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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Elllk who wrote (7438)	11/8/1997 11:50:00 AM
From: Tommaso	Respond to of 18056

"Good explanation, although it is clearly of the a posteriori persuasion" Maybe a posteriori to 1929 and 1969, as well as to other bubbles and panics in the past, but not to 1988-1997. The sell and hold (shorting SPY, buying BEARX, and for anyone who can afford it, a diversified--15 or 20--portfolio of short sales in non-dividend-paying high-p/e recent issues) strategy for at least the first 20% decline of the markets ought to pay off well, with few transaction costs. Also, immunity to whipsaws and expiration dates, as well as extravagant option premiums. Never before have there been such convenient arrangements for smaller investors to bet against the market. Because dividend yield is at an all-time low, SPY shorts are cheap to hold. But the horizon has to be at least six months, and probably more like two years. I bought one put option a few months ago on the S&P. After bouncing up and down it finally expired worthless. I decided that wasn't for me. As John Templeton says, "Get rich slowly." So, having missed the crazy years of this market, I am short SPY and into BEARX, and mean to hold this position steadily for as long as is necessary to let the market slip back to something more reasonable. Like a yield of about 4% and a P/E of under 12. The long-term average, more or less.