Wells Fargo equity chief: Shorting anything is ‘playing with fire’


John Manley, chief US equity strategist for Wells Fargo Funds, spoke to Business Insider on July 11, 2017, where he discussed his views on shorting stocks, and explained why a healthy dose of pessimism is always good for an investor. Following is a transcript of the video.

Joe Ciolli: So on the topic of crowded trades, there’s also the low volatility trade. People betting that the market isn’t going to go anywhere. That’s been a very popular trade. We’ve seen, you know, a lot of people piling into sort of these VIX ETFs and shorting them. That’s also been kind of highlighted as maybe a potential disaster, in the waiting, for the market, if that were to unwind if we were to get some price swings. Are you afraid of the low volatility trade? Is that also an overcrowded trade that maybe inspires some uncertainty?

John Manley: Well, you worry about being — anytime anyone goes short, it’s like playing with fire. Short anything, you’re playing with fire. You’ve committed to something you don’t own, and it’s a tricky situation. We’ve seen remarkably volatile politics and a remarkably unvolatile market. How can that be explained? The only explanation I can come up with is: we expect the worst. It’s an old saying, if you expect the worst, you’ll never be disappointed. And no one’s been disappointed yet. Now they will be at some point in time. But I think that there’s still that wall of worry. Why hasn’t it gone down? When is it finally going to get it? This is been going on for 5 or 6 years. Maybe it’s tomorrow, but I’d rather see it tomorrow and sell it a week after tomorrow than try and anticipate it because anticipation has been the wrong thing to do.