1994 Redux: Shorting Isn't the Solution

Why not short this market to oblivion? Why not bet against it with all of your heart and soul? Isn't that what made you the big money in 1994 when the Fed was last tightening?

Nah, being short then didn't make you much more money than being long. It didn't, because then, as now, it may be too late to make the big bucks off of shorting.

When I was urging people to take the money off the table, now that was when the going was good. Now things have come down already. A couple of tightenings are priced in. And now any time we get a weak number, such as the retail sales number we got on Thursday, the market will be rocking and you will get squeezed into oblivion, as I was on May 17 of 1994.

Worst of all, from the short side, is the powerful rally that always occurs when the Fed is done with its tightenings. It will happen when you least expect it, because it usually comes on the heels of a crisis. In 1994 the Orange County folks didn't foresee the rapid tightenings and they lost billions of dollars in foolish wagering. In 1994, the peso collapsed as money got drawn to the United States out of weaker currencies to take advantage of the high rates. ...