The Art of Short Selling (A Marketplace Book) (Hardcover)

~ Marketplace Books (Author) "When Media Vision finally went belly up, when Scoreboard matched its spectacular ascent with an equally spectacular descent, when Bank of New England took major..." (more)
Key Phrases: short sellers, short selling, extraordinary credit, Wall Street, Crazy Eddie, New York (more...)

Editorial Reviews

Amazon.com Review

To "sell short" on Wall Street, an investor finds overpriced stocks and then deals them before actually buying them. Regularly falling in and out of favor, the discipline remains one of the financial market's highest-risks but most profitable practices. The Art of Short Selling by Kathryn Staley, an expert in the field, uses examples and instructions to show how it can be done successfully--while cautioning that it "is not for the faint of heart."

Product Description

A one-of-a-kind book that shows you how to cash in on the latest investing trend—short selling

"The Art of Short Selling is the best description of this difficult technique."—John Train, Train, Thomas, Smith Investment Counsel, and author of The New Money Masters

"Kathryn Staley has done a masterful job explaining the highly specialized art of short selling. Her approach to telling the true stories of famous investment 'scams' will keep the reader spellbound, while teaching the investor many crucial lessons."—David W. Tice, Portfolio Manager, Prudent Bear Fund

"Selling short is still a misunderstood discipline, but even the most raging bull needs to know this valuable technique to master the ever-changing markets."—Jim Rogers, author, Investment Biker

On the investment playing field, there is perhaps no game more exciting than short selling. With the right moves, it can yield high returns; one misstep, however, can have disastrous consequences. Despite the risk, a growing number of players are anteing up, sparked in part by success stories such as that of George Soros and the billions he netted by short selling the British pound. In The Art of Short Selling, Kathryn Staley, an expert in the field, examines the essentials of this important investment vehicle, providing a comprehensive game plan with which you can effectively play—and win—the short selling game.

Whether used as a means of hedging bets, decreasing the volatility of total returns, or improving returns, short selling must be handled with care—and with the right know-how. As Staley points out, "Short selling is not for the faint of heart. If a stock moves against the position holder, the effect on a portfolio and net worth can be devastating. Investors need to understand the impact on their accounts as well as the consequences of getting bought in before they indulge in short selling." The Art of Short Selling guides you—clearly and concisely—through the ins and outs of this high-risk, high-stakes game.

The first—and most important—move in selling short is to identify flaws in a business before its share prices drop. To help you tackle this key step, Staley shows you how to evaluate company financial statements and balance sheets, make sense of return ratios, detect inconsistencies in inventory, and analyze the statement of cash flows. Through real-world examples that illustrate the shorting of bubble, high multiple growth, and theme stocks, you'll proceed step by step through the complete process and learn to carry out all the essentials for a successful short sell, including quantifying the risk factor and orchestrating correct timing, as well as implementing advanced valuation techniques to execute the sell/buy.

Packed with landmark, cutting-edge examples, up-to-the-minute guidelines, and pertinent regulations, The Art of Short Selling is a timely and comprehensive reference that arms you with the necessary tools to make a prepared and confident entrance onto the short selling playing field.

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Product Details

• Hardcover: 304 pages
• Publisher: Wiley (December 9, 1996)
• Language: English
• ISBN-10: 0471146323
• ISBN-13: 978-0471146322
• Product Dimensions: 9.1 x 6.1 x 1.1 inches
• Shipping Weight: 1.1 pounds (View shipping rates and policies)
• Average Customer Review: 3.6 out of 5 stars  See all reviews (20 customer reviews)
• Amazon.com Sales Rank: #85,413 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

63 of 64 people found the following review helpful:

5.0 out of 5 stars A Skeptics guide to Fundamental Analysis, April 26, 2003

By	Rob Ryley "Robert" (Northeast NJ) - See all my reviews

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.

61 of 67 people found the following review helpful:

1.0 out of 5 stars Book says nothing at all, August 19, 1999

By A Customer

This book, I believe, was written by the author to cash in on the fact that there are no books on short selling. Read about 15 investment books in the last few months. Some good, some not worth the money -- but this was the book that made me feel like being totally suckered. Gives some examples of companies that went bust, and about crashes. But does not even come close to suggesting any strategies or things to look for when deciding whether to short. Instead just says things like: high valuation alone is not enough to short, don't forget to read the SEC filings etc. Duh! No ideas at all. What a scam.

33 of 35 people found the following review helpful:

4.0 out of 5 stars More suitable as an introduction than technical training, April 15, 2000

By	"kingsransom" (Como, Italy) - See all my reviews

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.