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starbucks4ever (98.98)

Today is Mar 9 for bears

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August 21, 2009 – Comments (9)

Today's action illustrates why it's always a bad idea to short the market. Let's take a hypothetical investor who bought S&P in Oct 9, 2007 exactly at the 1565 peak. By Mar 9 2009 he would reach the 666 trough and be down 57.5%. From Oct 2007 to Mar 2009 the index was paying a dividend yield of about 3% a year. The 54% overall paper loss is all that he was facing on Mar 9 this year.

Now, take another hypothetical investor who shorted the market on Mar 9 at 666. Today, at S&P 1030, he is sitting on a 54.5% paper loss, and that before the dividends he had to pay. The anguish and despair in the bear camp must be greater than anything the bulls were facing on that Mar 9 afternoon. We are not even close to regaining the previous high of 1565, and yet the bears already managed to lose their shirt.

9 Comments – Post Your Own

#1) On August 21, 2009 at 11:26 AM, outoffocus (23.59) wrote:

Its why I dont believe in shorting.  Seems like the best way to "short" is to either buy puts or buy short or ultrashort funds. At least that way you only lose the money you put in.

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#2) On August 21, 2009 at 11:29 AM, jason2713 (< 20) wrote:

Very true, I started shorting a week ago using both QID and DXD.

I've taken about a 7-8% hit.

 I still think the market is drunk, bears had the momentum for a few days and I thought it was finally going to break through.  I don't think this is going to be a complete and total crash, but I think there will be a 10-20% drop starting very shortly.

 I hope I'm right.  I've been fortunate enough to ride this great rally from March until now, so I've had a fantastic year.  I've cashed my chips in, resisting the "greed" bug, and now think shorting is the way to make a bit more money...not much but some.

 

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#3) On August 21, 2009 at 11:42 AM, RonChapmanJr (97.20) wrote:

"Today's action illustrates why it's always a bad idea to short the market."

What a ridiculous statement. 

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#4) On August 21, 2009 at 11:49 AM, brickcityman (< 20) wrote:

Perhaps I misread your analogy?  Are you saying this is the optimal point at which to become a bear?  

;-)

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#5) On August 21, 2009 at 11:52 AM, outoffocus (23.59) wrote:

Perhaps I misread your analogy?  Are you saying this is the optimal point at which to become a bear?

Thats how I originally read it.  Sounds to me like a perfect day to redthumb.

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#6) On August 21, 2009 at 12:00 PM, starbucks4ever (98.98) wrote:

No, not yet. Wait until Dow 14000 by December and try your luck then.

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#7) On August 21, 2009 at 12:08 PM, Tacomatight (69.15) wrote:

jason2713,

" I've cashed my chips in, resisting the "greed" bug, and now think shorting is the way to make a bit more money...not much but some."

jason, you are all wrong about this. This Bull Market will have 3 phases in the short term. 1) Bounce from ridiculously low lows which you and I have profited from. 2) Return to normalcy(look at google finance and watch how most stocks had two major drops, we will now return to that second ridge right before the 2nd and final drop in crash). 3) Economic news that will cause most stocks to assault pre crash highs, and (knock on wood) possibly surpass them.

You shouldn't be finding shorts now, you should be looking for hard-chargers for the next leg up. Don't blow your momentum man.

-Taco

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#8) On August 21, 2009 at 12:57 PM, jstegma (29.50) wrote:

Now is the time to short. 

There are too many bulls with big heads, similar to the situation we had in March where Alstry was pretty much the norm.

Think about it for a sec.  You didn't get guys predicting huge upside for the markets in February.  The market tanked and they shut the **** up.  Why?  Now it rallies 50%+ in less than 6 months and they are falling all over themselves to predict more rallies into December.

These guys are relatives of that idiot I remember from the 90's who pointed into the camera and said "NASDAQ 10,000!"

So March 9 for bulls was time to buy.  Today is march 9 for bears - it's time to short.

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#9) On August 21, 2009 at 1:18 PM, starbucks4ever (98.98) wrote:

Actually, I was predicting Dow 14000 on Jan 1 2009. Looking back, I wish I had waited another 9 weeks.

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