Chic, Allan:
Being mostly guided by fundamentals, it is very worthwhile to me to have access to the thoughts of those who trade on a differing basis. Here are a few of the ever-changing things that are currently important at this end.
At this end, I am slowly but surely converting over from our "mania survival" strategy, of shorting only "mortally wounded" companies (i.e., those in or approaching bankruptcy), particularly when they exhibit the large price spikes that so frequently occur during the "proceedings", to a more generalized shorting of the techs (semis, PC box builders, cell makers, semi equipment producers, software, storage, opticals, etc.). The comfort level in this change derives from the fact that I can see no reduction in the bad news that crushes the buying enthusiasm on an almost daily basis.
Another shift in the strategy that I intend to implement over the next while is to slowly but surely increase the number of short positions that are viewed as "core". Right now, I am still inclined to take the quick profits on the nasty days and re-short on the rallies. There comes a point in a bear market when this is the wrong thing to do.
I also believe that "the nights belong to the bear". In the mania, over-night holds were a worry. Now, one is more likely to be rewarded when carrying a non-performing short position (by bad news, emanating from the company itself, or a competitor).
It is also worth pointing out that the need to shrink PEs, both with respect to disappearing "growth" as well as actual disappearing earnings, hasn't really been accomplished yet. Earnings declines are sufficiently nasty that the PEs have, in many cases, moved up, not down. This little anomaly is a delightful comrade-at-arms to the bear.
Finally, the general economy is in a tightening spiral. A poorly timed bear bet may move against one, but time is likely to bring the bet back onside as the spiral tightens. And until the record margins are squeezed from the system, this factor too is a friend to the marauding bear.
Best, Earlie
So far, things have been working out. Time will tell. One thing I |
