Short Selling

In the context of the Buffett Partnerships, Short Selling was not used for speculation on market declines, but as a risk-management tool.

📝 Practice in 1962

In the 1962 Letter, Buffett mentions selling securities short (~$340,000) specifically to eliminate general market risk in a Work-out situation.

By shorting the market-correlated aspects of a special situation, the partnership could ensure that its profit depended solely on the corporate action (e.g., a merger or liquidation) and not on whether the Dow went up or down.

⚠️ Constraint

Buffett expresses a strong warning against using leverage or shorting in the Generals category, preferring it only for protected or predictable situations like workouts.