I have made the decision to disband Hindenburg Research
429 comments
·January 15, 2025gmd63
WalterBright
> I've ironically lost more money the more closely I've paid attention to my investments
Money Magazine a few years ago compared various investment strategies in stocks. The #2 best performing one was investing in the S&P 500. The #1 best performing strategy was the "dead man strategy".
The dead man strategy comes into play when the investor dies, and his estate gets frozen until it winds its way through the courts. It turns out that doing nothing with your stock investments is (statistically) the best strategy.
I know for a fact that when I do nothing with my stocks, they also perform better.
kqr
A few years ago cost structures for managing one's investment portfolios were also significantly higher than today!
There's an even better alternative for someone willing to put in the leg work:
(1) Figure out your investment horizon. For many people, this is way shorter than suggested by generic advice, which makes some diversification beyond "stonks go up" meaningful.
(2) Figure out what costs you'll incur by rebalancing etc.
(3) Write a short script that optimises the amount of activity in portfolio management that improves performance over your investment horizon, given your costs.
Unsurprisingly, the result can vary a lot between people. The result is most likely going to involve a very low level of activity, but the process of finding it out is very informative.
What I've found out (and this is replicated also by more authoritative people like Carver) is that for almost everyone, mixing in some 10--20 % of a safer asset like 10 year bonds and rebalancing yearly outperforms a pure equity portfolio over most realistic investment horizons.
Galanwe
Agree with you 100%, I did the same simulations and found the same result.
I would suggest a step beyond though, because rebalancing your portfolio is fun year 1-5, but not so fun year 5-20: have a look at e.g. Vanguard retirement target funds.
Essentially, it's an ETF with a rebalancing rule included for a specific target date. For instance if you buy the target 2050 (your hypothetical retirement age), the ETF rebalances itself between bonds/monetary fund/stocks until it reaches that date, u til it's pretty much all cash in 2050.
Lowest hassle diversified retirement scheme I found.
tminima
I want to learn more about how to rebalance my portfolio. I started with ETFs and MFs and then bought some good stocks when they were low. But I have never rebalanced it. Would you be able to share some resources about it? Also, if possible, some pointers about your script.
sotix
I'd be interested in reading more literature (e.g. from Carver) if you have any links!
graemep
Doing nothing saves trading costs which are a major drag.
The standard advice for equities investors (at least in the UK) has been to invest in tracker funds for a very long time.
it is possible to beat the market. Many years ago I double my money in approx an year - but I invested heavily in I had been covering as a analyst (one of my previous careers) until immediately before. I am more cautious now.
matwood
Trading fees are at or near zero in the US now unless you mean capital gains.
Workaccount2
Just yesterday it was announced that Bitfinex will be returned the 95,000 bitcoin that were lost in a 2016 hack. These coins will be returned to the account holders which were affected by the hack.
At the time the bitcoins were lost, they were worth ~$575 each.
Today those returned tokens are worth close to $100,0000 each.
I doubt anyone who was affected by that hack realized they just got involuntarily forced into the best investment of their lives.
fckgw
> These coins will be returned to the account holders which were affected by the hack.
I haven't seen any reporting on that. Bitfinex, the corporate entity, is receiving the coins recovered from the feds. It's up to Bitfinex how they device to dole out those funds, if at all.
When these things happen, often times exchanges will make their customers whole by giving back the monetary value of the coins at time of loss. It's very rare they repay them 1:1 in bitcoin.
chasebank
Interesting part of the story is the hacker who stole them is a YC alumni, he founded mixrank. Kid only got 5 years in prison for stealing $1B.
tombert
This doesn’t surprise me in the slightest.
Most of my investing is just in passive S&P index funds, but I do occasionally buy individual shares.
Sometimes I make decent money, sometimes I lose money…turns out I consistently do worse than the S&P long term.
I treat buying individual shares as yuppie gambling at this point. It can be fun, but it’s usually a bad strategy.
fakedang
> I treat buying individual shares as yuppie gambling at this point. It can be fun, but it’s usually a bad strategy.
I would actually recommend the opposite - buy shares of a few companies that you know exceptionally well. That is, not just the companies, but also the market, the industry trends, etc. Charlie Munger recommends holding 5 stocks at max, while Peter Lynch suggests industries that are tangential to your work and daily life. Both solid advice. Revisit the list every year, and you'll already do better than most of the blind duds investing in the S&P500 (which arguably contains a lot of duds).
The problem with most ETFs is that you'll still be investing in a bunch of dud companies, whose only reason for staying in the market is by virtue of being big (think HPs and IBMs, for example).
Scoundreller
> I treat buying individual shares as yuppie gambling at this point. It can be fun, but it’s usually a bad strategy.
Naw, that's boomer gambling.
Options are yuppie gambling.
WalterBright
The conventional wisdom is to sell your profitable stocks, to "lock in your gains", and sell your losers to "cut your losses."
I call that "minimizing your gains" and "locking in your losses", and just hold instead. If I "locked in the gains" I would have missed out on 10x returns.
Of course, I did ride Enron all the way to zero (!), but it didn't matter. Think of it this way - buy 10 stocks. 3 go to zero. 6 have modest returns. 1 is a 10x winner, that more than makes up for the failures, and becomes the tentpole for your assets.
WalterBright
I have a friend who retired, and decided to go into day trading. He spent hours each day glued to the trading portal, making trades. After a year, he ruefully admitted that he'd have made significantly more money if he'd simply done nothing.
chii
> 1 is a 10x winner
out of 10 stocks, 1 being a 10x winner is an absolutely rarity and the fact that you would manage to pick it is pure luck tbh.
davedx
Exactly. I started buying NVDA in 2020 and I still hold almost all of it.
If you do rebalancing then you might as well hold an ETF that does it for you at the lowest cost. If you hold individual equities, keep your winners.
yard2010
This reminds me of that Mythbusters episode in which they test what is the fastest strategy in a traffic jam or congestion - switching lanes or keeping your lane. IIRC the result was that it's the same, but zigzagging makes you feel it's faster
dmos62
So invest in s&p 500 and do nothing, right? That's a good strategy for someone young, because it makes sense to be risk tolerant then. As you age you want more and more of your portfolio in bonds/cash, because you want the reduced fluctuation in purchasing power (i.e. comfort) that that brings you. These are the bare fundamentals of portfolio management.
eru
If you are young, you might even want to invest more than 100% of your portfolio into the S&P 500.
belter
Did they include the Monkeys?
"Most successful chimpanzee on Wall Street" - https://www.guinnessworldrecords.com/world-records/most-succ...
barnabyjones
Keep in mind, fraud isn't necessarily a big deal for the shareholder, not all fraud is Enron-tier. For example, I fully believe they were right about Adani, but it was basically just skimming money off the top. If Adani is an embezzler, but also good and funneling bribes to get gov't contracts, then the overall effect on profits may just be breakeven or even positive. The losers would be the Indian citizenry. The company isn't doing so well now possibly due to a culture of corruption, but that kind of long-term culture analysis is hard for traders. But generally, fraud isn't severe enough to enough to endanger the company, it's just taking some money out of shareholders' pockets, but dispassionate traders don't usually sell out of retaliation.
yowayb
True. Small frauds are common. I know people that have gotten away with pump-dumps. I know people that have raised obscene money for terrible ideas. I even helped close one customer while at one company, and then when I moved to another company, I had to meet the same buyer and he chewed me out in front of my rep because of the shady deal from my last company. And I even had a customer that kinda defrauded us! And when I was younger, I saw a lot of tiny behaviors that might be considered fraudulent if looked at from the angle of a transaction. I had to stop working for a while because it was destroying my soul. Nate says there was no danger or specific reason to close, but I very much doubt this.
dustingetz
zombie companies suck all the oxygen out of the room and away from productive companies, the victim is society and civilization at large and the damage is measured in lost exponential progress of unbound time axis, potentially millennia. Medical technology, longevity, scientific advances that we could have had but will not for another 10^N years - all retarded by malinvestment and misallocation. Theworldif.jpg
jfengel
The market can remain irrational longer than you can remain solvent. The market will tolerate infinite BS for arbitrary periods of time.
Which also means being careful of short selling. It can put you at unlimited risk even if you are absolutely right.
UniverseHacker
> Which also means being careful of short selling.
There are a number of businesses I know are badly run and will eventually fail, but I cannot find a way to monetize that safely without knowing the timeline for failure.
whatshisface
If you are the only person who thinks that it might fail, one cent put options will be free and you can buy them until the price hits zero, and then you can make a cent.
For example, the opportunity to sell $TSLA for $180 in one month costs about thirty cents right now. Keeping this up for ten years would cost $36.
unyttigfjelltol
> It can put you at unlimited risk even if you are absolutely right.
The risk is in borrowing, not short selling. How many momo jockies out there think about the "unlimited risk" from buying Tesla on margin? In that case, you're shorting USD, but no one talks about that because it always will be fashionable to short USD.
Just like it always will be fashionable to short JPY, for carry and more. Until it's not.
jpk
Short selling a stock means borrowing shares and selling them.
CrazyStat
Short selling has unbounded downside. If you borrow $1,000 to short sell TSLA and then it soars you might end up losing $100,000.
If you borrow $1,000 to buy TSLA your downside is limited—you can’t possibly lose more than $1,000.
encoderer
You can short USD by buying Bitcoin or a similar non-correlated asset but how could buying a usd correlated asset (TSLA) be shorting?
null
crayboff
> The amount of deceit put out into the world and gobbled up, on purpose, in business is obscene and seriously depressing.
In business, politics, everything. It almost seems like everyone is quietly agreeing that "if we pretend the pesky truth doesn't exist for long enough, we can literally change reality to be what we want".
I feel like I'm going crazy. There's no way that's how things can work for long, right?
ANewFormation
You're not going crazy, they are. But even once things start falling apart, inertia alone can give the appearance of productive movement for years to come.
This is probably why when somebody looks to try to find the cause for e.g. the collapse of the Roman Empire there were a surprisingly large number of potentially serious issues all happening simultaneously.
The reason is that the empire probably collapsed decades before its fall and so the stupid decisions and actions all continued to pile up, seemingly without consequence. All until the inertia finally ran out and suddenly the entire house of cards came crashing down.
benreesman
By all accounts it was like this at the end in the USSR too: infinite nepotism, no accountability, crashing standard of living near the median, deaths of despair attached to crazy levels of dangerous substance use.
This is what happens when bad people capture the levers of power.
nradov
There has never been a time in the history of the greater Russian Empire when good people captured the levers of power.
eltondegeneres
I didn't watch this talk but I read the article it's based on.
When an Iraq War supporting Tory like Niall Ferguson criticizes the US military for being both bloated and stretched thin by underfunding, it gives away that the critique is just disingenuous contrarianism.
jjkaczor
... and look how well that has turned out for the average Russian citizen (or journalist, or competing business-person who stands too close to a window anywhere but the first floor)...
Herring
It's not about pretending. Truth is the first casualty of war. If someone is trying to deceive you, they are actively exposing you to some kind of risk, usually for their own benefit, which is a hostile act.
roymurdock
We've kicked the can down the road for a while, but no worries, we will pick it up soon and recycle it ;)
rachofsunshine
This sort of thing is part of my personal motivation for getting into business. Lying is so rampant, so universal, so quietly accepted by everyone in a position of even mild power in business that it's easy to take for granted that you simply cannot succeed without it. I wanted to know if that was actually true - so far, it doesn't seem to be. But I don't blame people for worrying that it might be. People in positions of high power almost universally suck, and "just copy whatever really successful people do" is far from the worst strategy one can use in life.
(As always, you should trust what a founder says publicly about their company approximately not at all. If you want the answer for yourself, you gotta do it yourself, because you only know if you're lying or not. But I have my answer, I think.)
matwood
I hear what you’re saying, but it feels a bit too cynical to expand it to all business. Did you tell your boss you’d finish some task today? If something comes up, as often does at work, and you don’t finish, did you lie? Predicting the future is hard even as soon as what will happen today, now do that for the next quarter or 4 quarters. Of course there are fraudsters out there, but I view most founders as rampant optimists instead of liars. And you kind of have to be an over top optimist to be founder.
rachofsunshine
> Did you tell your boss you’d finish some task today? If something comes up, as often does at work, and you don’t finish, did you lie?
No. A good-faith failure is different from a lie.
The rule of thumb I use to handle ambiguous situations is "if my incentives were different, would I be saying something else right now?"
> Of course there are fraudsters out there, but I view most founders as rampant optimists instead of liars.
Most founders are both.
They're rampant optimists in the sense that they believe in their thing so much that it overrides all other concerns. But that often makes them liars via an argument of the form "my thing is so important and will change the world so much that I have to lie now to make sure it can be so great".
I'm not saying founders are ogres. The kind of lying they do derives from fairly ordinary human failures. But it's still lying, it's still normalized, and it still has terrible consequences all the time.
lvl155
This is a common thing among investment professionals especially in areas where you need strong domain knowledge such as biotech. Your conviction can become stronger the more you learn and collect supporting data. Conviction is a dangerous thing. This also extends to what’s broadly happening today in increasingly data-rich environment because we make data-dependent decisions.
nipponese
Buffet has this saying: "the stock market in the short term is a voting machine and in the long-term it's a weighing machine." I think a modern version of that is, in the short term the price is narrative and in the long-term it's accounting.
With Berkshire, Buffet figured out early, and firms like Hindenburg capitalized on the strategy of showing both sides of the story.
sfblah
In basically every other era of investing since 1930, you would probably have benefitted from that approach. While I think you're right to set aside the prudence you were targeting in favor of a passive investment approach, I also think that once the Fed ZIRP era ends, the knowledge you amassed will again become useful.
Jimmc414
"just feeling like it" seems insufficient explanation for dismantling a successful organization rather than transitioning it
they just completed their "pipeline of ideas" with "the last Ponzi cases" - seems like a surprisingly clean and abrupt end for an investigative organization
the team members are "brilliant" and "family to me" but heis disbanding rather than transitioning leadership
He mentions some team members are starting their own research firm but he "will have no personal involvement" That emphasis seems noteworthy
Claims there's "no particular threat" but takes pains to emphasize this multiple times
instead of maintaining the organization and training successors directly, he's planning to release videos and materials about their methods
No mention of the firm's financial position or client relationships
Not buying it, there's a story but it doesnt seem like he wants to tell it
eldavido
It's 11 people. It's a band breaking up, not Microsoft choosing its fourth CEO.
IshKebab
I suspect he saw Hindenburg as "his" and didn't want to run it but also didn't want anyone else to.
MattGaiser
And all the bespoke vibes and thoughts that go with that. Remove the people and what is there to sell?
n2d4
Short sellers are built on their reputation, and Hindenburg has a lot of that. Even if you fired the people, you'd keep the name.
That said, it would be wrong to automatically assume that they try to maximize gains; at this point, it's likely most of the team has enough money to retire, and at that point, making even more might not be their primary goal.
xmprt
And in that same vein it makes sense not to sell because if they ever see another great idea 5-10 years down the line I'd assume they might want to get back together under the same name and publish again. Selling would preclude them from doing that under the same name.
ilt
and very fairly, talks about sharing all the knowledge further so that more such organisations can crop up
fakedang
Short selling is extremely stressful and mindspace-heavy, especially if you're going with a global approach like these guys. It makes sense to exit once you've made your cheese.
Some of the team members clearly want to continue, and have his blessing in it. Still others want to get hired elsewhere too. All of these are normal. The Hindenburg name will carry them far.
Him open-sourcing them (for free) is so that others may continue the fight against unscrupulous market players. That's just his Principles.
What he's doing is the smart thing. The employees are likely worth a few millions and debt-free, while he has made enough to fund a small family office. The smart thing would be to leave the game, especially when as an outsider like him, you don't have the connects to fundraise (which is what most fundmanagers tend to spend most of their time on these days). IIRC even DeepFuckingValue did the same.
icehawk
Honestly? That feels like a more genuine explanation. Business say they reasons for doing things, but I've not seen a high level decision maker that isn't eventually just "going with his gut."
At least they're honest here.
revendell_elf
[dead]
nipponese
Even Buffet shutdown his first successful firm in 1969.
intended
Being cautious is good.
It IS possible, that this person is doing it out of passion, rather than a typical idea of a job or firm.
TLDR: Within the realm of possibility, relatively unusual.
fsloth
” relatively unusual.”
Hindenburg was anything but usual IMO so fits the picture.
There is a type of person who needs to re-invent themselves over and over.
blackeyeblitzar
Is this a decision to avoid litigation? I’ve seen people post analyses that disprove Hindenburg’s claims. And recently Supermicro’s independent auditors didn’t find the same issues Hindenburg claimed. Is it possible they’ve basically got rich from misleading attacks on stocks and are now shutting down to avoid something bad? Basically cashing out on their short positions?
EDIT: since I am rate limited, here’s my reply to the child comment from peepeepoopoo100
When EY resigned, it was because there was a long list of things that the independent review said needed investigating. But none of the issues had been actually investigated yet. Since then, my recollection is that there have been at least two independent reviews that have been fully completed and confirmed that the financial reporting of the company was accurate. And nothing had to be restated to the SEC, nor has the SEC asked for any changes.
Basically the big 4 auditor jumped off the ship, based on allegations and potential issues and nothing concrete, and they did not stick around to do the actual work they should’ve done. Instead of seeking answers, they made a vague accusation that the company might not be acting with integrity and ethics and left.
peepeepoopoo100
> And recently Supermicro’s independent auditors didn’t find the same issues Hindenburg claimed.
What are you on about? Their Big 4 auditor resigned and said that nobody should trust anything that the company's board says. Are you referring to the one (1) person they hired and paid to clear themselves of wrongdoing?
floydnoel
i've heard of EY cowardly doing the same thing to other companies. it is even mentioned in "the hard thing about hard things" iirc.
baq
There’s a promise at the end, we’ll see if it’s kept.
davidw
> In May 2022, Hindenburg took a short position in Twitter, Inc. following the announcement of its acquisition of Twitter by Elon Musk. After Musk's attempted termination of the deal, Hindenburg took a significant long position on Twitter, betting against Musk on the acquisition to close.
Something about that individual coming to power along with the other oligarchs? The coming political climate looks to be one where money is more important than the rule of law (even more so than usual), which might be bad news for a business like that.
sillyfluke
>The coming political climate looks to be one where money is more important than the rule of law (even more so than usual), which might be bad news for a business like that.
I think this is the correct answer for explaining the timing of this announcement at least. It's one thing to use your media to fight your short sellers, it's another thing when you become the government and start fighting your shortsellers with the entire political and "judicial" apparatus in order to keep the market irrational. Or force it to accept the new reality.
engineer_22
The statement by Nate Anderson does not contain any explicit or implicit connection to Elon Musk, Donald Trump, or the political climate. It's disappointing that you believe "money in power" is a new phenomenon uniquely exemplified by Elon's burgeoning interest in politics. Cuomo's monologue during the DNC about the falseness of "grass roots political power" in the United States is right on the mark. Biden's warning about "oligarchs" was awkward and insincere.
davidw
I said nothing about it being 'new' though, did I?
sgerenser
I’ll always remember them for exposing the Nikola motors fraud: https://news.ycombinator.com/item?id=24436721
_fat_santa
I think their two biggest breaks a Nikola and WeWork. Jesus I still remember the days after the WeWork short report dropped, crazy times.
steve_avery
Wow, this made me really emotional. And even though I definitely did not expect a chill Bali DJ set as the motivational link, it also resonated with me in some way.
I can't think of a more honorable way to move through life. I liken the act of closing shop at this point for Hindenburg to the legend I know of Cincinnatus, the Roman emperor who did the job of emperoring and went back to his fields when it was done.
It also moves me how the team is described, as being from whatever background, but all moved by the same fire. I wish that I could be a part of something like that. What the hell am I doing with my life?
dabauws
Being pedantic here, but Cincinnatus was never Emperor. He was, though, twice given "Dictator" powers by the Roman Senate during the Republican era.
bihla
Did he... link the wrong URL at the end of the post? I thought for sure it was going to be some sort of heartfelt speech, or motivational message, or something. But it's an instrumental DJ set which seems totally out of left field
dgfitz
> P.S. If you are chasing something you think you want or need, or are doubting whether you are enough, take a minute and give this a listen. It had a big impact on me at a pivotal time.
He shared something that helped him at a pivotal time. Your expectations are your own. :)
SapporoChris
The right music at the right time can be transformative.
bb88
I remember listening to the theme song for "The Social Network" often when I was frustrated at work about 12 years ago in a different job in a different state in a different life.
Scala & Kolacny Brothers -- Creep
It's a haunting choral cover of the Radiohead song.
masto
I was working at a dead-end IT job that was eating away at me because the company was a terrible fit, and I couldn't help but wonder if I could put my skills to better use than clearing paper jams and running mail merge reports. But the easy path was to just keep doing the same thing every day.
One day on the way in I was listening to Jonathan Coulton's "A Talk With George" (https://www.youtube.com/watch?v=AXk5dXYw728) and it kicked me in the face with:
Don't live another day unless you make it count
There's someone else that you're supposed to be
There's something deep inside of you that still wants out
And shame on you if you don't set it free
That being said, I had the same reaction to the link at the bottom of that post; I recognize anything can be transformative to the right person at the right time, but I struggled to identify the message in an instrumental DJ set.
MrDresden
For me that was hearing "Stellardrone - Breath in the light" a decade ago during a very stressful work period.
Now it is my go to, in stressful times, when I need to focus and gather my thoughts.
gordon_freeman
Like listening to “Lose Yourself” before every major interview. :)
netsharc
And the highlighted comment on that video (because it's got a lot of upvotes) is "Who's here because of Hindenburg?"...
I suppose all the research work, that comment, and the 750+ thumbs-ups, and my cynical meta-comment all brought value to the world. But I'm only sure of one of those things.
Cyph0n
I actually skimmed through looking for when the inspirational talk starts.
Over2Chars
I had the same idea. Maybe it's a subtle message?
Everyday, at the same time, in the same place, play that instrumental DJ set and with a blank document write down whatever comes to you.
Let me know what you find.
elbear
It's funny, because your comment made me go back and click the link. If it was some motivational speech, I wasn't interested (that's why I didn't click initially). But I actually listen to instrumental DJ sets and Cercle is one of my favorite YouTube channels. So thanks! :)
elbear
Ok, I listened to half of the set and it's not my style. This is what I like: https://www.youtube.com/watch?v=n_LcVqqHSY8
Jagerbizzle
I was pretty amazed to see him link this particular Lee Burridge set from Bali. I’ve watched/listened to it many times over and it never fails to put me in a happier state of mind.
harry8
But if you're into it, Ben Boehmer in Cappadocia, The Blaze atop the Aguile Du Midi in the French Alps are a couple of the many gems in that same series of Cercle sets.
yard2010
Cercle is a gift to the world. For anyone that didn't receive the gift yet - they're organizing great DJ sets in special locations. Multiple times I've put something to listen to, and found myself watching the whole show.
defrost
For myself at least that was a wild behind the curtain reveal; for a group that's had such a profound impact exposing some of the better kept secrets of some of the worst people and companies, Nate presents himself and his associates as surprisingly ordinary day to day types armed with grit and determination.
troad
In my experience, people tend to grossly overestimate the scale of publicly known organisations; the more publicly known, the vaster and more faceless people imagine it to be.
Over2Chars
They are short sellers, were you expecting roided out pro-wrestlers with tats and wild hair or something?
defrost
Absolutely, it's well known that Jane Street and other major traders draw heavily on the former WWW stable for their short staffing.
fuzzfactor
>exposing some of the better kept secrets of some of the worst people and companies
Some of the worst could be the most likely to make you an offer you can't refuse . . .
motohagiography
Hindenburg Research and Muddy Waters are like heroes to me. It's one thing to have an opinion about corruption, another to maybe be a whistleblower or activist, but to take levered bets against corruption and win is next level.
Almost every time I see a dark pattern in tech I think there should be an opportunity to bet against it. Certain companies I can think of who appear to be faking their MAU numbers with "urgent notices" to login to obviously abandoned accounts, or who won't let you close an account even though there's no way to get the balance out to close it, both seem like opportunities. Still others, who appear to gamify their notifications to drive DAU numbers seem as bad as twitter's pre-musk bot problem.
part of the case for breaking up some of the platform companies is that they protect some shitty practices from the market by having a behemoth to bail out products that wouldn't survive on their own, and they create a huge barrier to market entry against desirable products.
the page seems to be hugged to death, but whatever the case, congratulations. they are, and should be an inspiration to others.
paxys
Getting out while they are ahead is a smart move, especially considering multiple governments have started to take a closer look at their shorting tactics.
CyberDildonics
Their "shorting tactics" ? You mean doing extensive well sourced research that convinces other people that their position is correct?
aprilthird2021
I'm assuming when he says "governments taking a look at" he means like the Indian government and it's more of a Mafia-type "taking a look at" than a serious inquiry with any actual merit. A strongarm type thing
Over2Chars
I think its brought attention to numerous cases of accounting and other shenanigans.
What I've noticed, casually, is that they often target companies or management with a pattern of fraud and abuse, and surprise they keep doing it.
VP of Sales gets slapped on the wrist for illegal tactics?
A few years later he goes on to be promoted to CEO and.... does the same thing!
Amazing.
rajup
Pretty big allegations without any source.
adastra22
They interview people involved with these companies, then based on these interviews write report that is privately distributed and take out coordinated short positions.
That’s almost the definition of insider trading. Almost. Now afaik what they are doing is nominally above board, but they are walking a very fine line.
In less than a week a president will take power whose chief advisor has a really big grudge against short sellers.
Getting out now is on point for Hindenburg.
hiyer
I wouldn't say they were ahead at least in terms of reputation. They targeted India's Adani group and failed. The Supermicro "revelation" was also a damp squib. I suppose they made plenty of money with their short-selling though, so in that sense they are, perhaps, ahead enough.
fakedang
Only failed Adani because they misunderstood how deep the Indian government would go to join in the cover-up, instead of actually investigating it.
The Big 4 auditor for Supermicro literally quit, citing concerns. It's the SEC's job to do the investigating (and it's failed badly and likely to fail more with the coming admin).
mkagenius
I wouldn't be surprised if Adani just asked "How much money will you make in your life time?" And just offered the same to close the firm.
omcnoe
Supermicro stock is down 40% from the publishing of the report, hardly a damp squib.
jojobas
Looks like the jury is still out on Adani.
arrowsmith
Can someone give me the context please? I’ve never heard of this organisation before. What do they do and what are they known for?
sixhobbits
I'd really recommend Matt Levine's various columns on this. Here's one [0] - it's paywalled, but if you sub to the newsletter you get the full texts for free. Not sure if you can get historical ones, but I'm guessing he'll talk about it again in the next issue this or next week. I added the excerpt here [1] too. Very entertaining and informative take on most things finance.
[0] https://www.bloomberg.com/opinion/articles/2024-07-02/people... [1] https://telegra.ph/Hindenburg-01-16
djyaz1200
They published about Carvana 13 days ago and now are disbanding... https://hindenburgresearch.com/carvana/
Over2Chars
Stone cold assassins indeed. We need more people like him.
sciurus
For anyone needing an introduction to Hindenburg Research: https://nymag.com/intelligencer/2022/01/nathan-anderson-hind...
ilamont
Has anyone else publicly copied the Hindenburg investigation/financial model? It's not proprietary AFAIK.
steveBK123
It's a hard business to make money in. Shorting tends to be intrinsically harder because the market goes up over time and Americans are generally optimists. Plus the last 2 years we've seen 20+% market moves upwards.
Despite it being a necessity for functioning markets, when you are short, seemingly everyone is against you - business management, regulators, media, etc.
Not surprised to see them bow out. Chanos did so last year.
This is one of the reasons frauds go on so much longer than you'd expect - no one wants to hear the truth.
tart-lemonade
People have this idea that short sellers are market manipulators who conspire to wipe out innocent day traders' life savings and trigger mass layoffs with the stroke of a pen (hence the term "financial terrorism," which is absolutely comical in its hyperbole but used with complete sincerity by the anti-short crowd), but like tines said, it's a risky business that requires lots of research that frequently goes nowhere with limited upside and uncapped potential losses. The amount of times they and other short sellers publish damning evidence on a company only for the stock to shoot back as soon as the company releases a "nothing to see here" non-response really shows the difficulty in making money in the space (and how much people want to bury their heads in the sand).
Given the regulatory environment we are heading into, I expect short selling will become an even riskier business since the SEC isn't going to be prosecuting fraud anymore (or rather, they'll be doing even less than they are now), making it much easier to sic the lawyers on firms like Hindenburg. Even though this isn't their stated reason for bowing out, I wouldn't be surprised or hold it against them if it was a factor.
Over2Chars
I think the prospect of an impending SEC or other investigation is only one factor in stocks losing value.
They highlight inflated sales and financial irregularities like a chain of companies that engage in self-dealing, but are portrayed as independent to hide their real ownership, and so on.
If you believe what they say, your faith in the company is shaken because they're pulling a con job on you to invest in them and believe their story. If the SEC investigates that just supports the claim that it's a con.
If they don't investigate - for whatever reason - it doesn't mean that it's not a con and you won't lose all of your money believing it.
So a change in the regulatory environment is only one element.
For example, the Modhi/Adani thing is outside the reach of the SEC. And after watching a piece on it, apparently shorting it was amazingly tricky, and they had to go through some Singaporean markets to arrange a short position.
jonstewart
SEC Commissioners turn over slowly. It is not quite as independent as Fed, but more independent than most agencies.
gimmeThaBeet
Matt Levine always has the good stuff, but he had commentary on a profile of Jim Chanos (the lesson not necessarily being specific to Chanos) that always sticks with me. The profile that discussed the idea that the real sort of 'secret sauce' was that the combination of Chanos' main funds were like 190% long, and then 90% the short stuff he wan known for.
On its surface, nothing crazy for long/short funds, the notable part was that basically all the effort was on the short side, and the long side was implied to be very humdrum. And the short book had like negative returns over a long period. It just struck me as a really elegant (if extreme) example of what uncorrelated returns can do if you do somehow have some edge over time.
And I'm not sure what Hindenburg's holistic picture is, but whether rightly or wrongly now I usually assume most of the kind of very public shorts operate similarly. I was never really on board with the "short sellers are evil" train of thought, but I did believe, "oh these very public short sellers only short things, they just go around all the time thinking everything is awful". And my assumption now is that they are like, kind of really theatric long/short funds.
Matt had some line like if you extremely good at something, you can get rich doing it, even if it loses money. As long as it's not correlated.
cushychicken
I’d wager a big part of how they make money is as SEC whistleblowers. It’s not as huge of money as shorting is - but it’s typically a single digit percentage of the recovered fines. Considering these guys nailed a company that defrauded people of $3 BILLION dollars, they’d net $30 mil from turning that company in even if the payout is only 1%.
The SEC has a policy of paying out part of recovered fines as bounties to whistleblowers to align incentives. If your company is doing something sketchy, you get a payout by doing the right thing.
I’m not a lawyer but I think that mechanism works just as well if you’re an external reporter of fraud. SEC makes money and pays you for your diligent forensic auditing.
yieldcrv
Its 10% to 30%
where did you get 1% from, its a really good bounty system to clean up the markets and you get to be anonymous if you use a lawyer, the trick is to get the SEC to prioritize it. They are now inundated after some large payouts made the news in financial circles
hn_throwaway_99
Do you have any evidence/links that discuss this? I'd be surprised that they'd get any whistleblower fees, because they themselves aren't actually the whistleblower. E.g. a whistleblower usually refers to actual insiders with private knowledge that then "blow the whistle". In Hindenburg's case, they basically just did research anyone is capable of doing (although in many cases, after they became known, they did have whistleblowers reach out to them).
tines
> Shorting tends to be intrinsically harder because the market goes up over time and Americans are generally optimists
Also, with shorting the best you can do is double your money (if the stock goes to 0), while you can lose an unlimited amount (as there’s no cap on a rising stock); whereas with going long, you can only lose all your money (again, if it goes to 0), but you can gain an unlimited amount.
ryandamm
Except for leverage... but the general point remains that the upside is capped and the downside in theory is not.
dktp
This is incorrect. The way shorting works is you borrow a stock (and keep paying premium for the duration) and sell it
Premiums are usually small, so you can make many multiples of paid premium
And since their business model is releasing the findings, which in turn makes the stock drop, they can time their short position very well and don't need to pay premiums for long
handfuloflight
See put options.
1024core
> Shorting tends to be intrinsically harder because the market goes up over time and Americans are generally optimists.
... and the market can stay irrational longer than you can stay solvent.
I remember once I tried shorting a stock, of a market leader in my area. I knew the field well enough to see that they were trying to fudge some numbers and their quarter was _not_ as good as they had claimed it to be.
But sadly the market didn't see this and the stock went up. E*Trade started pushing me to cover my positions, and eventually I ended up losing a 5-figure sum (nothing earth-shattering, but still a good chunk of my cash).
After I had bought it all back, slowly the market realized what I had seen and the stock dropped as I had expected. Unfortunately I did not have the deep pockets to stick around long enough; all I was left with was a hole in the wallet and a hard lesson learned.
xsmasher
Somebody say the thing please
JamesLeonis
They are planning to release their methodology. Buried in the article:
> Beyond my own desire for relief, it also feels selfish to keep the knowledge we’ve accumulated trapped within our small team. I have more than enough. In the past several years we’ve been flooded with thousands of messages from many of you asking how we do what we do, or whether you can join the team. I read them all and I’ve been trying to figure out how to respond in a way that can answer everyone—so over the next 6 months or so I plan to work on a series of materials and videos to open-source every aspect of our model and how we conduct our investigations.
Over2Chars
Aside from the obvious risk of short selling is the tornado of lawsuits and threats that arise from targeting shady companies.
Just because some company is accused shenanigans or breaking the law doesn't mean they won't try to litigate you out of existence.
Or that they don't have associates with baseball bats who might visit you in the night to discuss your "bad choices".
It takes some real minerals.
paxys
What they do isn't anything new or revolutionary. Short sellers have existed ever since public markets have existed. See Muddy Waters Research, Citron Research, Kynikos Associates, Pershing Square (famous for their crusade against Herbalife), Gotham Research, all of the Big Short folks. And these are just the active ones.
ipsum2
There's quite a lot of short sellers that publish their research.
karel-3d
You need to have a very thick skin, because the shorted will come at full force against you.
I have read somewhere (long ago forgot where) that the only country this can work is America; in other countries, he would need to be scared for his actual life. Adani, for example, is in bed with India government.
I've ironically lost more money the more closely I've paid attention to my investments because I was naively confident in the market's ability (or as I've come to suspect, willingness) to react to evidence of fraud.
The amount of deceit put out into the world and gobbled up, on purpose, in business is obscene and seriously depressing. The magnitude of damage to psyches and thus economies that anyone acting in a fraudulent manner in finance creates is far-reaching and immeasurable. Punishment for financial crimes should be calculated based on the average lifetime earnings of a citizen -- if your victims are folks earning at or below the average wage, and you've scammed 100 lifetimes worth of average earnings, it's as if you've murdered 100 people.
Hindenburg's reports were a true pleasure to read, and their track record proves their positive contribution to society. Many self-important people online are quick to pounce on short sellers as being evil, and that will forever be a serious red flag to me thanks in no small part to Nate Anderson and the folks at Hindenburg Research.