[vitolds]

The nice thing about markets is that people can put their money where their mouth is. I wonder if DHH, assuming he had an opportunity, would short facebook at $50 billion valuation. Investment banks have talented people working for them, and they have excellent knowledge on how different assets are priced, they may be wrong but it's very hard to tell exactly when they are wrong. I guess betting against them would be rational if DHH had some unique insight as to why $50B is too much. However a claim about the bubble 2.0 or frothy markets is not something unique -- I'm sure they have already priced this public sentiment into the deal.

[danenania]

Well, his whole point is that Goldman isn't value investing, but hoping to profit as a market maker. Goldman may believe the stock is basically worthless but still think they can make big profits on the deal.

As for "people can put their money where their mouth is" and shorting:

"Markets can remain irrational longer than you can remain solvent." -Keynes

[edge17]

shorting means you have to also be able to stomach the upside pain. Maybe it'll end low, but you have to have enough capital to float against margin calls while it climbs. I know people that got eaten alive for shorting yahoo back around 2000 - they were certain it was overvalued and rode short positions from $40 till over $100. Then their wives made them liquidate the positions; if they'd held out a little longer they would have won... shorting isn't all about being right - you also have to have enough capital.

The above quote is very apt. Even if I didn't believe in FB's valuation, I wouldn't short it because I doubt I have the financial fortitude to take the pain.

[jayzee]

Wait till they bring the economy down again and the smart talented people at GS ask for a bailout.

Besides how would you short shares in a privately held company?

[msy]

By trading securities that derive from a private vehicle that owns shares.