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

To: larry who wrote (11441)	7/13/1998 4:27:00 PM
From: John	Respond to of 18691

I think you meant "head fakes."

To: larry who wrote (11441)	7/14/1998 11:15:00 AM
From: Pancho Villa	Read Replies (3) \| Respond to of 18691

Larry/All and Internet stocks: Hope my experience with this puppies will help people to think twice before shorting these stocks. Larry, if I am not mistaken you were the one that wisely pointed out about the odds of making money on AOL and YHOO shorts. At least on the short term, you have been right, and IMHO you will continue to be right at least until we get a significant market correction and probably beyond a correction. On AMZN, I still believe this is one of the most dangerous shorts around. I just covered the reminder of my position at 108+. Also, the remainder of my LCOS and XCIT shorts. Thus I am kissing goodbye to the short/long side of net stocks for the foreseeable future. For all those who remain short I wish them the best. Even though I covered I would be extremely happy to see these puppies come down to a fraction of their current price. When one turns on the TV set anywhere in the world, as I have recently done in Argentina, Italy and Venezuela and not 5 minutes go by without some direct mention to the internet, email, e. commerce etc. and even the cat is considering a net hookup, You see that we may be in the early [and not late] stages of internet mania. If this were the case, the short side may prove fatal. I held down to the internet shorts longer than I should by believing in the intelligence of the marginal investor in efficinet markets. My rationale being that as soon as key investors became aware that the valuations vis-…-vis the market potential of these companies did not make sense these stocks would collapse. The problem obviously is determining how soon is soon. IMO this has to do with investor's psychology. IMO investors are currently wearing 100X optimistic glasses. How long will it take for them to switch to 100X pessimistic glasses? When they do not even the most optimistic news about stocks will cheer them up. Internet mania coupled with USA market mania can make for a very dangerous cocktail. The recent problems in Asia, which IMO should have pushed the market down, instead pushed it up as investors perceive risk/growth in relative terms. We may perceive a lot of risk in our markets but as Dale Baker mentioned a while ago, to Asian eyes the US is as safe as it can get. Today, the US is perceived as Japan was in the late 80s, invincible. Internet stocks, MSFT, DELL, and a full basket of blue chips are the main receptors of investor (domestic and foreign) admiration for our technology, capital, and marketing leadership. Some pretty smart people are of the opinion that the market is terribly overvalued. This is no secret to anyone. However, I heard recently that one of the key ingredients to the amazing bull market we have had in the last 15 years has been the demand generated by short covering. The recent increased participation of retail investors in the short side may have had an accelerating effect. Does this mean one should not short stocks? I don't think so. The guidelines presented by Bill Wexller in his Profits of doom site do not warrantee success in shorting but may be of help. He also makes a good point on why internet stocks are dangerous shorts. Another very important factor is not to overextend oneself in any one short. I still hold the view that this market presents the greatest short opportunity of the last three decades. However, no one knows how long stocks will go up before they go down. Take the case of AMZN, which I shorted at 80 before the split (ouch!), the stock basically tripled on me. Now it may be the case that six months from now AMZN will trade under 10, but if one takes a large position on such a short one can be wipped out before the sun comes out. Pancho PS: I am still holding a significant number of short stocks including y2k, and stocks like ZONA, WDRY BFT. I must admit I still hold down to some overvalued story shorts such as CDRD which may not be wise but at least these are not linked to internet mania. I have covered all internet shorts and DELL which in my opinion is probably the company making the most money in the net.