Daily Archives: March 24, 2015

A mulligan for “The big short”.

I got stopped out of my S&P 500 shorts -once again. Total costs of trying to short the market are mounting (3 to 4% of my portfolio over the last year), and the sequence of stopped out trades is testing the limits of my resilience. But my conviction is as high as it has ever been. I’m “bruised and battered” but, unlike Bruce Springsteen, I know how I feel, recognize myself fully, but want to stay the course. Undeniably hardheaded and stubborn, this is not an example of being unable to see the complexity, or the other side of the trade. I understand the bullish arguments embedded in the common knowledge game we are playing. And I sure know timing is tough because they don’t ring bells at tops -and this mother-of-all-bubbles is no exception.

In order to fish, you have to deplete your sardine stocks on board. Particularly if you are fishing for bluefin tuna. To balance things out, the expected reward tastes sweet. On top of the shot of high octane adrenaline, one catch can be enough for the day -if you are a small fishing boat. Financially I am a small boat, and the big short can save the year (and the decade) for me. Smaller drawdowns are conceivable with easier trades, but there is not that many available with the same degree of conviction and decent potentiality.

When we look back in ten years’ time (if we are alive), the trade will be seen as “glaringly obvious”. The timing is not. It never is. It’s tough enough to fine tune a top or a bottom, but in a rigged, herd driven market, it is almost impossible to get it right from scratch. At the very least you need to spend some money in various attempts. And that does not guarantee your success. See what the people in Saxo Bank have to say about shorting the equity market. Hardly encouraging. It shows just how distorted markets have been over the last decades. The past testifies to how unfrequent and short bear markets are. Optimists say this can go on forever. I will just add ¡Amen!shorting the S&P

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