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

To: KMcKlendin who wrote (48220)	6/20/2001 4:48:04 AM
From: Sun Tzu	Respond to of 70976

Please don't take this as an encouragement to short...I'll try to answer some issues. ...market delivers an average annual return of ~11%...the probability is that my short plays will loose money The operative word here is "over time", which is evident in the words "short [term]" and "long [term]". There is no such thing as a "long term short". You anticipate the near term market conditions and if it moves against you, you take losses and wait (or go long). The caveat here is that you need to be agile to catch the moves as stocks tend to tank faster than they rise. Other times you can use shorting as a hedge or arbitrage position. I made a bundle of money in what was to me a no brainer; When PALM was valued double COM, I shorted PALM and went long COM, knowing that COM owned 80% of PALM. Similarly, for a while, you could bet that AMAT and NVLS would converge and trade the spread any time it lasted over 7% for more than 5 days. Overvaluation may be easy to find, but predicting the Bubble's end is is difficult This is no different than going long. One could say that undervaluation is easy to spot but there is no saying when the stock will rise. Worse, the value may slowly evaporate as you carry the dead money and wait. Furthermore, if you are long the market when the bubble bursts, you could be waiting a long time to recover (at 10%, it'll take the comp more than 10 years to regain its previous peak). I highly recommend reading Investment Gurus by Tanous to gain insight as to how the best fund managers operate. Secondly, the most successful shorts do not short a bubble stock or expect to catch the top, just as most longs do not try to catch the bottom on a falling stock. You could have made more money shorting RMBS at 20 than at 80. The bottom line, what you look for in a short position is not much different than how you play the long position, except that you need to be a faster/better trader due to the shorter time span and possibility of "unlimited" losses. regards, Sun Tzu

To: KMcKlendin who wrote (48220)	6/20/2001 8:19:24 AM
From: Proud_Infidel	Read Replies (1) \| Respond to of 70976

[World DRAM Price] Microchip Makers in U.S., Korea Start Production Adjustment to Reflect Drops June 20, 2001 (TOKYO) -- The spot prices of 128Mb DRAMs (PC133, 16M x 8) continue to decline worldwide. The prices have been falling for 10 months since August 2001, excluding the small recovery in March 2001. Reflecting this situation, U.S.-based Micron Technology Inc. and Korea-based Hynix Semiconductor Inc. started production adjustments. According to a worldwide DRAM price survey conducted by ICIS-LOR, based in London, Houston and Singapore, the 30-day rolling average prices of 128Mb DRAMs for large-volume users between May 3 and June 1 was US$4.43 in North America, US$3.84 in Europe and US$3.91 in Asia. Compared with the previous week (30-day rolling average prices up to May 25), the prices remained the same in North America, while they fell 5.62 percent in Europe and 2.60 percent in Asia. As for prices of memory modules, the spot price of 128MB dual inline memory modules (DIMMs, PC133) fell 5.29 percent from the previous week to US$25.80 in North America, 4.61 percent to US$29.42 in Europe and 7.12 percent to US$25.20 in Asia. Table: 30-Day Rolling Averages of 128Mb DRAMs (PC133, 16M x 8) May 3-June 1, 2001 (survey by ICIS-LOR)Area Contract price Week-on-week comparison North America US$4.43 0.00% Europe US$3.84 -5.62% Asia US$3.91 -2.60% *Week-on-week comparison is the comparison with the 30-day rolling averages of April 26-May 25, 2001. Previous report:Spot Prices Continue Declining Worldwide (Tamao Kikuchi, Nikkei Market Access)

To: KMcKlendin who wrote (48220)	6/20/2001 9:25:50 AM
From: advocatedevil	Read Replies (2) \| Respond to of 70976

Keith, There is little I could add to Sun Tzu's reply to your post. I agree with comments like: "There is no such thing as a long term short." No one would disagree that over time the average stock moves higher. A dark side player looks at a shortened time horizon in order to remove that factor. IMO, trading short is not for everyone. It doesn't offer you the luxury of being able to forget about your investment for awhile. You must stay on your toes. (For the record, the vast majority of my holdings are made up of conservative long term investments. My short plays are for fun and profit, with an emphasis on fun. Of course it wouldn't be much fun if you couldn't turn a profit!) AdvocateDevil

To: KMcKlendin who wrote (48220)	6/20/2001 8:24:49 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

re: shorting: 1. I short mainly as a risk management tool. Even this year, when I've used shorts & puts more than ever before, I still am net long the market. By shorting stocks that I think are overvalued, while holding long positions that I think (hope) will go up, I am reducing market risk. If North Korea launches a nuclear missile at Alaska tonight (or any other unpredictable event happens, that will drive down all stocks), then my puts will help preserve my wealth for my heirs (I won't be able to enjoy it, since I live near Elmendorff Air Force Base, the likely target). 2. Yes, over the last century, stocks averaged 11%/Y. But for many stocks, 11% up or down is a typical daily move. Most shorts are held for a few days, to (at most) a few months. Since early January, I've thought we were in a volatile market with no net upward movement. The way to make money in that kind of a market is to take advantage of the volatility: buy the dips and quickly sell the rallies. It's worked very well, so far. At some point, we will return to a bull market, and buy & hold will start working again. Maybe I'll be clever enough to correctly time my return to LTB&H (yes, I see the contradiction in that sentence). 3. You don't make money in shorts by trying to time the end of the bull market. In a bubble, stock prices become separated from the fundamentals, and sentiment/liquidity takes over. If a company is growing EPS at 25%/Y, and it hits a PE of 100, it indicates that no one is buying based on valuation. So, the Dumb Money (momentum guessers, people who can't read a balance sheet, etc.) may push it to a PE of 200, or 1000. No way to tell. Rather, the way to make money is to wait until the bubble is clearly bursting, and the trend is clearly down. Then, short the rallies, short those sectors/stocks that have still held up, short the stocks that still sport valuations far above what you'd expect from the fundamentals. Like the semiequips, now. The trend is your friend. And the trend is not always up. 4. I'll refute your last point: IMO, anyone who knows enough about a stock to go long, also knows enough to go short. The knowledge needed is the same. If you don't know enough to short, then you don't know enough to decide when to go long the stock, either. From previous discussions on this issue, I think the resistance to shorting is mainly temperament, not knowledge. Many people feel that shorting is UnAmerican, disloyal, dirty, like burning the flag or a teenager hiding a porno magazine under his bed. To me, going short has exactly the same emotional content as going long. I'm just trying to make money: any way, any stock, long or short. I have no loyalty to any stock or any idea.