In this interview with Bloomberg, Stan Druckenmiller explains why shorting is a risky business saying, “I’m Not Sure I’ve Ever Made Money on Shorts”. Here’s an excerpt from the interview:
Our shorts have been fine this year, except my index shorts which have been a disaster.
But we always short the same way. I just try to look at the current situation and then I try to think of a situation 12 to 18 months from now based on my forecast.
If I believe the security prices are going to be less, then I short them.
Frankly, I‘m not sure I’ve ever made money, if I took back the last 40 years. I’m afraid to look. I’ve never had a down year, but I’m not sure I’ve made money in shorts.
I like it. It’s fun, but you can get your head handed to you. It’s a game that really only professionals should play. The odds are against you.
If you’re dead wrong on a long, you can lose a hundred percent. If you’re dead wrong on a short, you can lose 10 times your money. When I was at Soros, I shorted $200 million worth of Internet stocks in March of ’99 and in three weeks covered them at a $600 million dollar loss.
I lost $600 million dollars on a $200 million investment in three weeks. I was short 12 stocks, and they all went bankrupt, every one of them.
You can watch the entire discussion here:
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