Shorts Will Be Poison for a While
This column was originally published on RealMoney on Nov. 18 at 9:36 a.m. EST. It's being republished as a bonus for TheStreet.com readers.
You don't know the pressure, unless you've been there. You're running a hedge fund, a darned good one, not like those lying or underperforming rascals you keep reading about in the The Wall Street Journal, where every hedge fund seems to be created equal in deviousness and stupidity, except if it is related to George Soros.
That means you are up maybe 8%-12%, and you are thinking, coming into November, "Maybe I'll just lock down, maybe I'll just go to the islands for the next two months because I am beating everyone."
Of course, you are beating everyone for one reason, and one reason only: You know how to short well. You shorted the financials and the homebuilders into the Fed's shenanigans. You shorted tech until the fourth quarter, the preferred way to do things every year. You bet against big pharma, maybe hedged with big biotech. You bet against the semiconductor equipment bow-wows and you shorted the cell-phone component makers against a decent-sized long in Marvell (MRVL) or Texas Instruments (TXN). You went long Google (GOOG) against a short of Yahoo! (YHOO) or Amazon (AMZN). You may have missed oil on the way up, but you have been short it ever since those big Exxon (XOM) prints that stunk up the joint, and you bet against the integrated oils with a long in the OSX or Schlumberger (SLB) for best-of-breed protection.And you made relatively good money while everyone else floundered. Sweet. Book the year and go home? Nah, got to keep something on, of the shorts that have made you so much money this year. Then you start smelling it. It's in the air. A trend change. The Broadcoms (BRCM) and Qualcomms (QCOM) go down on a silly Merrill downgrade, but they don't stay down for the count. That silly Cramer comes on television and says buy Texas Instruments, and, fittingly, it goes down first and he has to take his lumps for hurting people, but then he says double down and it works! And works big. The oils roll over and the money spills into tech and the financials. We get a new Fed chairman who seems less set in his ways than the last one. We catch a cold snap and the Lowe's (LOW) short, such a perfect one, backfires because it takes share from Sears (SHLD), but Eddie Lampert's buying in so much Sears that maybe it doesn't matter and the bar's so darned low anyway, who cares?
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