Random Thoughts on a Summer Friday

July 22, 2017
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Random Thoughts on a Summer Friday

Market Psychology, Short-Selling and Sci-Fi
Random observations, thoughts and brain-ticklers as a midsummer weekend approaches.
Bloomberg, July 21, 2017

Rather than bury you on this midsummer day in a column full of opinion and data, I want to offer some interesting ideas worth exploring. Some of these may eventually become columns, while others will persist on my things-to-do list, until I either delete them or die. But all of these are, in a word, fascinating.

Quote of the Day: Let’s start off with a quote from Meir Statman, finance professor at Santa Clara University. He is the author of “What Investors Really Want,” and made the following observation: “Markets may be crazy, but this does not make you a psychiatrist.” So true.

Another lead lost by America: Japan and other countries want to put a man on the moon. The battle to commercially exploit space begins in earnest, with the U.S. having squandered a half-century lead — just at the country did in infrastructure, mobile telecommunications and broadband.

Not Wrong, Just Early: Here is the thing about selling stocks short: so many things must come together and at just the right time for it to work out well. You need 1) a fundamental reason to dislike a company; 2) a technical reason to dislike its stock; 3) some sort of catalyst to generate momentum to the downside, which can be a long and expensive time in coming and; 4) patience to wait it out. And although short trades can only go down by 100 percent, savvy long-short traders often juice potential reward by marrying a put 1  to a short trade. The added expense of that option trade’s time decay can be expensive in case you are early, otherwise known as being wrong.

Friday Follow: Speaking of which, if you are not following AQR’s Cliff Asness on Twitter, you should be disqualified from working in finance. He thinks with both sides of his brain, having mastered both doing the math and communicating in plain English. He frequently bests me on Twitter, shows endless patience with detractors, is a sci-fi nerd and is hilarious to boot.

 

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