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Investing/Strategies / Shorting Stocks
|Subject: Re: Why shorting is not Foolish - an opinion||Date: 4/21/2000 2:00 PM|
|Author: drking||Number: 6629 of 44593|
Interesting post, and undoubtedly well-intentioned. However, it unjustifiably paints short-selling as an activity undertaken by humorless, rapacious, downright mean people who, somehow, lead to the further decline and ultimate demise of the companies they have shorted, then dance on the grave of that company with evil glee.
Let me first state that short selling is not for everyone, and does indeed require a somewhat different mind-set than that required for low-maintenance LTBH investing. Shorting can be very dangerous, and requires close monitoring of your positions. With rare exceptions, I would never ever short a stock unless I knew I could monitor my positions daily over the course of one or two weeks until I covered. Therein lies the difference b/n LTBH and short selling: unless you are an active investor willing to do the work needed for your investment to pay-off, do not short.
I don't know about others here, but I am in the market to make money. Pure and simple. I do not want to spend my golden years working under the Golden Arches. One means of making money in the market is through LTBH, and that works very well for many people. Including me: about 75% of my portfolio is in LTBH stocks. Shorting stocks is another way to make money in the stock market.
When I short a "new new economy" company with no earnings or a P/E over 1500 that has risen in price over 300% in the last 6 months, and walk away with a 10% return in less than a week, I am educated about the fickle nature of the market, I am certainly enriched, and, quite frankly, I am amused that I could make such easy money on so obvious of a play. Are the employees of ITWO or ARBA out on the street because I shorted their company's stock? Of course not. Would it be better to go long in these firms? Maybe, but why risk it in this market? Have I contributed to the an overall store of ill-will? I don't know. I do know that the instutional investors who are dumping the stock I have shorted don't care about me or anybody else, other than their bottom lines. Yeah, I feel sorry for all those folks who were so heavily margined that they had their positions sold out from under them, consequently increasing my short position profits. I hope they found the experience educational and will avoid margin in the future.
Fund managers and other institutional investors move these markets, and they are in this for only one reason: to make money.
As I began, short selling is not for everyone, and each investor must determine his or her comfort level with any particular investment strategy. I short to make money (and to hedge my long positions). I don't have a philosophical problem with that and I do not think that my short selling harms the firms I short (in fact, when I cover I am actually buying shares of beaten-down stock).
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