Home › Forums › Financial Markets/Economics › Record amount of Stock Shorting in US Markets…
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4plexowner.
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May 28, 2007 at 10:26 PM #9173May 29, 2007 at 12:04 AM #55327
ezpass
ParticipantI am not certain if you read the entire article or understand how shorting works. Bull markets can continue for quite a while and simply because there is record short interest, it doesn’t mean the market is about to go down. In fact as the article states, the record shorting can infact fuel an even bigger bull market.
There is a quote that says something like:
“Stay with the trend, the trend is your friend”, at this point the trend is up and unless something turns it around, it will likely to stay up, until…When the until happens, try not to get run over, just like the shorts from the article, which will cause them to cover their short and in fact add to the buying volume.
Nothing goes up forever, but while it does, stay with it.
May 29, 2007 at 12:04 AM #55344ParticipantI am not certain if you read the entire article or understand how shorting works. Bull markets can continue for quite a while and simply because there is record short interest, it doesn’t mean the market is about to go down. In fact as the article states, the record shorting can infact fuel an even bigger bull market.
There is a quote that says something like:
“Stay with the trend, the trend is your friend”, at this point the trend is up and unless something turns it around, it will likely to stay up, until…When the until happens, try not to get run over, just like the shorts from the article, which will cause them to cover their short and in fact add to the buying volume.
Nothing goes up forever, but while it does, stay with it.
May 29, 2007 at 6:09 AM #55339Cow_tipping
ParticipantYes yes yes … I knew it.
The shorting is what is causing the market to not crash.
The experienced hands (institutional managers) are short the stock in their hedge funds and are holding the equity in their mutual funds (they are 80+% of the equity and 90+ on options BTW) and they buy more shorts when bad news comes out and dont run and sell the equity in a panic.
That makes equity prices apparently shrug off bad news and option prices go through the roof. So options for shorting get more $$$ and the law of dimnishing returns takes over.
I believe this is the first time we are having a likely market crash stemmed by options. 87 crash had so little options, post 9/11 was an inevitable crash but options traders made like bandits on their shorts cos there was some serious bracing for armageddon after the .com crash a few months prior. The lessons from then are being put to use now. I’d anticipate the mutual funds to dump the stock ~2-3 weeks before their put options expire and their puts will be worth more when they mature. However since they can hold 3 months out, 4 months out or year out puts, we never know. So can you say crash in slo mo … yup.
However house prices will crash fast when the stock prices seem to hold up in spite of all the bad news.
Cool.
Cow_tipping.May 29, 2007 at 6:09 AM #55356ParticipantYes yes yes … I knew it.
The shorting is what is causing the market to not crash.
The experienced hands (institutional managers) are short the stock in their hedge funds and are holding the equity in their mutual funds (they are 80+% of the equity and 90+ on options BTW) and they buy more shorts when bad news comes out and dont run and sell the equity in a panic.
That makes equity prices apparently shrug off bad news and option prices go through the roof. So options for shorting get more $$$ and the law of dimnishing returns takes over.
I believe this is the first time we are having a likely market crash stemmed by options. 87 crash had so little options, post 9/11 was an inevitable crash but options traders made like bandits on their shorts cos there was some serious bracing for armageddon after the .com crash a few months prior. The lessons from then are being put to use now. I’d anticipate the mutual funds to dump the stock ~2-3 weeks before their put options expire and their puts will be worth more when they mature. However since they can hold 3 months out, 4 months out or year out puts, we never know. So can you say crash in slo mo … yup.
However house prices will crash fast when the stock prices seem to hold up in spite of all the bad news.
Cool.
Cow_tipping.May 29, 2007 at 8:06 AM #55345The-Shoveler
ParticipantNor_LA-Temcu-SD-Guy
All this Private LBO stuff got the market impossible to predict IMO .
I guess if you can’t throw Credit at housing anymore, Throw it at stocks.
Both will end badly IMO, they just won’t be able to get the returns they are looking for (or maybe worse).
May 29, 2007 at 8:06 AM #55362ParticipantNor_LA-Temcu-SD-Guy
All this Private LBO stuff got the market impossible to predict IMO .
I guess if you can’t throw Credit at housing anymore, Throw it at stocks.
Both will end badly IMO, they just won’t be able to get the returns they are looking for (or maybe worse).
May 29, 2007 at 8:51 AM #55353
CoronitaParticipantNot sure if you guys have read any of Harry Dent’s publications…You might find what he has to say interesting.
May 29, 2007 at 8:51 AM #55370CoronitaParticipantNot sure if you guys have read any of Harry Dent’s publications…You might find what he has to say interesting.
May 30, 2007 at 8:49 AM #55505Chris Scoreboard Johnston
ParticipantChris Johnston
Record shorting is as bullish as it gets, be careful with this kind of thing. Low levels of shorts/complacency is what you want for a major top. Huge short postions are typically present at major market lows. I know it confirms your opinion, but that does not make it correct.
May 30, 2007 at 8:49 AM #55522ParticipantChris Johnston
Record shorting is as bullish as it gets, be careful with this kind of thing. Low levels of shorts/complacency is what you want for a major top. Huge short postions are typically present at major market lows. I know it confirms your opinion, but that does not make it correct.
May 30, 2007 at 9:05 AM #55509ParticipantNor_LA-Temcu-SD-Guy
Stocks (companies) are very leveraged and expesive for this major market low IMO .
The Private LBO stuff has got the market all out of wack.
When the U.S. gets a cold, the world will still come down with the flu IMO . (no disconnect exists yet).
When this Disconnect finally does happen, the U.S.A. will be a once was has been (and much despised for our efforts of trying to do good).
May 30, 2007 at 9:05 AM #55526ParticipantNor_LA-Temcu-SD-Guy
Stocks (companies) are very leveraged and expesive for this major market low IMO .
The Private LBO stuff has got the market all out of wack.
When the U.S. gets a cold, the world will still come down with the flu IMO . (no disconnect exists yet).
When this Disconnect finally does happen, the U.S.A. will be a once was has been (and much despised for our efforts of trying to do good).
May 30, 2007 at 2:16 PM #55560Anonymous
GuestHilarious, the stock market: Shanghai goes down 7%, S&P goes up 1%.
As quipped on iTulip last week: ‘Cat rescued from tree, market goes up 1%.’
May 30, 2007 at 2:16 PM #55579GuestHilarious, the stock market: Shanghai goes down 7%, S&P goes up 1%.
As quipped on iTulip last week: ‘Cat rescued from tree, market goes up 1%.’
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