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Strategies & Market Trends : Roger's 1998 Short Picks
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To: Roger A. Babb who wrote (18640)2/1/2001 9:25:28 AM
From: Daniel Chisholm  Read Replies (1) of 18691
 
Interesting. I too have recently been short (a very small position in) RIMM, as a bit of a proxy for drastically overvalued "tech stocks" (the argument I bought into was that it is basically a hardware manufacturer, which even under very successful business scenarios is unlikely to earn enough to justify its valuation).

FWIW, up until my RIMM short I think I had a 100% losing record on all my "valuation is too high" shorts. I think that eventually "valuation shorts" will work, but if and only if the bubble market psychology is broken. I thought a couple of months ago that we could very well have turned the corner, hence my RIMM short. Since then I became less convinced (and am even less convinced now) that the bubble mentality has been broken, so I covered it.

Any thoughts on how we might know (or at least have decent betting odds) when it will be time to pile on the valuation shorts? I am presently worried that the Fed might re-ignite the bubble mentality.

(I too have thought about shorting KREM, but have not pulled the trigger. Similar arguments (good business with good products, but drastically overvalued) can be made for shorting SBUX. I have shorted SBUX in the past, and lost money at it too (see my record, above ;-), however at some point these stocks must surely be priced for what they are -- 8-12% ROE businesses).

- Daniel
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