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Shorting is a su**ker's game, in general. Look at the internet bubble.
I am definitely a sucker, I remember when people would ask, I was telling everyone to short Ariba, when it was ~$300 and going down. I really did not follow my own advice until ~$85.

Doubled my money - oh wait, wasn't even my money in a couple of months.

I will say it is an emotional drain, that is why I could not pull the trigger until I saw <$100. Even then I was ready to buy it back MANY Times.

But - the hedge strategy of going long and short in the same sector is a good idea. I prefer Energy Sector, but using the Google and Yahoo example is good.

You are going to spend the time studying the stocks that you want to invest in. You look into internet stocks and see after you have looked at a few (may be 10) you see some are really good and some you wonder WTF. You looked at one, after doing the math - you decide this one is for you - BOOM, you go long.

What is wrong with, you looked at one, after doing the math - you decide this one is going down - BOOM, you short.

If you have the power to pick one that will go up, it is the same power to pick one going down. But the beauty is the hedge.
If you are totally wrong and the sector drops 5%, you are probably ahead because the worst stocks do worse, if the sector goes wild, you are probably better because good stocks do well. The only way you suffer a grand loss is if you are wrong on two stocks. Which, if you are wrong on two long stocks - you are going to suffer just as bad. But if long on both - what happens if the market just punishes them because it is Tuesday. OUCH

Who thinks long and short -pairing, Honda and GM was also a long term strategy....
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