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simple ques
Started by scrubswannabe
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(Not just directed at you, OP)
Repeat after me: No one knows what the market is going to do.
Most "experts" just blow hot air, and don't put their money where their mouth is (by shorting the market like you suggested.)
Repeat after me: No one knows what the market is going to do.
Most "experts" just blow hot air, and don't put their money where their mouth is (by shorting the market like you suggested.)
IMO most people tend to have a bullish bias which always gives them the glass half full view on most things, including the market. The experts that I follow and read have been shorting the market since late October.
Another reason is that to short the market, you have to be very nimble. Most bull runs last longer than bear falls. In a bull market the indices grind up slowly where in a bear market they fall pretty quickly. It's one of those things where you have to be ahead of the curve.
You also have to factor in that a lot of fund/money managers have one specific goal or system that they use and are often dealing with a lot of money. For them to change in / out of a position, it takes them a considerable amount of time. It's almost like watching an oil tanker turn.
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Short S&P 500 ProShares (SH) and UltraShort Financials ProShares (SKF) will give you the inverse of their respective indices' daily return. Of course shorting an index has less risk than equities, but less upside. Should have been shorting BSC...down 46 % today.
Smart people can get rich off other's losses...
http://articles.moneycentral.msn.com/Investing/SuperModels/GettingRichOffTheSubprimeMess.aspx?page=1
Smart people can get rich off other's losses...
http://articles.moneycentral.msn.com/Investing/SuperModels/GettingRichOffTheSubprimeMess.aspx?page=1
Do you know how the process of short-selling works? Unless you're buying ETFs that already short-sell the market, you're taking on a great liability and open yourself up to Mr. Margin. Go ask Carlyle Capital if they like Mr. Margin.
Yes, but, if the market decline is such a sure thing, you won't have any problem selling for less than you bought. You will only generate a margin call if the market goes UP.
I tell something like that to all the naysayers. If you are so sure about the market decline, why are you not shorting? Probably because you are not really sure about the market decline and are just running your mouth (directed at no one in particular.)
Heh just as a fact correction, Carlyle wasn't shorting. If they were shorting the vehicles they were invested in, they would have made a ton of money and not lost it. Their real downfall was being extremely leveraged (~32 to 1) on bad investments. You could make the same case of Bear Stearns.
I'd also like to point out, there's nothing wrong with shorting, but you best be sure that you know how to manage your risk -- a concept which 95%+ of investors have no idea how to do (personally I think its important for people to manage their risk regardless of the direction of their investments/trades). I'd honestly argue that a short position is no riskier than a long position and short positions can be extremely rewarding (as things usually fall much faster than they rise ... fear is a more powerful emotion than greed).
never sell etf short.
well,the sdn guy.
well,the sdn guy.
I didn't use Carlyle as a shorting example, I used it as an example of a firm that couldn't pay up when margin came a knocking since they were leveraging their position with borrowed money, something akin to shorting stock.
I agree with you. It's a great party till something goes wrong.
The problem I have with shorting, apart from the riskiness of the investment, is that while the potential for upside can be great, the downside is still limitless. A stock can only go down to 0, but the stock can potential appreciate to infinitum.
I'd rather sleep at night knowing the most I could potentially lose is the principal I put in, and not an infinite amount, but that's just me. I'm a bit risk averse, and knowing this, I stay away from shorting stocks and unnecessarily complicated investment vehicles.
Just out of curiosity, how do Ultra Short ETF's work?
My vague understanding of selling short is: you borrow shares, share value declines, then you buy the shares at the lesser value, and give them back to the lender (keeping the difference). That's about right?
Is buying an UltraShort ETF the same thing? Are you taking the same risk (losing more than your principle)?
My vague understanding of selling short is: you borrow shares, share value declines, then you buy the shares at the lesser value, and give them back to the lender (keeping the difference). That's about right?
Is buying an UltraShort ETF the same thing? Are you taking the same risk (losing more than your principle)?
There is no sure thing in the markets. The market's aren't sure to go up either.
It's possible to be short something with out using margin 🙂 You can also buy puts.
Personally if you are willing to ride something out at a loss of more than 15%, either you have a ton of money and don't care, or more likely you probably shouldn't be investing in the first place.
I've mentioned it before and I'll mention it again, one of the most common themes (if not the most common theme) across the most successful investors is risk management and being willing to admit they are wrong. Theres plenty of ways (literally thousands) to make money in the markets, and no one is ever right 100% of the time. In fact you may find this surprising, but some of the most successful investors are only right about 50% of the time, but they cut their losses short and their let their winners run.
Ultrashort ETF's work by being a double inverse of whatever instrument they track. Instead of borrowing these shares, you actually buy them. They go up as the instrument they track falls.
I'm pretty sure there is no conceivable situation in which you can lose more than your principle as you are allowed to buy them in retirement accounts etc. Also, the instruments they track are very large and liquid markets. I'm guessing if it ever came down to it, they would just reverse split the ultrashort ETF.
I wouldn't recommend using any of these instruments understand exactly how they work, and only if you consider yourself a nimble investor/trader.
Thanks! Although I'm muuuch too inexperienced to consider shorting a stock or investing in an UltraShort ETF, it's helpful to understand how they work.
Next up on mgdsh's list of Earth-shattering revelations for today: The sky is blue. Advertisement - Members don't see this ad
