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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Peter V who wrote (195)	1/5/1998 10:53:00 PM
From: phbolton	Respond to of 18691

on techweb yesterday there was an article noting that web commerce may have hit $1 billion in the 4th quarter. If it grows a lot over the next two years to say to $3 b in the 4th quarter and $10 b per year (the 4th quarter being the high one for retail) and advertising is say 5% of sales, or $500 million, and if YHOO gets every penny of this advertising then if the stock price stays at its current level it will be selling at six times revenues. Any realistic assumption is that YHOO gets a whole lot less than 100% of all advertising revenue.

To: Peter V who wrote (195)	1/5/1998 11:16:00 PM
From: Cosmo Daisey	Read Replies (1) \| Respond to of 18691

Peter, Due to good timing I have never had a margin call. Also I keep some of my core long holdings in the same account so I have plenty of buying power in reserve. The day after I shorted AVNT it lost 3+ points, the day after ZONA it lost a couple, the day after TALK a couple also. CREE 1 1/2 so its timing, timing , timing. Once I am in a positive cash mode its easier to handle the day to day movements. Three days after I shorted GTW it was up two so I covered and took the loss, if I had stayed I would be down eight points. Timing, Timing, Timing. Shorting on a good up day is the hardest thing to do but the best timing, today was clasic. Cosmo

To: Peter V who wrote (195)	1/7/1998 1:39:00 AM
From: Dan Duchardt	Read Replies (1) \| Respond to of 18691

I'm not the expert here, but no one else seems to have really addressed your question. If you check with your broker I think you will find they will allow you to drift deeper into "debt" than you can put yourself initially. The 1/2 rule applies when you take a position in a margin account, but your account ratio can be less. I've seen numbers like 30%, and I believe that is typical. In your example, you would need $1000 cash available, with buying power of $2000 to borrow the 100 shares to sell short at $20. If this is your whole portfolio, and neglecting commissions, your account value would be $1000, and your account ratio (value/long+short) would be 50%. At $22/share, you would be on the hook to cover $2200, but your account value would have dropped to $800, a ratio of 36%. You would hit a 30% ratio at about $23/share, and if that is your limit your broker would buy shares to cover your short position leaving you with $700 available cash and $1400 buying power. Your 30% loss would be twice the 15% move of the stock. And of course if the stock price dropped 15%, you would make 30%. If you own other stocks, or have other cash, all of that figures into your account value and ratio. Of course you need to confirm that this is the way YOUR broker would handle the situation and calculate the account ratio. Also keep in mind that you have borrowed someone elses stock to sell short, and they might want it back, so the timing of your cover buy may not be your choice even if you do satisfy the margin requirements.