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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (48126)	6/18/2001 9:25:36 PM
From: Joseph Beltran	Read Replies (1) \| Respond to of 70976

I'm long NVLS (since 31) and holding. Planning to sell next year. Long also AMAT, ASYT. Going short is as strategic a play as going long. No difference, except the downside of a short position is technically unlimited. If you had any conviction in your "short" argument you would short. No need to fabricate some bullshit about "tactical" versus "strategic" decisions.

To: Cary Salsberg who wrote (48126)	6/19/2001 6:46:54 PM
From: Sam Citron	Read Replies (2) \| Respond to of 70976

Why don't I short? Many years ago fiduciaries who managed portfolios on behalf of widows, orphans and the like were prevented from investing in anything but the bluest of blue chip securities by a rule of law known as the "prudent man rule". The rule said that the fiduciary had to manage such funds as if they were his own money, and could be held personally liable for any losses if he bought any security that a jury after the fact might consider "risky". This meant the exclusion from such portfolios of entire classes of assets. The rule, of course, was meant to protect the investor but ended up hurting him by forcing him to buy the most overpriced "safe" stocks. Gradually modern portfolio theory proved that what mattered is having a diversified portfolio rather than the idea that every single security in the portfolio be "prudent". Thus courts gradually allowed such fiduciary portfolios to include even a smattering of commodities, junk bonds, and short positions. Paradoxically the portfolio becomes less volatile, hence safer, by the introduction of a riskier class of investment. In the same fashion, I would posit that your portfolio, which is apparently limited to tech stocks, can be made more efficient by the introduction of a few selective tactical short positions. Why would you be adverse to experimenting on a limited basis with such a "prudent" form of portfolio insurance? I wouldn't bet the farm, but the beauty of this business is that you can exactly match your position to your conviction and risk tolerance. Being long the stocks you like and short the ones you hate helps remove the "market risk" from your portfolio, which should appeal to someone who wants to bet on individual companies rather than the market as a whole. But in any case, limited tactical short positions in an industry in which you are very familiar is a way of self-insuring your tech portfolio against the downdrafts that inevitably beset these stocks from time to time and better leverage your research budget while waiting for these stocks to become cheap once again. It's not surprising that your ST bearish posture on semi-equips is so mystefying, if not irritating, to the typical trader, who simply can't understand your forebearance from shorting stocks that you are absolutely convinced are substantially overpriced. The economist in me is somewhat confused too, since I'm much more subject to persuasion by "revealed preference" than by subjective rationale or rhetoric, and it therefore causes me to apply a slight "discount factor" to your bearish opinion. I figure that there is usually a certain price that can induce a rational buyer to become a seller and a rational seller to become a short. Is this assumption correct in your case, Cary? Do you think that there is a certain price that could persuade you to go short? I'm still trying to determine whether your refusal to short might have any rational basis. As you apparently have never personally tried it yourself, I am inclined to surmise that you are either highly prejudiced or are an unusually quick study, who feels no need to throw an apple into the air to be absolutely convinced of the existence of gravity. You said that shorting is tactical and much riskier than any of your long positions. Is this risk not risk that you could be compensated for being willing to undertake? When you suggested that your former coworker sell SDLI last year at $200, were you suggesting that he take profits or go short, and what is the rational distinction between the two? Please pardon this unseemly attempt to probe the nature and extent of your short aversion. At least I'm not asking when you first felt the inclination to display this phobia. <g> Sam