Reality of Risk, Re: Vivus short situation:
It is possibly that today's Barrons edition beast describes the Vivus
short situation. A No of " well heeled individuals " in vesting in
" boutique brokerage houses " , who want to protect their interests by
hedging through short selling.
Here is what Alan Abelson editorialized this week ib Barrons :
"Contrary to popular belief, short-sellers are not extinct. They remind us a bit
of second lieutenants in World War I. There were always plenty of them
available to lead the charge over the top; they just weren't the same ones who
were available to lead the charge over the top the day before. Similarly,
there's no shortage of short-sellers; it's simply that, with rare exceptions,
they're not the same ones who were around two years ago.
The basic argument for the existence of short-sellers these days is that they
provide institutions and well-heeled individuals with a hedge. However,
institutions and well-heeled individuals more and more are asking themselves
whether they really need a hedge against capital gains.
The conspicuous survivors among the short-sellers have been those who
cheat and sprinkle their portfolios with longs. That they cheat does them no
great dishonor; after all, short-sellers, like regular people, have mouths to
feed, mortgages to meet, Mercedes to maintain. What always amazes -- and
amuses -- us is, looking over their portfolios, how tough it is to distinguish
their shorts from their longs. Quality is the same; only the names differ."
So in Vuvus' case for example ( and this is PURELY HYPOTHETICAL, and has
NO connection to relity ), take UBS Securities ( Union Bank of Switzerland,
land of cream and honey, " boutique ) with famous well heeled clints
could have used this hedging practice. ( again a purely fictional situation ).
So what all these guys may be doing is, a) either they already coverd
their shorts( which does not appear that they did ) or,therefore
b) plan to do so , soon?, and convert their short into more long situation.
Either way sooner or later the short is going to have to be covered.
We don't know when. But when it does I thonk it will likely be explosive.
The uncertainty of the timing of the short squeeze ( although now likely
to be sooner than later) , plus the magnitude/explosiveness of it,
are probably the two best arguments now in favor of buy and hold.
TA
Here is the whole Barrons article;makes for fun reading. I stopped it
half way. In the last half he suggests that Mrs.Cherry sell short
Dell and Iomega.!!!!!
Monday, September 22, 1997
A Job for Ms. Cherry
By Alan Abelson
Neither snow nor rain nor heat nor gloom of night stays these couriers from
the swift completion of their appointed rounds. Provided they have big feet.
That footnote to the Postal Service's famous motto was not widely known
until quite recently. But now the whole world is familiar with it, thanks to a
petite ex-mail carrier named Martha Cherry. Ms. Cherry, who cheerfully
slogged through rain, snow and snarling dogs in Westchester County for 18
years, dutifully delivering letters, epistolary flotsam and jetsam and such
weighty fare as Barron's, was summarily fired one recent day.
And, it grieves us to say, none too soon. For her crime was indeed a heinous
one. She took small steps in covering her route. Or, as the postal pooh-bahs
carefully detailed the complaint in the notice informing her of her dismissal:
"The heel of your leading foot did not pass the toe of the trailing foot by more
than one inch."
One little step leads to another, the top mailmen (forgive the redundancy)
recognized to their everlasting credit, and only their quick and decisive action
in giving the boot to Ms. Cherry prevented countless other carriers from
adopting a mincing gait. How much indebted the nation is to their vigilance is
underscored by secret surveys conducted by the Postal Service revealing that
tiny-toed carriers are the No. 1 reason that letters take months to traverse
two city blocks.
Thanks to the invaluable lessons learned from the Cherry case, the Service
has already made giant strides toward greater efficiency. Each and every mail
carrier is being put through the paces and subjected to rigorous testing
specifically designed to weed out what is known in the Service as
"inchworms" -- shufflers unable to put one foot an inch ahead of the other.
When this reverse cherry-picking process is completed, deliveries will be
speeded up by an average of 11 seconds a month, yielding sufficient savings,
it is estimated, to put the Postal Service on a paying basis for the first time
since the Pony Express was sent out to pasture.
Despite her troubles in the Service, Ms. Cherry is by no means a footloose
person. Quite the contrary. The indications are she is possessed of estimable
qualities of mind, spirit and moral fiber. So we are only too happy to suggest
that she turn for employment to the private sector and, more specifically, that
part of it that is absolutely booming, Wall Street.
Given her pedestrian preference for short over long, she'd obviously be a
natural as a short-seller. And, luck would have it, that's the one investment
category in which there are abundant openings.
Contrary to popular belief, short-sellers are not extinct. They remind us a bit
of second lieutenants in World War I. There were always plenty of them
available to lead the charge over the top; they just weren't the same ones who
were available to lead the charge over the top the day before. Similarly,
there's no shortage of short-sellers; it's simply that, with rare exceptions,
they're not the same ones who were around two years ago.
The basic argument for the existence of short-sellers these days is that they
provide institutions and well-heeled individuals with a hedge. However,
institutions and well-heeled individuals more and more are asking themselves
whether they really need a hedge against capital gains.
The conspicuous survivors among the short-sellers have been those who
cheat and sprinkle their portfolios with longs. That they cheat does them no
great dishonor; after all, short-sellers, like regular people, have mouths to
feed, mortgages to meet, Mercedes to maintain. What always amazes -- and
amuses -- us is, looking over their portfolios, how tough it is to distinguish
their shorts from their longs. Quality is the same; only the names differ.
It doesn't seem very gallant to nudge Ms. Cherry into such a hazardous
occupation without extending a helping hand. Or, at least, tossing up a
candidate or two to get her started. No use in breaking her in gently, though.
Might as well, we figure, put her in harm's way, so she'll know what a rough
business she's engaged in. No pain, no loss, or something like that. |
