Fundamentals change, if they're bad, they probably get better. If a CEO is ruining a company, they fire them and the stock price goes up. Mostly you short something that looks okay right now, (and the share price) but the future is not so good. I made a project of shorting dollar store stocks some years ago. I was sure that shipments of cheap goods from China would end, and the big discounters had all the advantages, their own shipping fleet, and inventory control. It took a long time. Now I would make the same case for restaurant chains. (I shorted PF Chang and got killed when they took them private.) I had the same vibes on California Pizza Kitchen (never went to zero either). I wouldn't short NVDA here, the cat is out of the bag. I would short AAPL maybe.
One thing that has changed for the positive for short-sellers is the normalizing of interest rates. It used to be that short-sellers could earn 5%-7% on the cash balance they collected. That went to zero in late 2008 stayed there for 12 years. Getting an incremental 5%+ on returns is a nice change.
Shortselling has certainly become a hard game, not saying it's dead, but it's been complicated by 1) passive flows i.e. ETF's and 2) Federal Reserve/Treasury motto "whatever it takes". Those 2 things, BUY even the most damaged of companies the most important asset in the world...TIME. Every company on your "stocks to avoid" list is part of an index/sector ETF, which creates buyers no matter what widgets they sell, what news comes out, their are just buyers with no regard to price. Couple that with the river of money from Federal Reserve/Treasury indicating lower rates ahead, makes it really hard to "Fight the Fed". I believe the market reverses, when we get couple more prints of inflation rising, and the narrative from Federal Reserve is "we can't lower rates" into inflation surge. It's an exciting time to be alive! :-)
PEN. We are overdue for a 10%+ correction for some multiple mean reversion back to historical averages and to shake out some hot money. Maybe Nvidia is the catalyst when they report this week.
There is a lot of money waiting for the 10% pullback, but the 10yr yield creeping higher will scare some of that money.
My Uber driver was touting SuperMicro the day before it crashed 200 dollars per share. We're as frothy as an expertly brewed latte. Enjoy it but it's going to run dry.
🤔... No, though Vail is intriguing.
Fundamentals change, if they're bad, they probably get better. If a CEO is ruining a company, they fire them and the stock price goes up. Mostly you short something that looks okay right now, (and the share price) but the future is not so good. I made a project of shorting dollar store stocks some years ago. I was sure that shipments of cheap goods from China would end, and the big discounters had all the advantages, their own shipping fleet, and inventory control. It took a long time. Now I would make the same case for restaurant chains. (I shorted PF Chang and got killed when they took them private.) I had the same vibes on California Pizza Kitchen (never went to zero either). I wouldn't short NVDA here, the cat is out of the bag. I would short AAPL maybe.
One thing that has changed for the positive for short-sellers is the normalizing of interest rates. It used to be that short-sellers could earn 5%-7% on the cash balance they collected. That went to zero in late 2008 stayed there for 12 years. Getting an incremental 5%+ on returns is a nice change.
Very true!
Shortselling has certainly become a hard game, not saying it's dead, but it's been complicated by 1) passive flows i.e. ETF's and 2) Federal Reserve/Treasury motto "whatever it takes". Those 2 things, BUY even the most damaged of companies the most important asset in the world...TIME. Every company on your "stocks to avoid" list is part of an index/sector ETF, which creates buyers no matter what widgets they sell, what news comes out, their are just buyers with no regard to price. Couple that with the river of money from Federal Reserve/Treasury indicating lower rates ahead, makes it really hard to "Fight the Fed". I believe the market reverses, when we get couple more prints of inflation rising, and the narrative from Federal Reserve is "we can't lower rates" into inflation surge. It's an exciting time to be alive! :-)
PEN. We are overdue for a 10%+ correction for some multiple mean reversion back to historical averages and to shake out some hot money. Maybe Nvidia is the catalyst when they report this week.
There is a lot of money waiting for the 10% pullback, but the 10yr yield creeping higher will scare some of that money.
We will see! Great article.
My guess for the "green flag" is: Hannon Armstrong Sustnbl Infrs (HASI)
🤔 nope.
MODG or VAIL ? :)
Thanks Herb
My Uber driver was touting SuperMicro the day before it crashed 200 dollars per share. We're as frothy as an expertly brewed latte. Enjoy it but it's going to run dry.