Posts filed under “Short Selling”

UltraShort Indices

I don’t understand why, but I keep seeing portfolios strewn with Ultra-Short inverse funds. These are the ETFs that bet 2X and even 3X that major indices will go down. 20, 30 even 40% of some accounts are laden with these.

Please stop.

Eventually, the downside bet will be a moneymaker. Eventually. But if you make that Macro call even a few Qs early with a leveraged bet, the negative consequences could be severe. As I have frequently suggested, waiting for a technical signal prior to shorting is a much better approach than guessing.

Note that I have no problem with the concept or the use of these – but you must understand the risks and issues of using these very short term instruments. There is lots of slippage relative to the indices they seek to short, meaning lots of tracking error. But that is the technical reason for why these should be used sparingly, or as a hedge, and only for days and weeks — not years.

The more basic question is the foolishness of shorting strong indices running straight up — without any technical or timing signal, it is suicidal to guess when this all comes to an end.

It is one thing to miss opportunity sitting in Treasuries or cash; it is something else entirely to fight the tape, let the trend run you over, and argue with the market.

Unless you have a red “S” on your chest and wear a cape, do not step in front of a speeding locomotives . . .

Category: Really, really bad calls, Short Selling, Trading

NYT: The Shorts Did in Lehman & Bear!

I’ve been doing the slow burn on a very foolish article in Tuesday’s NYT Dealbook, about European Short Selling rules. The author is somewhat clueless about shorting. He writes: “Companies have long complained that short-selling can lead to stock manipulation. In the financial crisis, managers at Bear Stearns and Lehman Brothers accused large investors of…Read More

Category: Bailouts, Financial Press, Really, really bad calls, Short Selling

Rules for Shorting

I know Whitney Tilson from our Street.com days. He is a smart guy, and a very good Value manager. But like many value guys, he can be early (on trading desks, they call that “wrong”). In his January letter to investors, he discusses some of his recent shorts that have not worked out (see PDF…Read More

Category: Short Selling, Technical Analysis, Valuation

Is China an ‘Enormous Tail-Risk’?

“The Chinese delegation has said all week that there will be double-digit growth for years to come and the Brits have lapped it up. But the data doesn’t add up. We think we’ve experienced credit bubbles over the past few years, but China is the biggest. And yet the global economy is looking to China…Read More

Category: Economy, Short Selling

Smart Money Gets Massively Short NDX

> While bullish sentiment towards the equity market has rebounded sharply since the end of August, at least one group of traders is not feeling the love, especially when it comes to technology-related shares. Based on recent data from the Commodity Futures Trading Commission, commercial traders (i.e., defined by the CFTC as those who manage…Read More

Category: Psychology, Short Selling, Technical Analysis, Think Tank

BNN: China Yuan Discussion, RIMM

BNN speaks to Diane Brady. senior editor, Bloomberg BusinessWeek, and Barry Ritholtz, CE and director of equity research, Fusion IQ.

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Did I just smoke a fattie? I don’t recall . . .

Click for video


Headline : September 16, 2010 : Panel – Part One [09-16-10 12:15 PM]

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This looks better (sober). . .

Click for video

Headline : September 16, 2010 : Panel – Part Two [09-16-10 12:25 PM]

BNN speaks to Diane Brady. senior editor, Bloomberg BusinessWeek, and Barry Ritholtz, CEO and director of equity research, Fusion IQ.

Category: Media, Short Selling, Technology, Video

Beware Leveraged ETF Slippage

Good article from Bob O’Brien in Barron’s warning about the dangers of 2X Short funds: Beware of Leveraged Short ETFs. Its not just the short leveraged ETFs, its all of the leveraged ETFs that have the same slippage characteristic over time. As anyone who has ever traded them can tell you, they fail to track…Read More

Category: ETFs, Short Selling, Trading

Home Builders Sell Signals

I was just discussing how ugly the Home builders look with AJ, one of our institutional sales traders.

Nearly every builder has been on a SELL SIGNAL in the Fusion IQ ranking system for several weeks now. These names are down 20 to 35% over that time.

AJ has been flashing TOL to various institutional clients as a possible short, but all of the builders — DHI, KBH, LEN, PLT — look pretty punk.

Considering we are now in the early stages of a second leg down in Housing, plus the excess new and shadow inventory that is out there, its hard to consider anything other than selling these names. Clients who are short have been advised not to cover yet.

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Residential Construction Member Names and Rankings

click for larger charts

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D.R. Horton (DHI)

Other Homebuilders’ charts after the jump . . .

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Category: Quantitative, Real Estate, Short Selling, Trading

Chanos Shorts Oil Majors, Ford, Hasn’t ‘Played’ BP

Hedge fund manager Jim Chanos, founder of Kynikos Associates Ltd., spoke with Bloomberg Television’s Erik Schatzker for a special that will air on “For the Record” next Friday, 6/25. Chanos talks for the first time about his new short positions since he went public with his bet against Chinese property in January 2010.

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Transcript after jump

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Category: Short Selling, Video

Congress: Insider Trading For Lawmakers OK

This is simple to resolve: All Congressional trades should be reported within 30 days. Problem solved.

Category: Politics, Short Selling, Video