I remember several years ago telling everyone and their brother to sell short all the banks and bond insurers and financial companies.
I had several clients that worked at Lehman Bros (LEH). I even told many of them why I was shorting the company they worked at and how I believed it would go under. We always just agreed to disagree on the future of LEH and the market.
They kept going on and on how it would never happen and the sad thing is many of them had most of their net worth tied up in LEH stock. Many of them kept buying on the way down “averaging down”. I ended up short selling LEH into bankruptcy.
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Please also tell us about the financials that you shorted which survived and subsequently doubled and tripled. It defies reason that LEH was the only one you placed a bet on. Inquiring minds and all…[/quote]
I short sold TONS of companies/stocks. Yes, many of them came back but I covered short positions in December 2008/January 2009. I didn’t catch the absolute bottom in March but then again it’s impossible to perfectly time the absolute bottoms and tops.
I’m not saying I’m any financial genius because I’m certainly not. But I don’t think it took a genius to see that things were in bad shape.
Also, I’m not saying all the plays I made were correct. After harping over and over how horrible the banking/financials were. I tried to catch a falling knife with Washington Mutual. I shorted it down to the single digits from way up high and made quite a bit of money. But then I bought and went long 2 days before it totally collapsed. I didn’t think the US government would let it collapse. Boy was I wrong!
So that’s what I get for trying to catch a falling knife. The government let it collapse and basically handed it over to Chase Bank. The stock became almost worthless overnight. I lost $250,000+ in two days. That hurt.
I’m reminded of that as I just got some paperwork in the mail last week from a class action lawsuit…as usual the lawyers will make all the $$$$. It said I could get 7 cents per share or something silly like that.
Yeah, lots of financials came back and I missed the upside on them. But many of them are still in horrible shape. Look at Citigroup. Without the reverse split they’d be less than $3.
I am however long in BAC in the $6’s which I’ll hold for the long term as I do think they will come back. They have a TON of toxic waste on the books but I’m comfortable buying in the low $6’s there.
