Warren Buffett on SHORT SELLING 📉💰 ONE SHORT SALE NEARLY KILLED HIM! 👍🔥

WARREN BUFFETT AND CHARLIE MUNGER TALKS ABOUT SHORT SELLING.

THIS IS A COLLECTION FROM ALL BERKSHIRE HATHAWAY MEETINGS

Back in 1954, Warren Buffett made a short sale, that nearly killed him.

Buffett traded a chocolate company's shares for cocoa beans in an unusual arbitrage in 1954. The trade nearly took him out of business.

Here's the transscript of the video
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Charlie and I are no strangers to short selling. I mean, we both. Failed at it!

We did a reasonable amount of short selling.

Making a lot of money short selling, still, is not a game that appeals to us over a long period of time.

We shorted out the general market for about five years in the partnership, to a degree. We borrowed stocks directly from some major universities.

We went to Columbia and Harvard and Chicago and different places and actually arranged for direct borrowing

And then we went long things that we thought were attractive. We did not go short things that we thought were unattractive; we just shorted out the market generally.

Generally speaking, I think if you’ve got some very good ideas on businesses that are undervalued, it’s really unnecessary to do any shorting out of the market.

We made our money by being long some wonderful businesses. We didn’t make it by a long-short strategy.

There have always been hundreds of cases, or thousands of cases, of things that are ridiculously priced, and phony stock promotions, and the gullible being led in to believe in things that just can’t come true.

We really just focus on businesses. We don’t care if there’s a stock market

It is the sort of thing that you can go broke doing.

You see way more stocks that are dramatically overvalued in your career than you will see stocks that are dramatically undervalued.

So you might think it’s easier to make money on short selling. And all I can say is, it hasn’t been for me. I don’t think it’s been for Charlie.

It is a very, very tough business because of the fact that you face unlimited losses

You can run out of money before the promoter runs out of ideas.

It is very painful and it’s — in my experience, it was a whole lot easier to make money on the long side.

Arbitrage situation when I was in — well, it was when I moved to New York in 1954, an arbitrage transaction that had to work.

I was short something

You can’t expose yourself to the loss that would be there if you did do it on a big scale.

“If you want to be miserable, you know, during Easter or something like that,” he says, “borrow a lot of money to be repaid at Lent,”

Being short something, which keeps going up because somebody is promoting it in a half-crooked way, and you keep losing, and they call on you for more margin

It isn’t that hard to make money somewhere else with less irritation.

it’s not something we think about.

What makes common stock prices so hard to predict is that a general liquid market for common stocks creates, from time to time, either in sectors of the market or in the whole market, a Ponzi scheme.

You have an automatic process where people get sucked in

And it can build to perfectly ridiculous levels, and the levels can last for considerable periods.

That’s what makes it so dangerous to short stocks, even when they’re grossly overvalued.

It’s hard to know just how overvalued they can become in addition to the overvaluation that exists.

At least a hundred companies, maybe more, that we felt were frauds, you know, bubble-type things.

That’s why you can’t short, at least we don’t find it makes good sense to short those things.

It’s just tough.

You can’t short the whole company.

You need more and more money as the stock goes up. You don’t need more and more money when a stock goes down, if you paid for it originally and didn’t buy it on margin.

We have no objection to anybody selling Berkshire short at all.
The more shorts, the better, because they have to buy the stock later on

There’s nothing evil, per se, about — in my view — about selling things short.

I would say that it’s a very, very tough way to make a living.
It’s not only often painful financially, it’s very painful emotionally

It’s a very tough psychological game to play. Few people may be well-suited for it

I would never put any money with a short fund, but not because I would think it would be ethically wrong. I just think they’re unlikely to make money.

I do not see the problem at all with people shorting stocks.

The shorts generally have the tougher time of it in this world

So I do not see shorts as any great threat to the world

There’s no question that the purchasing power of the U.S. dollar will decline over time

Purchasing power of most currencies around the world will decline.

We have not had the total runaway-type inflation that really can be upsetting to a society"

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Ray Dalio, Howard Marks, Jeffrey Gundlach, Jeremy Grantham.
What did warren buffett short?
The short bet warren buffett made in 1954