Forum Archive Index - February 2003

["gooner" <nickk@quicksilver.net.nz>]

Holden

You asked "In todays market why is shorting stocks not really mentioned much
as a good alternative to going long?" AND also said "More stocks are going
down then going up So I ask, why is shorting stocks not advocated in popular
media? From my initial understanding of it there appears to be less risk
then trying to go long in todays market.

Consider what is said below.  This is not the 'answer' to your question and
also not from my mouth (I plagiarised it!) but something to ponder
nevertheless.

Fundamental analysts (the long-haul hang-in forever brigade) will learn a
hard lesson in reality as they watch their advice once again, costing their
clients billions of dollars. For the past three years they have been spewing
out the same old line "the market is about to recover", and for the past
three years they have been totally wrong. They're about to be wrong for
another year. The economic data (forget any wars for the moment) coming out
of the USA is shocking, yet these analysts twist and spin the facts into
good news. Why people listen to them defies imagination.

USA company earnings, profits and capital spending are all falling. Stocks
are still grossly overvalued. Corporate America keeps reporting a dismal
outlook for the coming year. Consumer confidence and the dollar are falling.
Unemployment, foreclosures and bankruptcies are rising every day. Fear,
uncertainty and doubt are also rising. The next big US stockmarket scandal
has yet to hit the headlines - 'Pension Plan Shortfalls', and when it does,
watch out, as stocks across the board will be savaged once again. In the
eyes of fundamental analysts, this all adds up to good news! However, one
day they will be right, but that may be several years away.

Technical analysts at least see the real world at a glance by means of
visual representation of the facts. Very few (if any) are running around
telling their clients to invest in normal equities. Instead they tell the
truth, and have been encouraging their clients to get out of stocks for the
past three years, and they're still encouraging them to do so. Technical
analysts have saved their clients billions of dollars. This often boils down
to a simple case of 'A Picture Says A Thousand Words'.

.........you should sell most (if not all) of your traditional stocks and
shares, take your savings out of managed funds, ignore the long-term
long-haul advice and Elliott Wave Theory, put your money into safe
government bonds for the time being, and seriously consider buying some gold
bullion (the real metal) and some gold shares.

We expect that gold bullion and gold shares will head significantly higher,
but also become more volatile for various reasons (nerves, fear,
speculators, hype, short-squeezing, manipulation) over the next few weeks,
so just be patient, and ride this period out......

In the meantime, the fundamental analysts and financial media will continue
to pump out that the falling stockmarket and rising gold price are caused by
Iraq war jitters, and when the war is over (which they forecast will be
quick) then everything will become happy again - "Gold will fall and
equities will boom". Unfortunately that's rubbish once again. Just remember
that the US economy and the US dollar were in trouble (and gold was steadily
rising) long before 911 or any mention of Iraq warfare talk.

The primary underlying trend for............the US economy, it's down, and
down, and down.
And for the rest, they will also follow suit.

HOLDEN.......shorting stocks isn't advocated because the media is owned by
people who want the good times to continue...they don't want to be seen to
be telling people to sell shares.............brokers don't tell clients this
either...........very rarely will a broker give a 'sell' recommendation.

AND HOLDEN YOU ALSO SAID

"You don't need to put money up front (although of course you should have
funds to cover those short positions"

Well the brokers who short sell in NZ (And there aren't many) will most
probably require funds in a trading account to cover your positions.  You
can leverage (ie borrow) on those funds but that is not for the faint
hearted.  Short selling the S & P and DOW indices is very easy and in todays
climate the smart move.  If you had a permanent short position (not
recommended and again not for the faint hearted) on the SP500 during the
last 28 months you would have done very nicely thank you.  But, most brokers
would recommend stops and would probably almost demand it if you are
leveraged.

I have many friends short selling the SP500.  They need many short blacks to
get them through the day (they are up all night!) but have made a packet.  I
chickened out -  much to my annoyance now.  Good luck if you decide it's for
you.

Cheers

Gooner


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