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Investing/Strategies / Shorting Stocks
|Subject: Re: LT investors, think before you short||Date: 3/16/2001 3:35 PM|
|Author: bfeddish||Number: 7734 of 44599|
>>Do not go with the trend (shorting) if you are NOT a professional, a true professional, trading with millions of your money, or hundreds of millions of other people's money. If you're a small long term investor with a couple of hundred thousand in equities, you are as ill equipped to short as you are to set a new deep sea diving record or para-glide from the side of a 12,000 foot mountain. <<
I'm confused. What exactly is a professional? It seems the professionals told me to buy eBay, Amazon, Yahoo!, etc. when they were hot. They said, it's the “New Economy”; you don not need to make a profit as a new economy company. Lets take Yahoo! For instance. It was a hot stock to buy for a while. I sat on the sidelines purchasing blue chips and other “quality companies”. I could not bring myself to buy it and here's why. I am a software developer and Yahoo is a search engine. A piece of software that I could probably write in a few days. That's it. So someone thinks this is worth billions of dollars? “But they have adds..they are a content aggregate” everyone says. When was the last time anyone out there has clicked on an add and bought something out to the blue? Companies are going to start to realize the money they are dumping on these Internet companies is going to waste. So there I sat on the sidelines as this stock went up and up. The “professionals” kept saying “buy it” all the way up to the top. They are still saying this today. Well my belief is the company is worthless. I don't care about it's “business model”. I took advantage of shorting Yahoo! from about half of it's highest peak. Since I unfortunately started investing in stocks about <2 years ago most of the stocks I've gone long on went down as people dumped their money in tech stocks. I've made my money back shorting some of those dot coms (AMZN, YHOO, EBAY, HITS). As far as I'm concerned, the dot coms were a pyramid scheme that shifted the money from the average person the professional's pockets. Look at Amazon. Is this a joke? This Jeff Bezos was plastered over every magazine cover as a “business genius”. As far as I'm concerned, he was just in the right place at the right time. How can a business sell things for less than they are paying for them? This is a good “business model”? When Amazon first started, they had an excellent web site for it's day and they had excellent customer service. I often received the books, well packaged, the next day even though they were shipping 2 or 3 day. Now, a few years later, their service is much worse and it takes about a week or two to get a book. Bezos is laying off people saying “this will improve customer service.” Um, yeah. I don't think this company will ever make a profit other than the billions Bezos is walking away with. I've done my math, the money the company is lacking seems to be less than Bezos has in the bank. I'm not going to invest in this company.
>> At this point you want to be researching like crazy, searching for those issues you want to own coming out of this mess. At this point you want to set your head up, your psyche up, to be ready to buy the best issues you can select. DO NOT presume that the last greats are the next greats. <<
This is very sound advice. Unfortunatly I find this difficult. I keep looking over so many companies' financials and they all have such high valuations, high inventories, etc. It's tougher for me to make a decision on what to go long on right now than what to short. With such high valuations many of the stocks I would like to buy could drop in half at any time. Getting back up again will probably take years. Over the last couple of months, I was surer that Amazon and Yahoo were going to drop in half than I was convinced that many blue chips would not. The dot coms are low now and I will soon be covering them and taking my profits. I can then wait for the smoke to clear and start investing again.
No, I'm not a professional but I got into the market at the end of 1999 and watched my money disintegrate starting in March. After shorting I have it all back plus 20%. It's just I was a little taken back by this post that told me I am ill equipped to short without saying why this is so. From the context it looks to me that only the professionals should be allowed to make money, not the average investor such as myself.
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