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Originally Posted by 68 stang
Greg you mentioned to never short anything. Is that because this class is Investing 102, or never at all even with WTH money? I just want to understand your thought process.
Have you thought about teaching a Investing 103 or a 201 class?
Thanks again!
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Shorting stocks - which can be done two ways -- a Naked short or a Short against the box....
Naked short means you borrowed the shares from the brokerage and sold them. The brokerage deposits the money into your account - but now you OWE the brokerage the
SHARES. You can't pay back with money - you owe the SHARES you borrowed.
A
Short against the box means YOU own the shares - but you put in a short sale - thus you get the cash - you still hold the shares in your account - and eventually you'll have to give up the shares OR buy shares to replace what you sold short.
The problem with going "Short" is that by the time the "man in the street" thinks it's time to short a company - which in essence means he thinks the company is doing poorly - the PROFESSIONALS on Wall Street are about 10 Zillion times AHEAD of you. And you get caught in the classic "short squeeze" trying to cover your short in a rising market. The more it rises -- the more "shorts" have to cover - the more the stock rises... so it's a toilet bowl way to try to GAMBLE on the stock market - which is complicated enough without trying to be cute.
If you think a company is going to do poorly --- why own it at all - in any form? The key that I've been trying to get across here (in 102) is that we want to own best of breed - great companies - ones we're proud to own - and like them enough that when they do go down (in sympathy with the market) we want to buy more of them so when they rise - we make money.
Shorting is playing a game of chicken against a stacked house. Let the pros with billions to play with do the shorting and hedging and euro dollar gold trades.
I've seen all too often - stocks the everyone is short - and you wake up one morning and the company has agreed to be sold to X company for X amount - or fires the CEO and hired the most famous turn around guy in the biz etc.... and you just get your arse handed to you. Rarely do you get a chance to have the CEO shoot himself in the foot - ala NetFlix CEO - where people are short (BIG TIME!) and the SOB delivered the perfect short to them on a silver platter. This is the polar opposite of playing the IPO game... for every 10 short positions you try - one will be a home run.... the same can be said about IPO's - one out of 10 will be a home run - so the odds are not very good.
My favorite saying has been - and continues to be - "better lucky than smart" . A guy can be real smart and just know that shorting X is going to be a winner -- but if he's not LUCKY -- something like I said above will happen and you get creamed.
Brian Hobaugh SCCA National Tour June 2014
First Hemi 'Cuda Convertible Ever Built
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No really I do..
they are a short term fad soon to be replaced by the next short term fad. They are not Google, Microsoft or Apple who make products people have integrated into their daily lives. I know, Facebook is part of people's daily lives, but in an entertainment sense more than a practical use sense. I believe people are quite fickle when it comes to entertainment and can easily and quickly move onto the next hot thing. I heard recently, can't recall where, that there were more people leaving FB per month than joining. I believe usage on there has about peaked and will start to decline as people get bored with it. Anyone prone to get hooked by that type of thing probably already is and will eventually get bored with it. I would much rather own a piece of the companies that make the vehicle for getting on FB (and it's replacement), the cell phone makers and cell service providers. Websites and social media fad will come and go but the way people access those things will remain.
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