Hi Que!
RFMD went in the wrong direction. I have a choice. I can continue with my short in an attempt to prove I was correct about the poor fundamentals in the semiconductor industry, or I can cover and take my losses.
At this point it isn't important to be right, it's more important to survive. Investors are starving for a turnaround. There's no way of telling how high they run the stock up before it corrects and eventually reflects its proper value.
How high does the stock go before it corrects? What if it continues up another 15, 20 or 25 percent and then starts to correct? How far would it then have to come down to prove I was correct?
I'm cutting my losses and I'll let the stock do what it wants to do. I can always come back to it if the situation warrants. I can even go long and enjoy the ride.
It's funny, a friend mentioned to me yesterday that when you're long on a stock and it drops $2 in a day, you justify your position by saying it'll come back. However, when you're short a stock and it drops $2 in a day, you experience an entirely different set of emotions.
While in the Marines, we were taught not to be heroes. When the shooting got heavy, you were expected to find cover. Once you were safe, it was then your job to Improvise, Adapt, Adjust and Attack.
A dead hero can't fight. I'm ducking for cover so I can continue to fight.
In my opinion, shorting stocks teaches you more about sound investing than anything else I know. It teaches you how to be proactive and how to manage your investment decisions.
Too many investors who hold long positions hang on to their positions when good investment principles dictate that they shouldn't. They die a slow death, just ask those who bought CSCO at 60 and are still holding on. Too many investors don't use stop loss limits in an attempt to survive and have more capital to invest elsewhere. Try going short and don't use stops and see how quickly you die.
My advice to people who want to learn the stock market game is to learn how to short stocks first. The lessons and investing principles you learn there will make you a better investor in the long run.
Just my humble thoughts,
dabum |
