Book Review: “Fooling Some of the People, All of the Time”
The story of Greenlight v. Allied
Available at the Brooklyn Public Library for free.
How would you feel if I told you that American taxpayers were defrauded out of 300M dollars?
What if I told you that this same scam cheated American investors out of Billions?
And if I told you that the regulators had been given evidence of the scam, acknowledged it was a scam and still chose to look the other way?
Fooling Some of the People, All of the Time is the book about this scam. It is a story written before it’s own final chapter. After it was published, it’s author, David Einhorn was vindicated. Allied Capital eventually went to death’s door before being bought out. Not before shareholders were nearly wiped out.
In the book, Einhorn lays out the evidence which led him to originally bet against Allied Capital and why he publicly announced the idea at a charity dinner. He then details the responses by the company, the financial media and the regulators. It is a saga of criminal activity, wild accusations, lawsuits and scandalous incentives.
Investors who read this, will get an insight to the level of due diligence that some funds take when shorting (betting against) a company. They will also understand better the incentives which influence analyst recommendations to the detriment of the retail investor. Finally, it shows how the system rewards regulators that look the other way.
History doesn’t repeat itself but it often rhymes. The past year has seen increased government scrutiny around hedge funds and short sellers. At the same time, management of many SPACs and other “growth companies” have cried out about “Shorts and Distort”. This book, written over a decade ago, serves as a warning example and a reminder for investors to mix a healthy dose of skepticism to management with an open mind to the bear case.
My opinion: A must read for anyone with an open mind to learning about hedge funds and short selling. Readers who enjoy historical crime drama, financial scandals will enjoy this. Can be a bit technical for beginning investors.
