SHORT INTEREST RATIO VS BORROW COST - OR HOW TO AVOID SHORT SQUEEZES

Short interest ratio is easier to find and easier to analyse, but it won't help you avoid short squeezes; borrow cost does a better job.

I was having lunch with an old fund manager friend, and we were talking about my recent post - the three profit centres of short selling. I suddenly realised we were getting short interest ratio and borrow cost of a short mixed up. If veteran short sellers could get this concept confused, then anyone could. I thought I would do a quick presentation on the difference between the two and why it is important to distinguish between the two. In my view, borrow cost is a much better metric to look at, as it will be more likely to help you avoid career ending short squeezes.