Posted on 04/17/2014 1:30:55 PM PDT by Kaslin
I was listening to a financial guru/talking head of one of the local radio money shows recently. He was pontificating about the opportunities that were being presented in the stock market if only you knew where to look. What caught my attention, however, was his pronouncement about the problem with recent IPO offerings, most notably Ally (formerly the bankrupt GMAC). He kept warning people away from this stock which put him in my camp. However, when a caller asked him if they should short the stock he immediately went to my “Are you kidding me?” list.
It wasn’t whether or not to short Ally that was in question. My angst came when he boldly stated that shorting should be left to the professionals and not attempted by the average investor.
He cited a few statistics that taken at face value makes some sense but when viewed in the light of day becomes as idiotic as his premise.
“Since 1929 to 2012 the S & P has been up 9% annually so shorters are betting against the odds and history”. Taking an 84 year span is an awfully long buy and hold time period. I seem to recall the ’29, ’87, ’99 and 2008 crashes as possible interrupters in his sea of tranquility.
“Going long you can only lose 100% of your investment but make many times more. Going short you can only make 100% of your investment and lose many times more”. This statement eliminates such devices as stop losses, both long and short, and the development of inverse ETFs which minimized risk and maximized profits for the short position.
“You can be right about the company but sometimes the stock continues to rise, meaning a short position will lose”. How many times have you thought you were right about a company, and went long, and the stock continued to go down? It happens both ways.
Disregarding dividends and certain hedge strategies, like call writing, money can be made or lost when a stock goes up and down. Going long or going short gives you the best opportunity of maximizing profit potential regardless of market or stock direction.
Shorting is not for everyone. Suitability, goals and risk tolerance all should be considered.
But to say shorting is not for anyone (save the professionals), which many believe, simply staggers my imagination.
It would be like going into a fight with one hand tied behind your back. The outcome would be fairly predictable.
If you are long about a stock and it goes down, that’s it. But shorting is inherently a margin activity, and you might be called upon to put up more cash if you short goes up too much. If you can’t do that, your brokerage will sell you out and close your account.
If you think a stock will go down, buying puts for cash is a safer strategy.
No they won't. Just like with margins if the price goes too much the wrong way the brokerage first tries to contact you to give you first choice, and if they can't find you they just automatically close part or all of the position in question while keeping the rest of the account positions active.
Buying on margin or selling short is for honest people who are as confident in a stocks direction as they say they are. If someone shoots their mouth off but is not willing trade accordingly, then he's saying one thing and confident in what he's not saying. He's lying.
Short is nothing but a leach...sucking the blood from our future.....and probly our freedom.
Go ahead explain how the process helps...in anyway.
oh well
Better watch it Prox, Therapsid's trying to find out where you live. Looking more and more like the FR's just not quite the place for wealth creators it used to be.
If you know of an inefficiency, and you short it because you can see farther into the future than another blowhard, doesn't that make the price of the company or commodity more realistic and make the market run more efficiently?
I don’t think the point is whether shorting helps or not. It’s just another tool to try to make money. There are 2 side to every trade. I would buy a put or sell call spreads, depending on volatility if I thought the stock was going down.
The stock market will shoot up when hyperinflation hits
The short has always been avail.....but global bashing at a keystroke has not.
The short went from counterproductive ...to damaging...to devastating...What if capitalism can no longer afford the drag?
I suggest that the time without question has arrived.
Proof is all around.
There have been several times in history when capitalism could fly or fold...we are there again.
The short can go back to its hole in the ground...as a side bet between executives at the club.
It has no bus.in computerized trading.
Betting against the future,,,attacking new ideas...for profit....the system is SINKING right now....cant afford to have half the people pulling.
Go ahead...rationalize ....but if you still dont agree than study the people who do NOT want the short restricted....that would be the same list who WANT gun ownership restricted.Hmmmmm
yEPPERS...Same Same GLTUA ETRDS
:)
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