https://financialpreparedness.substack.com/p/respect-the-shorts
I've been a value investor for over three decades. Not only do value stocks have the highest return over the long term, they also have the least risk (unless they're a Value Trap) because they provide the largest margin for error.
There are lots of reasons to not buy stock in a company, including:
- management has made it clear that the goal of the company is not to maximize shareholder value
- it's not a good business (i.e., its long-term return on invested capital is below its cost of capital, or it's not consistently profitable)
- it's losing its competitive advantage (e.g., its return on invested capital has been declining)
- it produces a commodity (so can only compete on price) management is trying to defraud investors (usually by manipulating financial statements)
- it doesn't pay a dividend, or the yield is too low, or its dividend hasn't increased over time or was cut in the last year or two
- the dividend is at risk of being cut if the company has a bad year
- it's financially weak or isn't growing
- it's overvalued (due to high investor sentiment, artificially low interest rates, etc.) insiders have been selling a lot of shares recently
- political and regulatory uncertainty (e.g., clueless/utopian/kleptocratic people are in power)
- it's heavily regulated (e.g., utilities)
- its operations or balance sheet is opaque, or it's prone to imploding suddenly (e.g., banks)
- management spends a lot of time, money and energy on virtue signaling and interjecting the company into irrelevant political and social controversies instead of on maximizing shareholder value (management may be forced to do this due to pressure from fund managers Blackrock, State Street and Vanguard, even if they know it's imprudent and don't want to do it) poor management
- management is plundering the company
- it's too popular with investors and/or analysts (which means that it's probably fairly priced or overpriced, so little chance of an abnormal profit opportunity)
- low trading volume (so large bid/ask spread)
- it's a newer issue (so hasn't stood the test of time)
- currency fluctuations
- potential or current lawsuits
Lots more follows, including probably the longest sentence (on today's unprecedented conditions) you'll probably come across this year.
Respect criminal scumbags?
No thanks.
He's not suggesting you respect them as paragons of virtue . . . only that you consider that people who survive and prosper as short-sellers KNOW WHAT THEY'RE DOING and you'd be wise not to bet against them in the market.
Very different. And yes, one reason a particular short-seller may be doing well is that he or she has inside information and/or is working (perhaps illegally) to tank the stock he or she is shorting -- none of which changes the advice to not bet against them in the market.
I know what he meant.
OK. I don't understand your comment then.
No problem.
From the column:
Wow, you weren't kidding.
The article seems to assume that the short sellers are brilliant at reacting to problems before they happen, and not the cause of them. I suggest the opposite; short sellers do what they do to cause a stock to do what the PTB want it to do, for whatever reason the PTB want them to do it.
In other words, the short sellers are among the gears, dials, and switches that the PTB use to control everything, and are "in on it," even the ones that don't realize they are (controlled by planted information).
I don't follow the market, and shorts in particular, the way Rob does and not even the way many non-professional pedes here do, but Rob studies the market for a living and apparently sees a lot of shorting activity that is NOT driven by people trying to take down a company.
The book and movie "The Big Short" is a good example of why someone might do that. You see a situation where something -- the mortgage bond market, a tech company, whatever -- is hugely over-leveraged, dramatically under-capitalized, and bizarrely over-valued (not really so uncommon, is it?), and you figure it's heading for big losses -- so you short it. That's a dangerous play -- you can lose your ass -- but if you've really done your research, it can pay off big time.
I know that many people on this board (or at least a number who have posted here) have been impacted by people or companies shorting a stock maliciously in order to CREATE a situation they can benefit from. I've read about such things elsewhere than on this board as well.
I have no idea what the proportion of malicious short activity is to the what I'll call honest short activity, but I think Rob's point makes sense in either case: Betting against those who are heavily shorting a stock is potentially dangerous, so make sure you know what you're doing.
The exact system you are citing was designed specifically to fail in the way that it did, and they knew full well that the short sellers would play their part. It all worked out exactly as intended. Controlled Opposition doesn't always know it is controlled opposition. On the contrary, I think the vast majority do not know. Take for example the people involved with Antifa. I would bet the vast majority of them are idealists, brainwashed by their indoctrination, starting in pre-school. Really, starting in the crib, because their parents before them were brainwashed too. Such True Believers are just as useful as undercover agents, or agents provocateur, etc., possibly even more so in a way, since they are truly beyond incrimination.
People are led around by information. There is one source that controls all information, and in my investigation, I have yet to find a single time where anything caught them by surprise (not counting the past 6 years or so).
I'm not saying that following short sellers is (or rather, was) a bad idea. On the contrary, it is a great idea because they are literally being fed the information that will motivate them to follow the path laid out for them to follow.
All the world's a stage. Believing that anything is organic is, as far as I have found, not supported by the evidence.
Having said that, if Q et al are really for We The People, then all the rules have changed, and all the signals from before may be completely wrong, because there is a new director for The Show.