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Strategies & Market Trends : Value Investing
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To: accountclosed who wrote (5500)12/20/1998 1:53:00 PM
From: Paul Senior  Read Replies (1) of 78660
 
A. Roquentin. My opinion would be that Graham would say that short selling is best left to professionals, and should not be practiced by the small investor.

He might even counsel professionals not to engage in short selling.

Ocassionally we have a discussion here about short selling. (Forget now about Graham-- his particular methods -- and just think about any kind of valuation techniques).
The very logical idea is that if stocks are undervalued by our criteria and we can identify and buy them (then sell them when they go up), we ought to be able to reverse the process-- we can identify stocks that are also overvalued by our same criteria, sell them short, and buy them back at a profit. It seems that if the criteria are any good at all (buy low and profitably sell high), we ought to certainly be able to reverse it (sell high, buy low). I rise up at that point -g- and say, WRONG! Short selling is a totally different animal.

My experience is that nobody believes or appreciates this difference though until they actually try short selling a few times. To me, kind of like thinking about walking backwards. Seems easy enough to do - just the reverse of what we normally do-- but it doesn't work out so easily or well when we actually try it. Paul Senior
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