James is an unusually clear eyed analyst:

“In good times, few focus on such ‘mundane’ issues as earnings quality and footnotes. However, this lack of attention to ‘detail’ tends to come back and bite investors in the arse during bad times. There are notable exceptions to this generalization…

Contrary to the silly populist backlash which sees short sellers as rumor mongers and conspirators, they are actually amongst the most fundamentally driven of all the investors I interact with. Rather than being some malignant force within the markets, in my experience short sellers are closer to the accounting police (something the SEC once purported to do!).

Whilst companies often accuse short sellers of lying and conspiracy, it turns out that the accusers are often the guilty party. Owen Lamont from Chicago University has examined the battles between corporates and short sellers in the U.S. between 1977-2002. He found that ultimately it was the shorts that were right; the stocks underperformed the market by a cumulative 42% over three years after the start of the battle.”

-James Montier
Mind Matters: Cooking the books, or, More sailing under the black flag
June 30, 2008

via Welling@Weedon