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Author: XXLTINVESTOR Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 44596  
Subject: LT investors, think before you short Date: 3/16/2001 2:33 PM
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If you are only on long, and on margin, pray for luck. If your longs are fully paid for and your shorts are the only ones on margin, you should be a survivor

If you are a Long Term Investor or one with an outlook which exceeds this afternoon, NAKED Shorting or Shorting against the box is as unrewarding a gamble (for almost all investors) as is buying as a top is forming.

In addition to all of the obvious signs, and the smell of fear from those investors around you, down and down and down, etc. is a key part of the formation of a bottom. Relative strength of those remaining strong eps and rev issues in the trashed sectors that took you into the death dance is another key. Blood red screens, huge overbearing dec vs adv, etc. all signs of growing panic, of the vertical part of the huge Tornado (or any similar name) steeplechase, and of the sure knowledge that you are approaching a rest area usually referred to as the bottom. Capitulation is rearing its ugly head. Keep yours focused.

If the decline reminds you of an extended large firefight you actually survived, you're about to get through it if you keep your wits about you and get into the resting area. Everyone gets a wound, a cut, a bruise, but those who do not lose it, get to be able to repair the pain and the damages.

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.

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. Price vs FUTURE fundamentals for the next 2 years (set a target – elections – 11/02 is as good a target as any) because by then this firefight will be a harrowing memory, but still a memory. And, if you select well now, you win. Those who “step out of the box” as the thwack from a hit into that log above your head, who forget their training, their focus, their sight lines, their responsibilities to themselves, their families, their associates end up either lucky or unhappy.

Take clean sheets of paper. Write down the sectors you want to own on 11/7/02. Then write down the issues you think are suitable. Get prepared for the next bull.

If you short that means you have to make two decisions – cover the shorts and then buy the long-term investments. Too much for those not a true professional. Stick with the one that fits you, long-term capital gains from well-researched selections.

Good luck
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Author: Gator8387 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7732 of 44596
Subject: Re: LT investors, think before you short Date: 3/16/2001 3:02 PM
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Anyone whose account is 100% invested, or even close to it, at this point should avoid shorting (especially if you are on margin).

This is because you probably lack the acumen to short successfully. You do not have to be a "professional" to short successfully, but you do have to be bright, have the capability to exercise independent judgment, and have the skills to conduct fundamental analysis of stocks.

Anyone who considers themselves "long-term investors" should avoid shorting, because they are necessarily passive investors who follow the herd.

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Author: edMulroy Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7733 of 44596
Subject: Re: LT investors, think before you short Date: 3/16/2001 3:33 PM
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Yes, for long term investors who fear the downside, it's probably better for them to buy puts rather than shorting. The possible loss is much smaller.

. Ed


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Author: bfeddish Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7734 of 44596
Subject: Re: LT investors, think before you short Date: 3/16/2001 3:35 PM
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>>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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Author: bfeddish Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7735 of 44596
Subject: Re: LT investors, think before you short Date: 3/16/2001 3:53 PM
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I forgot to say something about eBay. I think this is an excellent company that actually has a sound business model. I use it all the time as do millions of Americans. It think this company will be around for years. I am actually looking forward to going long with this company but not at the current price. When it was it the 30's the "Analysts Reports" said it would be $57 by years end. Just like in the old days of the internet frenzy, guess what happend to the stock the next couple of days. I just had to short it in the 50's as I am sick and tired of what the analysts say and how the sheep just jump on it. If I use the "Fools" method of evaluating a stock, eBay is maybe worth something in the teens. I think I'll pick some up then and hang on for a while.

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Author: XXLTINVESTOR Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7741 of 44596
Subject: Re: LT investors, think before you short Date: 3/17/2001 1:38 AM
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Gator 8387
I respect your opinion, and thank you for your similar thought in your 1st paragraph.

I am sorry I did not properly convey the point about shorting and being a professional. I meant that now, after 3000 NASDAQ points down, this Clinton/Gore bear market is either close to a violent conclusion, or gasoline is going go below $1.00 before long from lack of demand. And if someone, no matter how capable were to start to short stocks now, and they were not a professional trader, then they could be making either a mistake or get lucky which is, in and of itself, also a mistake - it just happened to turn out profitable this time.

In non-violent conclusionary times during choppy or bear markets, anyone can go short big stocks. It is now that I addressed. And, I hope that it is of value to those who are either following the herd recently, shorting, when such is not the best act at this time, unless one is a profesional or are being advised to by their broker(s).

Where we may have a polite difference of opinion is the matter of a long term investor being essentially passive, and therefore, unable to short. Especially when short against the box is the best protection tool a LT investor has during choppy or bear markets.

Personally both naked and vs the box shorts are used. Tried to do hedging years ago and found out that in bull markets it's like water skiing while draging an anchor -- no matter how powerful the engine, it reduces the benefits of going forward. So, I concluded that hedging is also for choppy and bear markets, but that is a personal opinion.

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Author: XXLTINVESTOR Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7742 of 44596
Subject: Re: LT investors, think before you short Date: 3/17/2001 1:44 AM
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thank you ed mulroy

I agree. Buying puts respects capital if wrong. But now, with put premiums @ four times credit card interest, it's tough.

Actually, I've never bought puts. Written covered calls if the thought is choppy, but not if the thought is bear (a few points of protection vs tons of points lost in a bear is probably the reason)

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Author: BWRobin Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7746 of 44596
Subject: Re: LT investors, think before you short Date: 3/17/2001 12:41 PM
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Do you have a list you would like to share?



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Author: spedblavio Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7751 of 44596
Subject: Re: LT investors, think before you short Date: 3/17/2001 5:24 PM
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I am sorry I did not properly convey the point about shorting and being a professional. I meant that now, after 3000 NASDAQ points down, this Clinton/Gore bear market is either close to a violent conclusion, or gasoline is going go below $1.00 before long from lack of demand. And if someone, no matter how capable were to start to short stocks now, and they were not a professional trader, then they could be making either a mistake or get lucky which is, in and of itself, also a mistake - it just happened to turn out profitable this time.

Yes, the NASDAQ has already come down a long way, and your point is well taken. But that's not the only game in town. I'm seeing a number of 2 and 3 letter tickers with charts indicative of topping out and breaking down below support; issues that have done well since the NASDAQ bubble began to burst but are now starting to rollover just like those Tech charts did earlier.

Try comparing 3-year charts of GE and CSCO for example. GE's current situation looks very similar to CSCO breaking down in December. I doubt that GE will fall quite as hard or far as CSCO has, but I do think that as it looks right now, 30 is likely to be seen before 60 is. Just an illustration.

Not making any predictions, but it could be a different market's turn at the bear slide now. Sectors that benefitted from money leaving 4-letter Tech are now poised to reverse down, or already have. The DOW, until the last few days, was basically sideways and not sharing in the NASDAQ's decline.

Of course, this is all TA talk. I'm not a regular 'round this board, but it seems like folks here are more oriented towards fundamentals. So maybe we're speaking different languages. I don't currently agree with the sentiment that shorting requires serious fundamental research and valuation analysis any more than I feel that way about going long. But then, i'm a TA convert, so that's just my style. I'm not here to debate FA vs TA at all; to each his own.

But that's my take, FWIW. And I am short a handful of 2 and 3 letter stocks because those were the clearest charts/courses of action to me right now. I do have a feeling I'm going to have to sweat out a rally here at some point soon, but I didn't want to be left out of any further breakdown. So, rather than waiting for a reaction rally to short from a little better position, I went ahead and took the shorts and plan to hedge them with some DIA and/or QQQ longs if it looks like things are rallying. But the charts have me pretty convinced that my short positions are good for more than just very short term quickies.

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Author: Gator8387 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7752 of 44596
Subject: Re: LT investors, think before you short Date: 3/17/2001 5:40 PM
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XXLTINVESTOR, I think now is as good a time as any for active investors (those who follow the market reasonably closely, though they may not trade much) to learn to short. I think all active investors should hold some short position, though you are better off if most of your portfolio is long (or cash) at all times.

The warnings I would give are:

(1) Do NOT risk significant money until two years experience;

(2) Do NOT start off with a large position, start with maybe 3% of your portfolio (needless to say, you should have NO margin debt when you do this).

If you have $40,000 in your account with no margin debt, try shorting $600 each of two stocks that you think will fail. Not much money in it, but not much stress either, and a good learning experience. You are taking baby steps.

(3) Do NOT short a stock just because you have lost a lot of money on it, you will get whiplashed.

Personally, I never go long a stock that I would be willing to short, and I never short a stock I would be willing to own. So, for example, since I have held the drug stocks, I will not even think of shorting them.

Why? Because in the back of my mind I consider them good stocks, and will bail out at the worst possible time if I shorted them.

(4) Do NOT have a short-term mentality, stocks do not die overnight. A stock like AMZN may take two years to die.

(5) Do NOT expect to earn 100% returns, or even 20% returns or positive returns, every year. It is much easier to make money going long than short, for the simple reason that the market, over time, goes up, not down. However, sometimes the only way to make money is short. I do both.

(6) DO cut your losses, sometimes you are just plain wrong. However, with very volatile stocks like AMZN or YHOO (I don't short YHOO myself), a 50% or even 100% spike is to be expected along the way.

Expect, at some point in your career, to have one really terrible, horrifying experience shorting, from which you will learn a great deal.

I would urge any active investor to take these steps right now, don't wait until the Nas is at 5000. Will you make money at it?

Not necessarily, but if you follow these rules, you will become a better investor, and have better success with your longs.

You will learn to be a very good researcher (I generally don't use the term DD, as to me DD is something someone pays me to do). You will learn to question your assumptions. You will learn to question the assumptions of others.

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Author: XXLTINVESTOR Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7753 of 44596
Subject: Re: LT investors, think before you short Date: 3/17/2001 11:07 PM
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spedblavio

are you going to use those charts to protect you, to give you a clear cover point?

Shorting GE naked is more fortitude than I have, against the box yes, but naked?? whew?

Maybe you might want to look at the regional banks. I have been long almost every CA and greater NYC metro area one (reason, boffo bull = cash into those areas and good real estate equity to back loans) and am in the process of scaling out of most of them because bear plus capitulation bottom/down market = later decline in real estate and, maybe, loan losses as RE equity slips under principle amount.

Also long a ton of o&g and those banks, but am remaining long as long as I don't see a rerun of the economic problems of the non-o&g economy during the 70's.

TA for me is a confirming indicator (and I'm not that good at it when it gets to the fancy stuff), adds timing to predisposition. So, I am a believer, but a fundamentalist 1st and last. Hope that helps.

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Author: XXLTINVESTOR Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7754 of 44596
Subject: Re: LT investors, think before you short Date: 3/17/2001 11:42 PM
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great post.

great set of rules. Mind of I save them?

Boy do I believe in the don't overstay your welcome or risk losing it all and whacking up your head/psyche so bad it'll take you years to get your head into the proper frame again.

I have been shorting for decades, but mostly as a protective device against a very long term attempt to make money.

The only add I might suggest is to use shorting to protect long positions that you still believe in LT. Either hedge or short vs box during choppy or bear markets. Retains those really inconsequential cost long term tax lots you don't want to harvest and pay taxes on retaining the ultimate cap gain on them for years down the road while converting some of the current value decline to short term gains, which are always useable in a bear market. Even the bs'ers need ST gains in these kinds of markets.

If I find a tank with a non-fundamental theme to it in all but a bull market (ie in a choppy or bear mkt), then I'll go after it and follow it down, with tight limits, just the reverse of what I do when I am long. Unfortunately most of my shorts over the past 1/2 year were long issues to me. PPD and AMZN were the only never owned and didn't believe in the buisness plan stocks. That I thought they were quack stuff was irrelevant until they finally broke down technically.

A good example of huge long converted to short was MWD, which I posted on that board. It was the prospect of a civil war between Dean Witter retailers and Morgan inv bank, research, High Net Worth Retail, propietary trading and 144/145 operations that said ooops, fire a neat guy like J Mack and that is war - the high quality inventory is going down the elevator door to other big inv banks leaving the low margin stuff to hold the fort till the people who stupidly started the war are either replaced by the board or get too old. The stupidity of their Clinton stuff with their center and right of center client base only compounded the effect and shortened the time to get to 12-13 times 2001 eps estimates.

A good hedge example, I was long a lot of GS also, and had chosen LEH as the partial hedge for MWD and GS during this decline. When Mack was "restructured, recast LEH as a naked short, substituted MWD by matching off GS with short MWD last sale dollar for last sale dollar, shorted every inconsequential tax lot vs the box, share for share and that worked. Covered LEH way too early. So, still long irrelevant cost MWD stock and all the GS, with short term profits from the 30 point decline in MWD plus a trade in LEH. All made possible by the bear market, not me.

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Author: XXLTINVESTOR Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7757 of 44596
Subject: Re: LT investors, think before you short Date: 3/18/2001 1:23 AM
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B W Robin

I just checked one of my lists and :

The ones I posted on the fool boards were:

GPS in early May, it was triggered by the incredible reception that one store (H&M) got in NYC when it opened around 3/30, and I am covering that now for the 2nd time, again on a scale down. Still think that mgt has some big ongoing problems but in the low 20's with strength at 19-20, I think it needs an overall mkt crash to make it a good risk/reward short at these prices. Hate to bet on another 1000 after/on top of the prior 3000 and thereby bet against the fed, the new administration, all of the legislators who are up for job approval on 11/02, the big banks and inv banks, etc from here on. Love to see those cheerleader, know nothing TV “talking heads” if it peels off from here, but the effect on M/M six pack is something I pray will never happen. Disturbing memories of the 70's rise from a dark spot.

MWD, triggered by the “restructuring” of the senior Morgan exec out of MWD by the Dean Witter retailers and helped by their foolishness re Clinton.

WMT, triggered by the possibility that they were just too big to be able to get the rev gains they were projecting when JCP, hiring a great retailer who should turn that turkey around, and the umpteenth turn around prospect at KM that seems to be working, and GPS's Old Navy taking something back from WMT's higher price point clothing, all smelled like problem. Besides, the recently retired chmn, whom I though of as a bean counting jerk, used up all the surplus to establish his legacy, preventing any meaningful financial engineering to cover any ooops.

ORCL, triggered by the hiring of Clinton's press sect which goes straight to absence of believeability in enough stock buyer circles coupled with the misconduct of the founder (IMHO) re hiring PI's to assist Clinton in tagging MSFT all purposed on forcing techland to contribute to them or be similarly attacked. I still believe that the smarties abandoned the “Net service and infrastructure players must grow as fast as possible to control their space before someone else does it to them” thesis (no eps ever Net 1st during 1Q00) when the contra thought entered their brain that Clinton/Gore would attack those “to be created” gorillas if they and their VC's didn't come up with more cash (they had to add that into the amount needed to finance the losses), just like that administration did to tobacco and MSFT while leaving its similar sectors which were supporters, booze and ORCL, alone.

In addition,
CDO, have to decide if there is a case here of huge misconduct or just the garden variety hosing of the shareholders.
GTW, initially as a hedge against the other PC mfg I am long – Trigger was their server product revs were way behind CPQ, DELL, SUNW, HWP and IBM and not about to get any better
PPD, started out as a gut disbelief that anyone was going to spend 50% of HMO costs to have a lawyer on call in my lifetime, and although union workers would fight to make it a full pay, they were not going to accept it as a co-pay. Now, again, the issue is what, if any, misconduct occurred.
VIA, it's a focus thing. Trigger, founder has a huge ongoing girl friend distraction to go along with a bitter divorce fight at a time when total concentration is required. Trigger, $8mm to Hilly as a pay off for something when there is no way that amount can be recovered from all the books she'll ever have gost written for her (the Texas congressman who was “retired” for selling a ton of his book to unions came to mind). Basically, so far it has been a market short, ergo, not that good if the market bounces. Maybe Hannibul boffo revs has a positive effect for a while and the rest of their offerings will be less than boffo.
AMZN, harvesting it now because it is at that point where a deal will/could send shorts screaming to cover as brokers are pressured by pros to get that stock while small accounts are told nope can't get the stock to keep that position in your account so you've got to cover by “X” or be bought in.
CMGI, being harvested – what else is left.
ERICY, being harvested, don't want to bet that the Wallenbergs will let it become a $1 or $2 stock, so what is left.
ATHM, was a hedge against long term AOL positions. Currently going to harvest it, price
ITRA, may try to see if it can go on as a bulletin board fraction for ever, if not harvesting it, price
IVIL, didn't believe the “segregated” business plan, it is going to be harvested – to me risk is m&a.
TRLY, used as a hedge against YHOO long position, but when the civil war broke out between American Lycos execs and J Agut, backed up the truck, so to speak. Now it's entering the “hat size” zone where pricewise risk/reward becomes questionable.
COMS, disliked CEO's style since the late 90's, used it as a short hedge against the routers guys I liked for years, now it's just a blot on the pavement. Hoping for a mkt capitulation and then will cover, or at the 1st sign of a bounce – hat size is enough.

Ones I would short now… I've got an empty tank

Need a good bounce to re-scan the landscape. Looking for shorts with a reason that has nothing to do with up or down 300 NASDAC points and is not a “new econ” fundamental econ = downgrade of eps and revs story because customers are withholding or cutting back.

The pops in the past 90 days were in
certain financials, probably shorts in there, but I haven't crossed that Rubicon yet – the risk is Fed Res cuts pop them and get me to be emotional about it, a bad thing to be avoided at all cost

o&g, even if America's Arab friends wanted to help the global Western & Asian consumer with their disposable income, cash flow, reduced net worth problem , crazies would kill them if they did since Clinton used his influence on Barack in order to buy his legacy and the consequence was he got an emotionally charged killing war going in the middle east. Gas still the best long bet, oil is “even steven” unless one predicts a 70's style econ tank.

Retail – the sector usually leads coming out of an econ downturn – and this sector sure popped from late Dec to mid Feb.
Think S is a carcass to be fed upon by the others for quite a while, but it is so cheap, everybody knows mgt is not very competent, and technically doesn't look that weak when compared to the overall market. I'm using it as a partial hedge against long positions in JCP and KM and it is giving me that Prilosec(sp?) feel. Put that together with my struggle with ANF and…. maybe I'm gun shy re retailers

Hope that helps someone.


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Author: spedblavio Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7758 of 44596
Subject: Re: LT investors, think before you short Date: 3/18/2001 2:43 AM
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are you going to use those charts to protect you, to give you a clear cover point?

They all have (to my eyes) pretty well defined levels of resistance which if reached will change my mind about the positions. Some of these stops are not as close as I'd like, but they're reasonable, especially with some hedging if necessary.

Shorting GE naked is more fortitude than I have, against the box yes, but naked?? whew?

Well, I didn't say I shorted GE, just used it as an illustration.

I'll look at some regional banks, thanks. Any thoughts on Insurance or Health Care sectors?



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Author: Gator8387 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7759 of 44596
Subject: Re: LT investors, think before you short Date: 3/18/2001 12:03 PM
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I tend to focus on terminal shorts. In terms of risk/reward, shorting stocks that are absolutely doomed to chapter 11 works pretty good (though you must be prepared for some hellish spikes). I look for one or two stocks a year.

The two problems with shorting terminal stocks is that one it is perfectly clear bankruptcy is imminent: (1) retail investors can no longer get a borrow cause it's fully shorted; and (2) the stock is very low, and it takes up $5 per share of margin.

The guys who do it as their sole profession can get borrows on anything, even fifty cent stocks.

Right now I have a position in AMZN, which may or may not go into chapter 11 (I think that in general people are reading too much into price of convertible debt, the coupon rate is very low so a price of 40 doesn't indicate sure thing bankruptcy to me), but if I wait until it is crystal clear, I won't be able to get a borrow. If things get nasty I box.

Internet stocks in general are difficult terminal shorts, in that in most cases they have no debt (since they are not credit worthy), so you can't look to the pricing of the debt as a tell, you have to make the call purely on cash burn and business model.



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Author: XXLTINVESTOR Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7760 of 44596
Subject: Re: LT investors, think before you short Date: 3/18/2001 3:55 PM
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Insurance is one group which is still purported to be very responsive to fed rate cust, but over the past few decades, to my sense, they aren't. They do what ever the market is doing. To a shorter, the problem is that few are overvalued and those that were (which I own) AIG and the wonderfully humorous duck stock -- AFLAC, just retraced.

Thought - shorting a legend is tough. Owned Berkshire for decades and bought it in every break. But, when the only way to achieve invetment size meaningfull enough to effect performance is to buy the whole darn company what happens when mistakes (everyone makes them) occur (two of his come to mind Salomon and U S Air). There is no exit door to the public and slow of foot. Ownership of the whole enchalata means exit only to profesionals. It has to happen, it will happen and that should put a small hole in the legend baloon blowing the legend premium out.

I'm gone and willing to pay the taxes to know that I don't have to worry about several business that could hurt me.


Another thing is the age issue -- there is a definate correlation between too old and mistakes and the issue is how to define too old since it is a state of mind not just a date thing. To borrow from "A Few Good Men" -- any chance he thought the old man was just losing it?

The other thing is political which causes hackles to raise on 50% of Americans. But shorting anything Clinton has been my best risk/reward theme for the past 3+ months. So, during Hilly's campaign there was an article about his lauditory eulogizing of her in Boston at something which, I think, related to Harvard. He has never been media political espousing uber liberal stuff or promoting that type of candidate before. Why a Clinton and not the other respected Senator from NY who just ran and beat a Republican? Why not Dodd (CT), Feinstein (CA), Hollings (NC), even the new former Wall Streeter Senator from NJ? That was the triger to get out while the investing world accords "top-of-his-game" premium. If this were 8/31/00, 10/23/00, 11/9/00, even 1/19/01 I'de really short it, but now.... got an instinctual reservation based upon decades of owersized financial reward buying Berkshire at and around bottoms. Maybe later for me, but you make up your own mind.

Health care. Lots of the biggies have retraced big time for them, erasing the defense premium they were bulked up on over the past 6-9 months. So, where there is no smoking gun to drive value down (like gore won or Phase 2 clinicals turned up no demonstrable proof of effacy) it becomes a market short of a defensive group which will have, as a group, very little problems hitting expectations, or we are all in a lot of financial trouble IMHO. Bio's are a different story. Don't think I would consider the bio tools guys or the acute desease perscription guys, but the bio's are a different story and if you follow the TA path + cash vs burn analysis, tops and emerging decline patterns are precursors to future bad news known by all the related scientists who tell their VC's and MD's at their inv banks. Always a bunch of crooks -- oops, misunderstood execs, in health stocks who become the Plaintiff litigators "meal du jour" as bottoms form and the usual bounce follows. Critical Path is an early case study -- there are more to follow. But do not know of any. Got any I can run by my wayward rich friends who buy the dinners and practice this sort of "ambulance chasing"?

Hope something hits the profit buttons for you?

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Author: XXLTINVESTOR Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7761 of 44596
Subject: Re: LT investors, think before you short Date: 3/18/2001 4:11 PM
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You have a lot of competition as accountants wax enthusiastic about the big tax benefits of a tank which does not go terminal (no tax due until 11 or cover but the profit is margin in ones account) especially now during tax season.

I just don't want to get into fights like 50% off day at the old Sterns, Kleins, Bambergers or Korvette's trying to retain the borrowed stock against big pro's beating brokers over the head with baseball bats to get the same thing as a stock enters the terminal zone - 1/2 to 5. But I understand the benefits.

As to AMZN its the distraction from focus risk of an m&a co-venture that could louse up my head when my own current personal agenda is to identify the best long-term longs and the price to buy them plus cash management of long and new purchase vs declining cash. Simply put, if AMZN ran up to 15-17 and I were still short the same amount as on 2/15, I would lose it for a while. So, in essence, it's an anger management thing.

On the short side, still looking for future executive misconduct defendants whose price is above $15.


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Author: Gator8387 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7762 of 44596
Subject: Re: LT investors, think before you short Date: 3/18/2001 4:45 PM
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XXLTINVESTOR:

Near as I can tell, you are totally and completely insane.

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Author: XXLTINVESTOR Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7763 of 44596
Subject: Re: LT investors, think before you short Date: 3/18/2001 4:54 PM
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gator8387
have you looked at PSIX?

If I may be so bold, I couldn't find what I thought was the key -- any info on who was, or could be, the biggie behind it who was big enough to keep feeding the cash burn monster. Since I couldn't get that as fact, I was shaken off of it around early Sept. Had a small long position and it ended up a tak loss.

hope it helps

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Author: XXLTINVESTOR Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7764 of 44596
Subject: Re: LT investors, think before you short Date: 3/18/2001 4:56 PM
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God forbid you ever met me and ascertained that as fact.

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Author: XXLTINVESTOR Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7765 of 44596
Subject: Re: LT investors, think before you short Date: 3/18/2001 4:59 PM
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Gator, got any other insane's who went over to the dark and crooked side, misconducted themselves, hosed the shareholders and are going to be "outed" sometime in the future?

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Author: crschoen Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 7769 of 44596
Subject: Re: LT investors, think before you short Date: 3/19/2001 1:13 PM
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If you are a Long Term Investor or one with an outlook which exceeds this afternoon, NAKED Shorting or Shorting against the box is as unrewarding a gamble (for almost all investors) as is buying as a top is forming.

Why can't you apply sound investing concepts to shorting as you do to long-term investing?

I long-term hold something like KO because I feel that it's a great business and will make a solid investment. I've evaluated the business and want a piece of it, and buy it when I feel the market has undervalued the future potential.

I hold naked short positions in companies like AMZN that I have evaluated the business and believe it is either over-valued or doomed to failure.

In either case, I'm taking advantage of what I believe is the incorrect short-term valuation the market has placed on the equity.

Explain to me why you can't use due dilligence to evaluate a short position, but it's ok to do that for a long position.

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