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Strategies & Market Trends : Value Investing

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To: Michael Burry who wrote (6852)	4/20/1999 2:35:00 PM
From: Bob Rudd	Read Replies (1) of 78525

Congrats on the AMZN short...I nearly reshorted on the recent runup but chickened due to: Concern that entry into auction Biz might continue to stir animal spirits in followers, Concern that a split announcement [I know nothing of one coming, but high price might justify it] could cause a beeeg jump, and Concern that they might use cheap currency to buy an infrastructure element with real value...like Ingram Micro. None of the above should be construed by anyone as implication that Amzn is anywhere near fair value, just that I don't want to be standing under it when someone lights the auxiliary rockets. Instead of AMZN, I shorted S&P E-mini futures a few days ago and covered at the close yesterday for about a 36 point gain after having it go against me for about the same amount. The reasoning is that the S&P is quite overvalued, but is less subject to the animal spirits of the net stocks. One of the issues Jim cited for selling his positions was possibility of sell off due to nifty fifty falling out of bed. The S&P short position covers this issue without abandoning the carefully selected value stocks. Of course there's still basis risk with this hedge...to the extent the S&P outperforms the value stuff, you lose. Interesting that this didn't happen this time. SPY on the amex is an alternative to futures with equal liquidity and the ability [I believe] to short on a downtick. It can be used in smaller chunks [the E-mini is 65k per contract at $50 a point] at 130 per share. The future, offers a tax advantage if your right in that it's 60% Long term even if holding period is intraday. Before I get hate mail from some board participants about all this having little to do with value investing per se, let me say that a mix of shorting activity that lessens exposure to overVALUED market allows one to maintain value positions within portfolio risk tolerance.

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