiencies still exist on both sides of the market--long and short.

The author uses case histories of significant corporate failures from the 80's and early 90's in light of the publicly available info at that time, which clearly demonstrated the inivetable fall of Wall Street's institutional favorites.

Numerous fundamental techniques are discussed, such as tracking changes in inventory and receivables, as well as tricks companies play to make revenues and earnings appear better than they are.

Also interesting--a high short interest ratio in a stock is often a significant sign of potential trouble in a company. Do not let those analysts lead you to believe a high short interest ratio is always bullish. Check the fundamentals and make your own call.

Qualitative factors are also discussed, with specific examples on how a close reading of public financial data on one company would have lead you to a profitable short sale of another. This occurs frequently in the finance and insurance industries.

This book is especially important, because every book I've seen teaches which stocks to BUY on a fundamental basis. No book ever mentions what fundamental factors suggest you SELL. Even if you never sell short, this is profitable info.

Being a student of technical analysis, what struck me is the insight those skeptical shorts had about the companies mentioned. Clearly, they knew the eventual outcome in each specific instance.

Yet, despite being right, most of these guys lost millions by going strictly by fundamentals. Those who survived incorporated additional (ie. technical) factors, such as relative strength or momentum. As Keynes stated, "The market can remain irrational much longer than you can remain solvent."

It is clear to me that using both fundamental and technical analysis is the most efficient path to market profits.

Rating:
Summary: A Skeptics guide to Fundamental Analysis
Review: I came across this book years ago in a bookstore, browsed through it, and put it away. Being caught up in the study of technical analysis at the time, I clearly wasn't ready at the time to find value (pun intended) in Staley's fundamental approach to the market. This time, however, I'm listening to her.

With a bit more experience, I can appreciate 3 of the many lessons _The Art of Short Selling_ teaches:

1) Fundamentals drive market action...eventually
2) It is often a costly mistake to short a stock simply because it apepars overvalued. A catalyst of some sort is needed to encourage massive selling.
3) Markets can ignore negative fundamentals for significantly extended periods of time--giving the astute trader ample time to sell at a profit, or even turn and sell short. Positive fundamentals are more rapidly incorporated into stock prices, but significant inefficiencies still exist on both sides of the market--long and short.

The author uses case histories of significant corporate failures from the 80's and early 90's in light of the publicly available info at that time, which clearly demonstrated the inivetable fall of Wall Street's institutional favorites.

Numerous fundamental techniques are discussed, such as tracking changes in inventory and receivables, as well as tricks companies play to make revenues and earnings appear better than they are.

Also interesting--a high short interest ratio in a stock is often a significant sign of potential trouble in a company. Do not let those analysts lead you to believe a high short interest ratio is always bullish. Check the fundamentals and make your own call.

Qualitative factors are also discussed, with specific examples on how a close reading of public financial data on one company would have lead you to a profitable short sale of another. This occurs frequently in the finance and insurance industries.

This book is especially important, because every book I've seen teaches which stocks to BUY on a fundamental basis. No book ever mentions what fundamental factors suggest you SELL. Even if you never sell short, this is profitable info.

Being a student of technical analysis, what struck me is the insight those skeptical shorts had about the companies mentioned. Clearly, they knew the eventual outcome in each specific instance.

Yet, despite being right, most of these guys lost millions by going strictly by fundamentals. Those who survived incorporated additional (ie. technical) factors, such as relative strength or momentum. As Keynes stated, "The market can remain irrational much longer than you can remain solvent."

It is clear to me that using both fundamental and technical analysis is the most efficient path to market profits.

Rating:
Summary: who could forget mediavision
Review: I recommend this book for any new beginner. The main reason I say for beginners is that I have not seen another book that adequately describes the emotional forces of the general market concerning short selling. As any finance student can tell you. One of the best ways to learn about short selling is through particular case studies. Many people have criticized the author for this type of instruction because the book does not explain in detail everything the reader should know about each case. This book was defiantly worth it because I further researched each case explained in the book. This is what any investor should do in order to get the big picture when looking for possible shorts. Look up the past articles and company reports that were published concerning each case. Observing certain trends within the financial media and company managers was extremely helpful to recognize when case examples were just beginning to fall.

The real complaint about this book is that the author could easily have provided this information, especially for the price range of this book. I give it four stars simply because it is helpful to beginners and so few books cover this topic.

Rating:
Summary: Excellent teaching manual for identifying companies to short
Review: Staley presents a thorough examination of the process of selecting companies for shorting. While Joseph Walker's book, "SellingShort" gives us the nitty-gritty details of the shorting transaction, Staley gives us the reasons for going short in the first place. She covers in fair detail the nature of short sellers and why some are successful while others are not. The majority of the book is comprised of case studies, written in the folksy style one finds on Wall Street Week (TV show) or in books like "The Motley Fool". Unlike "The Motley Fool" this book presumes at least a basic understanding of accounting and knowledge of financial statements. My one criticism of the book is common to many others in this genre; that being nobody edits these books (or, if they do, it is by running the "Spell Check" function on the word processor). Sometimes the folksy banter and financial slang is so thick it gets confusing. Nonetheless, this book is a must read if you are considering becoming a short seller; if for no other reason that it may save you a great deal of heartache and financial loss by convincing you that shorting is not for you.

Rating:
Summary: She says it all
Review: The author,Kathryn F.Staley reads balance sheets and company reports for fun. In her book she tells you where, when and how to look for candidates for a profitable short sale. With emphasis on the perils of short selling Mrs. Staley clearly points out that this is not a field for the faint of heart. You need to have a knack for raw fear to qualify for the ecclectic world of profitable and very wealthy short sellers.

This book clearly is more than a starting point - it encourages you and sets you on track.

Rating:
Summary: disappointing,it is not helpful for short selling at all.
Review: This book is'nt introductuction and rationale to the technical approach.

Rating:
Summary: More suitable as an introduction than technical training
Review: This book offers an excellent introduction, explanation and overview of short selling as well as success stories. There is no doubt that short selling should be an integral part of any market participant's strategy. However, if you are looking for a reference explaining how to apply technical analysis to the identification of overvalued stocks, then this book falls short.

I cannot blame the author for heavily emphasizing the psychological aspect of short selling as too much enthusiasm, confidence and greed are mostly what drive up a stock's price to unreasonable valuations. Likewise, when the "castles in the air" disappear, the stock's price normally plummets and creates a very profitable opportunity for short sellers. It is critical to recognize when these stages are at their peaks and Ms. Staley does provide tell tale signs.

I think this book has something to offer all investors. Whether or not it is found to be helpful largely depends on the individuals investment strategy and what tools he relies upon.

Rating:
Summary: Sobering About The Art, Subtle Analysis Tips Worthwhile...
Review: This book's author does the reader a great service by making clear the difficulties of successful short-selling. In my case, the irony of this book is it ultimately tempered my enthusiasm for adding short-sale techniques to my portfolio strategy kit. But this is a worthwhile book whether or not the prospective short-seller ultimately decides to practice this art, because there are useful insights about equity valuation which pertain to both buying/short-selling stocks.

Concerning the valuation insights, Staley is a bit assuming for the newcomer to basic financial analysis, but not so much so that newcomers can't benefit at all. As an aside, the book contains numerous typographical and grammatical errors which make one wonder if the book was rushed to publication.

Rating:
Summary: Great book for improving both long and short investing
Review: This book, first published in 1991, received little attention thru the run of bull market prognostications in the 1990's. Even in the aftermath of the collapse of one of the largest stock bubbles in history, 2000-2002, one still reads little about this book or others of its genre.

The text provides the layman with an overview of the way in which basic fundamental analysis is practiced in Wall Street. Those who practice their craft like Staley i.e. Robert Olstein, were loathe to buy Enron stock because they didn't like the way their books were kept. Obviously this fact was overlooked by many other analysts, many of whom are now looking for another job.

Staley belongs in the same class as Asensio, Olstein and O'Glove, all of whom pour over the footnotes of financial statements while eshewing management contacts. That more investors do not avail themselves of this discipline, demanded and emphasized by Staley, plays mute testiment to the giddy optimism they substitute for reasoned investment analysis.

A little investment success can go to the head of any investor and thereafter sow the seeds for his greatest losses. Think the investment version of Hitler's Operation Barbarossa; Hubris..... all too prevalent in the rise and fall of markets and of civilizations. This is a good book for all investors. The time to read it for the first time or again is NOW. It's always the human component that does you in, and not the unavailability of the tools for proper analysis. This is Staley's ultimate message.

Rating:
Summary: down-to-earth manual on avoiding bad stocks
Review: This is a very readable manual for long-term investors (disregard word 'short-selling' in its title). Its style and format is in line with Peter Lynch's texts on investing, but the book does require some proficiency with corporate financials.

The book is particularly strong in 3 areas: (1) clearly states observations/principles of detecting bad stocks (2) provides many examples of how particular observation is applied to real-life companies (3) gives a brief historical perspective on speculative bubbles and investor dilusions.

Read this book with highlighter.