The Most Dangerous Trade

Chapter 7Kass: Nader's Raider Hits the Street

Doug Kass's journey into short selling began at a harness-racing track at the Lycoming County Fair in in Williamsport, Pennsylvania. Going into the home stretch he was in the lead, driving a three-year old standardbred horse, Bacon, under sunny skies. Kass, a New York money manager, describes himself as obsessed with the sport of kings, hooked on the speed, excitement, and of course, the magnificent horses themselves. “I owned them, I bred them, I raced them,” Kass says.

That July morning in 1990, danger lurked. The leather collar that held up Bacon's head, called a martingale, had worn thin. As the two neared the finish line, it snapped and Bacon stumbled, overturning the sulky and spilling Kass, then 44 years old, onto the track into the path of trailing horses and their drivers.

Bacon escaped injury. Kass did not. The tumble and trampling collapsed Kass's liver. It shattered his left fibula and tibia and broke seven ribs and nine vertebrae.

Kass was airlifted to New York and Mount Sinai Medical Center in Manhattan, the start of a two-year convalescence in a full body cast. His agonizing recovery gave him time to ruminate about life as well as investment ideas—more to stave off boredom than to turn a profit. “I had to do something because I was going crazy,” he says.

By early 1992, still in a cast, Kass had turned his attention to a white-hot market darling—newly public Marvel Entertainment, the comic book publisher whose characters ...