Sometimes the Hustler Gets Hustled

Warren Buffett has deservedly built up a reputation over a number of decades as a seemingly unflappable investing legend. But in any business involving speculation (his famous "buying a farm is not speculation" analogy, notwithstanding) there will be many instances where event the smartest, most liquid, successful, in-the-know players will be made to look like fools. It may not last very long for them (see: autumn 2008), but they do indeed take a bite of some humble pie. 

Thus, with hurricane season turning out to be a doozy this year, I went short the "B" shares of Berkshire Hathaway earlier this week inside Market Chess Subscription Service, at $177.65, if nothing else as a hedge versus my open equity longs.

There are a few reasons why shorting Berkshire was competing to me:

1) This is a mega cap stock and not going to get bought out

2) Berkshire does not pay a dividend (which means I, as the short of common stock, would not have to pay the divvi)

3) Berkshire has considerable insurance and financial sector exposure, both of which are getting hit this hurricane season

4) The stock looked ripe to break lower from the bearish rising wedge, highlighted below on the daily chart for BRK.B. 

I want to stress that I am not writing this blog post to gloat about some far-fetched "Chess versus Buffett" duel, since I already took partial profits for a very modest win (again, this was more of a hedge play versus my longs). 

Instead, we want to reinforce the idea that stock market dogmas about certain sacred cows like Buffett can be absurd at times, and it is likely true that the market is beginning to price in the negative effects Berkshire will feel from the hurricanes, among other headwinds. 

Going forward, Berkshire falling to its 200-day moving average is not out the question, possibly even the $160 level. But the stock is already oversold at its 50-day moving average as the initial insurance/financial selling has been set in motion. 

If the stock stays below $175 and especially $180, I would remain fairly bearish on the name for the near-term.