Everyone loves a bull market—except for those betting against it, of course.
Short sellers, investors who bet against a stock and profit from shares falling, are increasingly throwing in the towel as they face heightened public scrutiny and a stock market that’s ascended over 50% over the past two years. Short interest in stocks in the S&P 500 has sunk to its lowest in over 20 years, according to Goldman Sachs.
And there are no bears quite as famous as the Big Short posse, who all made a fortune when their hedge fund FrontPoint Partners bet against mortgage-backed securities in the lead up to the 2007-2008 financial crisis, spurring the subsequent Michael Lewis book and movie adaptation.
But now they’re playing the long game, too. At an alternative investment conference in Miami, Porter Collins, Steve Eisman, Vincent Daniel, and Danny Moses said they still go against the grain, but through investing in what they see as overlooked corners of the market as opposed to placing short bets, Bloomberg reported.
Collins pointed to emerging markets as an area he’s focused on, while Moses emphasized that he focused on value. Eisman added he’s bullish on homebuilding stocks.
The bears are hibernating
The Big Short guys aren’t the only legendary short sellers retiring from the game.
Just this month, the founder of Hindenburg Research, Nate Anderson, announced he was shutting down his prolific short -selling firm that waged war against corporate behemoths such as Icahn Enterprises and the Adani Group.
And famed short -seller Jim Chanos, famous for predicting Enron’s implosion, turned his hedge fund into a family office last year after failing to raise enough capital.
The big picture: It’s easy to see why short selling would wane in popularity during a bull run, but the practice has also become a brutal endeavor due to changing market dynamics. Short- sellers are up against persistent litigation, ire from corporate America, regulatory hurdles, and more recently, threats from retail trading armies, who can upend entire negative investment theses in one collective Reddit campaign. —LB
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