Hi Paul,
If you will look real, real closely you will find, imo, that most people do not make consistent profits or a lot of profits from shorting stocks.
... Until recently, I did :-(.
Until recently, I was a lot smarter then than I am now ;-)
...or having large short positions .... is best left to professionals.
Until recently, I was smart enough to do this ;-)
Do this math:
Year 1: Up 40% (gosh I'm smart... Soros only compounded 35%)
Year 2: Up 40% (Guess I really am smart!...)
Year 3: Down 40% (Niederhoffer!)
Net: Up 17% over three years. That's half a percent better than T-Bills!
Now I am a real smart (until recently! ;-) guy who understands the risks, who is grown up and can "handle it", who only "invests" (speculates with) what he can afford to lose, who knows the downsides, who appreciates that you really can lose in this game, and that it is real money. And let me tell you, -40% hurts the ego and confidence more than I could have imagined, even though I thought I understood the psychology and the numbers behind this.
Now before you start feeling badly for me, can you imagine how much a 40% hit will hurt the pocketbook, ego and animal spirits of today's investors? It strikes me that this could be very depressing (pun intended). It hurts me to think about how most people I know will be moderately to seriously hurt by such an "event", and that I don't see anything that I can do to help them avoid getting hurt.
- Daniel |
