Mostly at Bronte we short frauds or promotes. Stuff where the management says X but X is not true. Sometimes X is a stretch (a stretch made by promotional management). Sometimes X is patently false.
Either way we can describe what we do. We find things where the market is deliberately misinformed and hence comes up with inaccurate prices. We think (on reasonable grounds) that we are smarter than a deliberately misinformed market - and we often are.
We can answer the question "what is it that we see that others do not?"
Sometimes (rarely) we do valuation shorts. [We have a few valuation shorts now.]
In a valuation short we are working on the same information as everyone else has. This makes me uncomfortable. There is an arrogance in suggesting we can analyse the information better than anyone else. We find it harder to answer the question of what we see when others don't and hence harder to justify the position at all.
Indeed often we have no idea what the others are thinking and when I do not know what someone is thinking it is hard to justify (or test) the view that they are wrong...
I think this is the explanation for the cliché in short-selling circles that shorting valuation is a poor game.
Anyway - I am uncomfortable because I can't describe my informational edge and I don't like thinking I am smarter than other people (as opposed to better informed than other people).
That is all.
The content contained in this blog represents the opinions of Mr. Hempton. Mr. Hempton may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Hempton's recommendations. The commentary in this blog in no way constitutes a solicitation of business or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.