With a bit more experience, I can appreciate 3 of the many lessons _The Art of Short Selling_ teaches:
1) Fundamentals drive market action...eventually
2) It is often a costly mistake to short a stock simply because it apepars overvalued. A catalyst of some sort is needed to encourage massive selling.
3) Markets can ignore negative fundamentals for significantly extended periods of time--giving the astute trader ample time to sell at a profit, or even turn and sell short. Positive fundamentals are more rapidly incorporated into stock prices, but significant inefficiencies still exist on both sides of the market--long and short.
The author uses case histories of significant corporate failures from the 80's and early 90's in light of the publicly available info at that time, which clearly demonstrated the inivetable fall of Wall Street's institutional favorites.
Numerous fundamental techniques are discussed, such as tracking changes in inventory and receivables, as well as tricks companies play to make revenues and earnings appear better than they are.
Also interesting--a high short interest ratio in a stock is often a significant sign of potential trouble in a company. Do not let those analysts lead you to believe a high short interest ratio is always bullish. Check the fundamentals and make your own call.
Qualitative factors are also discussed, with specific examples on how a close reading of public financial data on one company would have lead you to a profitable short sale of another. This occurs frequently in the finance and insurance industries.
This book is especially important, because every book I've seen teaches which stocks to BUY on a fundamental basis. No book ever mentions what fundamental factors suggest you SELL. Even if you never sell short, this is profitable info.
Being a student of technical analysis, what struck me is the insight those skeptical shorts had about the companies mentioned. Clearly, they knew the eventual outcome in each specific instance.
Yet, despite being right, most of these guys lost millions by going strictly by fundamentals. Those who survived incorporated additional (ie. technical) factors, such as relative strength or momentum. As Keynes stated, "The market can remain irrational much longer than you can remain solvent."
It is clear to me that using both fundamental and technical analysis is the most efficient path to market profits.
Concerning the valuation insights, Staley is a bit assuming for the newcomer to basic financial analysis, but not so much so that newcomers can't benefit at all. As an aside, the book contains numerous typographical and grammatical errors which make one wonder if the book was rushed to publication.