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Non-Tech : Ashton Technology (ASTN)
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To: Candle stick who wrote (1886)6/25/1999 10:07:00 AM
From: Sir Auric Goldfinger  Read Replies (3) of 4443
 
Even Cramer gets it, but not the CSer: "Little Interest in Short Interest By James J. Cramer Every time the short-interest figures come out, I brace myself for a mountain of email about how to use these numbers to make money.

So let me pre-empt the mail: You can't. That's right, these
numbers cannot make you money. Been there, tried that,
failed.

I have attempted over the course of the last two decades to
make money off these numbers in a variety of ways. I have
picked the most shorted stocks and bet that maybe we
could get a squeeze (a short squeeze that moves a stock
higher as people cover the short). I have shorted the most
heavily shorted stocks, betting that something bad will
occur (all after doing homework on the fundamentals). I
have tracked the stocks with small floats that are heavily
shorted to see if the "days to cover" figures might
spontaneously cause a rush up if anything good happens.

Nothing worked. Nada.

First, these numbers are hopelessly incomplete. There is
so much trading that is derivative or against convertible
bonds or against options or against indices that you are
just spinning your wheels on this stuff to get it to work for
you. You don't get to see what these shorts might be
against. Arbitrage corrupts these figures. The lack of
reporting requirements on derivatives, especially off-board
derivatives (private trades between brokerage houses and
institutions), renders them just plan irrelevant.

I also find these numbers virtually useless as an indicator
for where the market is going. When I first got in the
business, a big short-interest figure meant that the market
had to go higher because of all the stock that had to be
bought to cover. Then there would be these big decreases
in the number of shorts, and nothing would happen -- again
because the numbers are so distorted by arbitrage.

So why bother to publish them?

Beats me.
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