I'll warn you straight out - I am already preparing to nibble at some growth stock funds. Back when it became
obvious that 5000 was THE top for NASDAQ, I identified a 50% retracement as the first point I would become
interested in buying stock. I based that largely on looking at plots of other bubbles that burst. Review Japan's
Nikkei in the 1990s, and our markets in the 1930s and 1970s. I'm not certain it's going to get *that* bad, but
even in those declines, a long-term player achieved average market returns over 10-20 years by
purchasing at a 50% discount from the top. And since I'm not certain that I know 100% of what is going on, I'll probably play the statistics and begin nibbling.
That said, I'm nurturing a broad short portfolio, built on an accumulation of every bad idea or game I saw
employed during the bull. If it was stupid, I'm fading it. That means I'm short i-Nutz, data storage stocks,
semiconductors, superconductors, fuel cells, biotech, and any other imagination stock that was bid up by
people who didn't understand the huge risk to capital invested in them. For a complete list, sift through some of my recent posts. On many days, I've posted several of my thoughts. Allan is also an excellent trader; I can strongly recommend his talents.
I need to run right now, but I can show you some of my hand later. Unfortunately, the easy money has been
made in most of them. Some, like RIMM and RMBS, are just starting their failures. But many are risky shorts
here, and I am starting to cover them.
Shorting is an incredibly difficult strategy. While conceptually it is just like buying a stock and then selling it, only in the reverse order, the leverage mechanics of a short portfolio take a while to get a good feel for. While
a 100% long position involves no risk of forced exit from the position, even a 50% short position can be run to
uncomfortable debt/equity pretty easily. It took me a very long, painful time to learn it. It takes a great deal of
maintenance, thanks to the large number of bulls that specifically target short-sellers, even the short-sellers
that might be right on the long-term potential - or lack thereof - for the company.
BC |
