I agree - I don't advise shorting as well. I short with extreme caution - watching prices constantly, and usually covering by end of day.
I feel there are a number of factors pointing to lower stock prices at the moment, especially among internet stocks:
1. It's all but certain that Amazon will report a large loss today. However, they will also probably report an increase in sales. Investors will have to evaluate the increase in sales vs. the increase in losses to try to ascertain if AMZN is still a good buy in the mid-120s. I believe that investors are less patient than in previous months - and will only react positively if Amazon's results are absolutely stunning. However, I don't believe their results will be absolutely stunning. Of course, there is always the chance that they make some sort of announcement about advancing into new markets - which investors may love.
2. I believe tomorrow's Greenspan meeting will cast a cloud over the entire market until at least tomorrow afternoon - and who knows what will happen after the meeting.
3. I found yesterday's trade deficit numbers and the recent savings statistics disturbing. Trade deficit numbers used to matter - but they don't seem to bear as much weight these days.
4. We're heading into the summer and are only 5 months away from Jan 1, 2000, and markets are at all time highs. If we can depend on history, summer doll-drums should be setting in soon. And while Y2K fears may be over-blown - who wants to take the risk in betting that they aren't. I think fears of Y2K meltdowns in the US are overblown - however, I am less confident with other parts of the world. What impact will Y2K have if China, India and Russia - will these countries meltdown on Jan 1? Will this impact the US economy? Will Y2K lead to Asian and Latin American economic crisis? I don't mean to be spreading fear here - but there is a risk.
With all the above, I am compelled to believe that stock prices have a better chance of going down than up. I am therefore inclined to short. And in shorting, I look for those stocks that I feel are most over-valued. I believe my AMZN short is actually a greater risk than my EBAY short - as EBAY seems to have fallen into disfavor of late, while everyone still seems to love AMZN. But believe me, my short positions are small. Should either stock rise 3 points above my shorting price, I will cover. And I will most likely cover by end of day - despite the fact that I believe prices will go lower. It's just too risky - and I like to sleep at night.
Thanks,
-Eric |
