Customer Reviews

Don't Blame the Shorts: Why Short Sellers Are Always Blamed for Market Crashes and How History Is Repeating Itself

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I have never been very interested in books about Wall Street, especially now. But "Don't Blame the Shorts" engaged me from the word "go." I left the book thinking that I've been very misled about the way that the government and the media portrays short-sellers. According to the author, they are not forces of evil, but rather, they at like market regulators. We all know that short-sellers do what they do in order to make money, but Mr. Sloan proves that they also play a crucial role in maintaining the honesty and integrity of financial institutions.

Since we are passing through an era when the real truth about companies seems so hard to disentangle, the author picked the right moment to point out that it is actually the short-sellers who are trying to make Wall Street more transparent.

It's worth noting, also, that even though this author is a trained financial professional, his book isn't too complicated for someone from a different profession. While I would have been interested to read about a few more examples of his point, I won't take issue with a book that is slim and lively.

If you had any doubt that history repeats itself, you need to read this book on the history of short sellers and the role they have played in the development of the US. Policy makers need to understand that the ability to establish a short position is vital to the functioning and liquidity of capital markets. The book does an excellent job of describing the important role short seller's play keeping markets in check, providing liquidity and helping companies raise capital.
"Don't Blame the Shorts" should be required reading for anyone studying Investment Analysis or the history of the US capital markets.

If you have read the media blaming the short sellers for the Global financial problems and are confused or want to seek the truth, read this book.

Robert Sloan brings together history and finance in an easy to understand, well researched book. He recounts how at each market crash short sellers have been blamed together with details of the indictments.

Sloan explains how short selling is essential for any modern financial market to function correctly. All stocks will eventually be priced according the underlying fundamentals. Directional short sellers (which accounts for only a small part of the market) trade according to the fundamentals, Enron being a great example.

I would recommend this book to anyone with an interest in the financial markets and/or the financial beginnings of America.

In light of the market events of the past few years - both the financial meltdown and the government response to it - Bob's Sloan's book comes at just the right time to both present an entertaining look at short selling during the past 400 years and clarify many of the public misperceptions about the practice. The book is a perfect mix of objective history and subjective commentary by someone who empirically and historically shows that short selling is far from a nefarious, back-room practice that many politicians and the media would have us believe it is. As he takes us through the history of shorting (and the on-again, off-again regulation that has been enacted for the past four centuries), Sloan makes a convincing and nuanced case that shorting is a socially beneficial practice that tempers "irrational exuberance," keeps management honest, and provides incentives for ALL types of information to enter the marketplace, not just positive information. In essence, short sellers are the private-sector market watchdogs who indirectly encourage transparency and disclosure and directly help investors minimize risk while adding liquidity to the market. Furthermore, he shows how, in a tenuous marriage of convenience with corporate executives, government has consistently pandered to populist urges to curb short sellers (and their First Amendment right to express an opinion), what he describes as "serving public opinion without serving the public." He also exposes the hypocrisy of bank executives who, when lobbying for short selling bans, bite the hands that feed them and their prime brokerage businesses (i.e. the short sellers that pay for their services).

With politicians and the media in a race to the bottom to oversimplify complex subjects in order to gain public approval or ratings, books like "Don't Blame the Shorts" are more valuable than ever to someone who wants to block out all the "noise" and gain a more comprehensive understanding of how the markets work, who the major players are, and the role of government in it all. Simply put, I would highly recommend this book for anyone - finance professionals, academics, students, anyone interested in finance or the stock market - hoping to make sense of the modern financial world and the events of the day. It's educational, highly original, and a much-needed addition to the literature on finance and investing.

Having worked as a portfolio manager who is now running own money, I picked up this book in great anticipation because of the great reviews on Amazon and in the media. I am an avid economic historian and have always had mixed views about merits of shorting during times of market distress but wanted to give the shorts a fair hearing. It turns out to be a great disappointment despite its promising title.

The author spends more pages on Wall Street v/s Main Street debate than on shorting. He starts with a convoluted attempt to link the issue of shorting to the historical debate between Hamilton and Jefferson on the merits of banking and speculation. The first 3 chapters are devoted to historical evolution and distrust of banking sector as the author tries to establish a tenuous link between banking and shorting. He finally touches the issue of shorting in Chapter 4 in the context of the Great Crash of 1929 but then devotes next few chapters on the then-NYSE President Richard Whitney's defence of shorting. The problem is Dick Whitney turned out to be crooked character in the mold of Bernie Madoff and given his various vested interests, there is very little reason to give credit to his account (over that of his opponents).

The next few chapters are devoted to outlining importance of stock lending in providing liquidity and the battle for turf wars to regulate NYSE (which had stronghold over many of prime brokerage type activities in those days)and Wall Street. The last chapter again touches upon shorting debate in the wake of 1987 crash but then again digresses into the Wall Street v/s Main Street debate.

In between, there is some discussion of uptick/ downtick rules but issues like naked shorting (which is one of the reasons why shorts have acquired nasty reputation) are given short shrift. The author gives an impression (without providing enough supportive evidence) that all shorts are good and need no scrutiny because their activities provide vital liquidity to financial markets. While I have no doubt that there are some very good analysts on the short side, it is difficult to believe that there are no shenanigans on the short side (just as on the long side) and the author might have helped his case if he took a more objective view.

In the end, book comes across more as an apology for Wall Street and its free-wheeling ways while trying to paint all attempts at regulating it as misguided and politically motivated. All proponents of regulation from Senator Glass, Pecora and FDR to Barack Obama are painted with the same black brush as rapacious politicians encroaching upon Wall Street and free markets while turning a blind eye to cozy Wall Street old boys culture. So much so that in one instance, the author even tries to defend the nefarious practice of rewarding friends and family as a vital part of the capitalist system.

I would be shorting this book if I could short it.

I have recommended this book to all my friends. Sloan's book is unique, entertaining, well written, easy-to read chronicle of the 200 year history of short selling. Unlike any of the current books concerning the credit crisis and the stock market decline, this insightful book provides great and complete information on the conflict between speculative investing and it's function in our economy. As a hedge fund industry veteran, he moves through every time period where he vividly depicts each financial crisis or bubble and shows how the short sellers were unfairly blamed for all the problems. He cogently argues that short selling keeps the financial markets honest. Interestingly, if more people had focused on short sellers we could have prevented the subprime mortgage crisis from sending the economy into a deep recession; the internet frenzy or even Enron. This book is more comprehensive, eye opening, timely than any other finance book I am aware of. Sloan's advice is fresh, relevant and spot on. He takes many controversial subjects and handles it with poise, grace and logic. If there was a must read on the subprime crisis, this is the one. The bottom line is that this is an understated book, very eary to read and essential. Excellent finance book for people who don't digest balance sheets with their breakfast. I can't encourage you enough to check out it out. So go out and read it, if you haven't.

I am not an economist and I have fairly thin knowledge of how Wall Street and the financial markets work. Since the "crash" of 2008 I have been plowing through every book I can find on why this happened. Some neatly clear my head by a great deal, some are poorly written and serve the authors higher purpose not the public, but this book fits neatly in that category of having just enough information I can understand without having to look up something on every page to learn what the author is saying. I read this book fairly fast as I already had read Soros book on short selling and through CNBC, Bloomberg, and the Wall Street Journal I continue to understand the purpose of short selling in a free market economy.

The book is well written and thankfully the author does not repeat himself over and over to make the book longer. His writing is concise and easy to understand. Although his career has been as a financial manager from hedge funds to Lehman Brothers, he could just as easily be a journalist. He takes the reader through a long history of short selling going back to the time of Hamilton and Jefferson. As he moves through each time period where there has been a financial crisis or bubble he shows how the first outcry is to blame the short sellers. In each of these cameo appearances from history he goes through the political wrangling that goes on to kill short selling as the evil that brought the system down, especially the crash of 1929. After showing how the short sellers were trashed and blamed for all that went wrong he explains how they serve a purpose to bring balance into the not so honest financial systems of the world.

In the category of the not so honest, had people paid more attention to short sellers in the last 15 years the chances of losing everything due to Enron type of schemes would have been lessened. Same for the subprime market, Russian default on their debt, the internet frenzy and a lot more I most likely do not understand. Through this book I finally could see how the short seller are the brakes on what is inherent in a financial system where money is freely flowing, bubble are forming, and lies and greed run amok.

If you would like to blame the short sellers because you lost a lot of money in this last market cycle, perhaps if you read this book you may change your mind.

At a time where the government trusts markets less and less, Bob Sloan's book shows that only markets themselves - permitted to operate freely - can protect themselves and us. The short-sellers ferret out bad deeds, not because of statutes, but out of economic self-interest and thank goodness for that! I can assure you if Madoff had been running a public company, the shorts would have gotten him many, many years ago!!

Sloan writes compellingly that we are doomed to repeat history, with a new financial meltdown every few decades, and he argues convincingly about the causes of the 2008 financial crisis (and what DIDN'T cause the crisis, notably short selling but also Fannie Mae and Freddie Mac).

Where is today's Ferdinand Pecora? Where is the committee or commission to get to the truth about what happened, and to recommend real changes in our regulatory structure to make sure this never happens again? Why is it that the only person who seems interested in getting to the truth of the trustee in the Madoff scandal, Irving Picard--and why can't he be drafted to perform the same dogged inquiry into the whole system?

If you liked this book you'll probably like: The Big Short: Inside the Doomsday Machine, The Return of Depression Economics and the Crisis of 2008, and for an explanation of the causes of the crash of 1929 and the Great Depression, both The Great Crash 1929 and The Pecora Commission's Final Report.

Well-written, captivating and comprehensive. It's about time someone pointed out stock market is not spelled c-h-e-e-r-l-e-a-d-e-r. One can only hope that every smart CFO and CEO who reads this book will finally stop shooting the messenger. It's also invaluable for anyone interested in US history and the genesis of our financial system. The insights uncovered through the Hamilton/Jefferson back stories are powerful. This book should be a game changer.