RE: Yes! to the logical shorting theory
David,
Thanks for the AOL post about "logical" shorting. I fully
agree with that poster, and in fact posted something similar,
but without all the technical details about how to short
effectively, a while back. (Everybody on this thread knows
that I can't call a short sale effectively for squat and am
too chicken to do any shorting anyway.) All you have to do
is watch the intraday charts every day and ask yourself why
they look the way they do to get some sense of this.
Particularly striking a little while ago was the tendency
of the price to drop like a stone in the last half hour
of low-volume, flat trading days. (Thanks to Gary Wisdom
for drawing our attention to it.) Curiously, the AOL poster
doesn't mention this component of the shorting strategy.
It's clear that the parties dumping those shares are driving
down the closing price so that the newspaper-only investors
(poor blokes) will read the paper the next morning, see the
price drop (once again), and become weak-hand sellers. Once
the weak hands have sold, the short-term shorters can turn
around again and buy up at the cheaper price. Fun and games.
Meanwhile, the earnings have been growing steadily and will
continue to do so. Yes, the rate of earnings growth is slowly
coming down--it had better do so, or every household in the
USA will soon have to devote a considerable fraction of their
disposable income to the purchase of Iomega products <g>--
but the earnings are still going up. And if they are, then
the price will follow if you hold long enough. For lazy,
patient investors like me, that's what counts.
Cheers, Tom (long IOM) |
