Thursday, November 10, 2005

Shorting takes balls.

So on June 14th I had this post saying some of the reasons why I thought GM was going to hell. I ended it saying if I had balls I would short their stock.

What does shorting stock mean? It means you sell the stock, and then buy it at a later date. It means someone in the market is lending you their stock so you can sell it, and at a later date you buy the stock and deliver it to them. There is a huge market for shorts.

So you are betting that the stock is going to decrease in value. Thats all it is. You're first selling high, and then buying later. Its rather risky since the stock could go up to infinity.

I don't deal with this level of risk (yet). I look for basehits I can stretch into doubles or tripples. I try to bat 1.000 instead of having a high slugging percentage...but like Ichiro, I sometimes get lucky and hit the ball over the fence.

But that doesn't mean I don't see the deals. Since I mentioned shorting GM on June 14th the stock has dropped from 36 to 23. Thats a 36% drop in 5 months. That is a hell of a gain for anyone who shorted. I'd put that gain up against any homerun stock in the last 5 months.

Sometimes I think its easier to find shorts. Its easy to see what companies are going to go to hell....its hard to uncover the gems that are undervalued and going up.

But I don't have the balls to short stock. If I did I would have added a 36% five month gain to my accomplishments.


Anonymous Anonymous said...

Actually Ichiro isn't lucky when he hits one over the fence. He just chooses a gameplan of speed and contact hitting. You should see him in batting practice seriously. I am pretty sure he got an invite to this past allstar homerun derby (recall the international format baseball lined up for this event) but he declined because other "power" hitters deserved it.


Fri Nov 11, 01:11:00 AM EST  
Anonymous Anonymous said...

Good call. You would have shorted their stock months ago and today they're expected to file for bankruptcy. Try not to hurt your arm patting yourself on the back.

Thu Nov 17, 10:34:00 AM EST  

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