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Strategies & Market Trends : Value Investing
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To: Madharry who wrote (31232)6/20/2008 7:45:33 AM
From: Jurgis Bekepuris  Read Replies (2) of 78666
 
>I dont know why it should end worse for a short as opposed to a long.

Because as a short you are always "on margin" unless you invest like 50% of your available capital. 10-20% swing in a wrong direction and you have a margin call. What do you do then? Good if you're a nimble trader, but if not, you're screwed really really fast. You may be screwed even if ultimately you are right. And by the way there were a lot of people screwed shorting tech in the bubble and then housing in the bubble. Even Mike Burry had to limit withdrawals from his hedge fund when his short positions were all under water. So he won, but another year or so and he would have been history.

For longs this is not true. You can hold most of the companies forever and they will recover if they were sound businesses. So, sure there are examples of overvalued and phony companies that will never recover, but your opportunity lies in years and years of possible compound growth. For short this is not true.

And by the way, I do not share your doom and gloom on US banks. But you are welcome to short them if you like. I see such a proliferation of shorting gloom and doomers that in some cases their shorting becomes a self fulfilling prophecy, but they are also becoming more and more cavalier as were longs in the long bubbles. And "shorting bubble" does not end up (pun intended) well either.
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