A good year to be short

Like Teresa Gattung I see very little broad potential in international stock markets. Many shares are overvalued, and it seems like a huge correction is coming.

But there are always exceptions, and for me in the US markets two companies stand out – Apple and Amazon. Each are critical players in the transfer of media from things you touch to digital. Amazon dominates the market for eBooks with the Kindle-everywhere approach, while Apple does the same for music, apps and has a strong play in video.

Sadly everyone else seems to agree, so both stocks are very expensive. Not so earlier this year, so I purchased, with my tiny US portfolio, some AMZN call options, seeing that the price would rise. It did so I sold down and bought some put options, so I would not lose if the price suddenly dropped.

Indeed the shares did fall, and so I sold the calls, waited and waited and eventually sold the last of the puts last night.
Meanwhile there was the still-ludicrous Linked In valuation, and so bought a handful of puts, as I saw there was huge potential for the price to drop.

After far too long (is there really this little reason on Wall Street?) the price did drop with the big market correction, and I’ve progressively sold down.

End result – betting against the market made me a lot more in percentage terms than betting on the market. It’s that sort of year.

All the numbers are pretty small as most of my investments are in private NZ and Australian companies.

I’m not a financial adviser.

About Lance Wiggs

@lancewiggs
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2 Responses to A good year to be short

  1. Steve Ardagh says:

    The key word is betting. When did the stock market. i.e the place you go to trade stocks in business turn into a casino? I wouldnt actually care but we all pay when the house inevitably wins!

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  2. Adrian says:

    Well done with the shorting Lance. What does LinkedIn’s massive volatility, since IPO say? I think it suggests that tech stocks are not in a bubble yet.

    http://bit.ly/nI4QQG

    But…impending IPO’s from the likes of Groupon, Zynga and Facebook will bring in amateur investors, buying on a brand name alone, who will bid the prices up. I’m picking within a year we’ll see a bubble form in the tech arena.

    Are Facebook shares worth owning at ANY price? Hell no. At the end of the day, real profits are what make the underlying business valuable. The stock market, as usual is too short sighted to recognise real value, as shown by the sky high P/E ratios. Or perhaps they are just too optimistic about future prospects!

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