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

"A useful corrective to the view of short selling as 'unpatriotic' or uniquely anti-social."--John Plender, Financial Times, November 16, 2009 

"I liked this book. It was short and to the point and very well researched. As we are living in an era of history repeating itself, Mr. Sloan depicts the negative market psychology that has transcended Wall Street since the birth of our nation."
--Ted Stamas, Instablog, November 2009

On the 90th anniversary of the Crash of 1929, we find ourselves peering backwards through a virtual looking-glass to a time when global markets were in free fall, and venerable financial institutions were in tatters. Yet, here in the present, these same patterns seem to repeat, causing cable newsers, Congressmen, and commoners alike to scream the same refrain, "Blame the short sellers!" 

Certainly, short sellers make convenient villains; for one thing, they win only when others lose. But in Don't Blame the Shorts, Bob Sloan taps into a 200-year-old American debate to convincingly and emphatically argue that short selling is not what ails our equities trading markets, but what keeps them honest. To Sloan, short sellers’ objectives are simple: find overvalued securities and bet against overconfident investors. It's an approach that uncovered widespread fraud at Enron, WorldCom, HealthSouth, and other failed outfits long before regulators ever set foot in the door. 

Taking the long view of history, Sloan unearths the deep roots of the conflict over speculative investing and its role in our economy. It's a debate that oftentimes puts titans of American history and finance on opposite sides of the divide: Jefferson and Hamilton, over the fundamental nature of America's economic systems; a century later, J.P. Morgan and William Rockefeller, the brother of John D. Rockefeller, who was thought to be part of a cabal of short sellers that brought the country to its financial knees. Further, Sloan reintroduces us to the likes of Ferdinand Pecora, the federal prosecutor whose investigations in the early 1930s revealed a wide range of abusive practices of banks, and led to the creation of vital legislation, including the Glass-Steagal Act. 

Don't Blame the Shorts is an eye-opening account that overturns conventional wisdom about short selling, and the vital systemic (and symbolic) role it plays in making financial markets less opaque, more accountable, and, therefore, stronger. 

Author Profile
Bob Sloan is the managing partner of S3 partners, LLC, which he founded in 2003. Prior to S3 Partners, Sloan was a managing director, and the global head of prime brokerage and equity finance and a member of both the Securities Division Operating Committee and the Product Managers Committee of Credit Suisse First Boston. In 1998, he founded and was chairman of the CSFB/Tremont Index Co. From 1989 to 1996, he worked at Lehman Brothers in the equity derivatives and central funding unit.