Issues Shorting the Stock - Just came across WSJ news - Sharing it

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It’s hard to make money betting agaisnt a stock. The cost of borrowing can make you a loser even if you’re right about the stock declining in price. It needs to decline huge to make money.

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Shorting is a trap. Occasionally you can make money from shorting. Long term shorters don’t survive long

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• After more than 10 years of outstanding gains, David Einhorn’s Greenlight Capital has dwindled to about $5.5B in assets under management from $12B in 2014, the Wall Street Journal reports, citing interviews with Greenlight investors.
• The value of an investment in Mr. Einhorn’s main fund declined 11% at the end of 2017 from 2014’s end, during a period when the S&P 500 rose 38%, including dividends.
• As a result, some investors have withdrawn their money, and others say they’ll follow if results don’t improve. Boston-area investor Peter Weiss says he withdrew hundreds of thousands of dollars this year. And Morten Kielland says he’s withdrawn three-fourths of Key Family Partners SARL’s investment from the fund. Some others say they’ve pulled their money out or are considering it.
• According to the article, Einhorn told investors in a presentation early this year, that he had been shorting stocks including Amazon.com (NASDAQ:AMZN) , Athenahealth (NASDAQ:ATHN), and Netflix (NASDAQ:NFLX), stocks-- all are up 19%-103% this year. Meanwhile, Greenlight’s second-largest holding as of March 31, according to its securities filing, is Brighthouse Financial (NASDAQ:BHF), which is down 31% this year.

Don’t tell me ever again hedge funds are smart money. There’s no such thing as smart money and dumb money.

Surprised einhorn is still in business at all. That’s a guy who doesn’t listen to market and so full of himself to never admit mistakes.

I don’t get shorting in a bull market. It’s way easier to swim with the current, and buy things you think will increase in value more than the market.

Hedge funds make money by earning fees from rich clients. Many hedge funds require at least a million dollars to enter. These clients are very rich so they can afford the extravagant fees. It’s a system of the super rich rubbing each other’s back. It’s about networking and connections at the very top.

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Do you?

For those invested 10 years ago, 20% per year for 10 years = 6.2 times. 6.2 would become 5.5*6.2/12 = 2.83 :slight_smile: 14 years, annualized return = 7.7% about the same as S&P index. So investing in S&P index fund is as good as a super duper hedge fund manager. Best is low fees, so is likely better.

"More than half of the $3 trillion held in hedge funds nationwide is pension fund and retirement plan investments.”

That’s even worse, since it’s working class people paying the insane fees on their retirement funds. They don’t even have a say in it. The union bosses make all the decisions and convince the workers that it’s the right thing to do.

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Answer is

David Einhorn, like many Hedge Funds, will focus on maximizing his net revenue, using internal commission based ETFs/MF…etc, than his clients ROI.

This is all said in Chap 2 & 3 of Margin of Safety (MOS), that is why it is rated high.

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I recalled CALPERS (can’t remember whether is the correct abbr) sold out AAPL at the time when I started buying. These funds are supposedly run by brilliant, experienced and highly paid managers who have all the industry networks. Recalled they met with SJ and want to force him to do what they want. Anyhoo, too bad, many folks prefer financial advisors :slight_smile: and professional :confused: fund managers to manage their monies. IMHO, if you’re clueless, just put your money in a no-load index fund, completely effortless and guaranteed to have 7-11% annualized return over your lifetime (few decades?).

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But pension funds can’t buy S&P with Big Tobacco, Big Oil, and Big Pharmas in it. Maybe their members like to throw rocks at google bus and mad with all the gentrification so they can’t buy Big Tech either?

I take back my earlier comments. There really is dumb money. Whoever invests in hedge funds is super dumb.

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There are people, whose cash flow is multi-millions, they do not know how to invest or do not have time to spend and they go for Hedge Funds.For them, even less than S&P is good return !

Dumb money is abundant. Many people are really dumb on investment but they can make huge amount of money from businesses or from their talent.

Is hedge fund beating insurance products?

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Dumb money is not the worst. The worst money is the money who don’t care about returns, or even profit/less.

If you are the public pension fund manager or a pensioned retiree, you don’t care about the pension returns much, simply because it does not affect your interest. The retirees get the same amount no matter what, it’s the definition of defined benefit. And no one has the doubt on government’s tax capability, at least no worries in their lifetime.