The economy is not doing well. Some parts of the economy are doing just plain awful. The economy is also changing structurally. Examples: online shopping is devastating bricks and mortar retailing. Cheap natural gas is fast replacing coal. New government regulations are hurting many industries, e.g. coal and banking. Tastes are changing as new companies introduce products that quickly become popular and devastate the existing leader (e.g. the iPhone v’s the Blackberry).
These trends mean that in today’s world, it is easier to pick shorts than longs. Hence every diversified portfolio needs shorts. I have pushed shorting in recent months, replete with lists. We’ve done well shorting, including our latest BIG accomplishment – RadioShack (RSH). Yesterday RSH dropped 29% to an all-time low of $2.60 after it reported a second-quarter loss and suspended its dividend. The stock had peaked in 1999 at $78.50.
There are “issues” with shorting:
First, you have to accept that it’s not unAmerican to short some stocks. If the stock is going to fall, there’s no reason you shouldn’t benefit.
Second, you have to figure a “logic” that suits you. You need to figure how to find and pick stocks to short. The lists you’ll find on this column are not the final arbiter of what’s the best — though they’re a good beginning.
Third, you need to figure the size of your shorts and how much exposure you want. This depends on your “faith.” For example, the size of my short in RadioShack is much larger than my short in Research In Motion (Blackberry). There was always the nagging thought that some fool might buy RIMM the company for its “assets.” But I knew nobody would want RadioShack.
Fourth, you have to watch your shorts hawklike and be prepared to cover quickly if your shorts suddenly go against you, i.e. the stocks start rising. But you also got to have faith. I recommended shorting Arch Coal (ACI). Pretty quickly after my recommendation ACI started rising. I was losing money and one of my readers ripped into me (on the Comments below) saying how could anyone believe Harry, since ACI was rising. This reader (Fred789) had gone long when Harry said to go short. And wasn’t he, by definition, a genius and Harry an idiot? Subsequently, ACI fell. My ACI short is now in the money. Yet Fred789 says he’s still making money because he bought when the stock was cheaper. Sadly, it has never been cheaper recently. But what do I know?
So what to short today? You’ll find my old big list here. But…. this morning Business Insider (which is a super site) published “The 16 Biggest Mass Layoffs of the Year.” It seems to me that if you fire a lot of your people you’re probably not doing well. So, drum roll, here’s their list, along with my own charts.
Archer Daniels Midland. ADM. 3.9% of workforce cut.
Citigroup. C. 0.5% of workforce cut.
Cisco. CSCO. 1.8% of employees cut.
Kraft Foods. 1.3% of employees cut.
Yahoo. YHOO. 14.2%
First Solar FSLR 28.6%
Boeing. BA 1.3%
Supervalu SVA 1.9% (This one has been on our list for a while)
Best Buy BBY 1.7%
Research in Motion RIMM 30.3% (Long on our list.)
Pepsi PEP 2.9%
IBM 2.1%
Lockheed Martin LMT 8.1%
American Airlines 17.7% In bankruptcy. Too late for shorting.
Hewlett-Packard HPQ 7.7%
United Continental UAL 1.5%
More coming in a minute. These charts take time — Harry.
Florida bursts with new opportunities. The idea is foreclosures are happening, prices are cheap and eventually the properties will be come back in price, as they always do. Hence, the world and their uncle are forming funds to buy houses at foreclosures. One fund summed the opportunities:
Why are there opportunities at foreclosure auctions?
+ Small pool of buyers due to cash only terms
+ Auction rules require advance capital in Clerk of Court account which can only be replenished with 24 hours notice
+ Bank errors and mispricing often result in low acquisition prices
+ The foreclosure of a priority position lien sometimes creates equity post foreclosure where none existed prior to foreclosure
+ Acquisition cost at foreclosure auctions result in cap rates that are significantly above market rates
14 second video is hysterical. Two German children demonstrate the table cloth trick.
You’ll die laughing. Click here.
Harry Newton who figured why dollar stores are booming:
The bottle on the right costs $3.50. The one on the left costs $1. and actually has one ounce more gunk (33 versus 32). And you’re still buying Windex?
harry – That $1.00 glass cleaner was probably made in China and who knows what they put in it.
Shorting…follow your nose
Among the 21 categories of items shipped by rail, none have a tighter correlation to GDP than waste.According to a 2010 piece on Bloomberg, economists Michael McDonough and Carl Riccadonna note that waste has an 82 percent correlation to US economic growth.This should be pretty intuitive. The more you produce, the more you throw out.McDonough, a Bloomberg BRIEF economist, tweeted out an update on the indicator.And frankly, it stinks. Waste carloads are way down.the chart is here
http://www.businessinsider.com…
I asked my Financial advisor about this article about how Wall Street rips you off which Harry seems to sing that tune also.
http://www.thereformedbroker.c…
He wrote back. I agree and
In the wake of the implosion of many non-traded REITs, non-traded business development companies (BDCs) have emerged as a relatively new structure that is getting a lot of attention. But with high up-front fees, limited liquidity and sometimes a reliance on leverage to goose returns, buyer beware.
“In my opinion, brokers should not be selling private anything—private placement, private REIT, private business development corporation—because it limits the flexibility, it limits liquidity, it limits transparency, and it almost always means higher fees internal,” said Joshua Brown, vice president of Investments at Fusion Analytics Investment Partners. “The only reason [non-traded BDCs] get sold is because it’s product and it’s sexy and it’s a way for a broker to get a higher fee for the same dollars that they would put into a public version.”
According to Tony Chereso, president and CEO of FactRight, the front-end loads on BDCs are fairly similar to non-traded REITs, which are high – typically around 11.5 to 12 percent.”
I have read the prospectuses on three of these and there is no way i would ever let a client of mine own them.
absolute fee machines for the broker that sells them and the operator of them…complete trash
By the way, no German children were harmed in the making of that video. It's a marketing campaign.
http://socialtimes.com/magic-t…
What was the commercial for?
Harry (i.e. Mr. Short)…..Do you still subscribe to Fred Hickey's newsletter?…..lol
No, why do you ask?
Harry newton posts a long post on shorting the market and half an hour later the market is up 225 points. Thank you, Harry! And remember: never doubt the United States of America. You come from an inferior country down under that lacks the can do American spirit, that's why you don't get it. The U.S. has a proud history in picking itself up by the book-straps. God bless this country, and to he#% with immigrants who come here and trash our nation's economy.
We'll beat the pants off you at the Olympics next week too.
Fred, I don't get it. If you don't get any value out of Harry's blog, he certainly doesn't force it on you, why do you waste your time reading it everyday. There has to be hundreds of thousands of investor blogs on the internet.
Harry isn't masquerading as a paid investment advisor, he's just living out loud his own personal adventure through life, trying to invest his hard earned capital that he has aquired over the years. I'm sure he would be the first to tell you that he is much better at building and running a business then he is at investing the earnings.
Dude, get a life, go spend your time reading or doing things you enjoy. Life is too short for you to walk around miserable all the time.
What a dope!
John,
I have a life. A wealthy life I built for myself, and I take issue with super pessimist bears like Harry talking people out of the stock market. The BIG problem with investment advice is the super bear analysts. Stocks are so much a better investment than anything else.
But you know what? Just to spare you,moron, I won't comment or read this blog anymore. (I found it through friends who also won't be reading.) I also won't be sharing any more tips like I did when I recommended WMT six weeks ago. It's up about 8 percent since.
I have a great life, man, that I built via investing for 30 years. I subscribe to the investing tenets of Buffett and Ben Graham. If you want to follow Harry's “shorts” instead, be my guest. dummie.
You are Native American, right? Apologies to you from all us dirty immigrants.
Fred,
your jingoism and xenophobia is exactly what is wrong with this country.
America is a great country and one that I love but it wasn’t built on the views
and attitudes you express. It was built on hard work, openness to ideas and new
people, and bringing the best of the world together. We get stronger together,
not at the expense of each other.
As
for Harry, why don't you lay off? He came to this country with nothing, built a
successful business that employed and helped a bunch of people, and is now
openly trying to learn the investment game. It is his exact spirit of sharing
and enthusiasm that makes this country great. You claim to love that “can
do” spirit but your actions don't reflect it. Why don't you do something
productive instead? Start your own blog, share your thinking with others and let
us all learn together. Your constant Monday morning quarterbacking might be fun
for your ego or help you overcome whatever deep-seeded insecurity you have that
makes you put others down to make yourself feel better. Frankly, it is
tiresome. And pathetic.
As
per the Olympics, I root for the US as much as the next guy but I think you are
missing the broader spirit of the Games. A spirit that is more important than
ever right now considering what is going on around the world.
You are a huge hypocrite. You knock me constantly, yet I can't lay a little constructive criticism at Harry's door? You even mock my name, dude. Talk about miserable and insecure. You have an inferiority complex the size of the Sears Tower.
Please lay off ME. Harry is an 80-year-old man, he can take it. This is just a meeting of the minds and an exchange of ideas. If he doesn't like my well-intentioned critiques he can block me.
Re: your comment about the Olympics – oh, man, you are either stupid or insane or both. Ideally, yes, it's about countries coming together, but in essence it is ruthless competition. So you're saying that all these competitors take performance enhancing drugs in the name of civic togetherness? This is the dumbest internet comment I have ever read!
Fred – on a per capita basis Australia beats the pants off the US every year. Its a 5x differential actually. Not even close.
I would rather live in Manhattan, New York than in Sydney or Melbourne anyday, anytime.
Oh, Fred789. It looks like you are the typical comment troll. No, this is not about your input that most disagree with. It is about your words – “to hell with…”; “stupid…”;” …dummie…” etc. – that people have trouble with. If you really have something to say, why can't you say it in a civil manner? Why the name calling? It is usually true that people resort to such method when they have no valid point. Could that be you?
As for Harry, I can tell you that regardless of what you say or imply, he is quite successful – by any standard. If you actually used the soft material inside your skull and do a little research, you will learn that Harry started and was able to exit from his business, along with his partner, to the tune of nine figures – in case your simple mind is having difficulty decoding nine figures, it means $100,000,000 + (the correct figure is closer to $130MM.) His company owned several magazines and a trade show under the umbrella of Telecom Library and the buyer was Miller Freeman, a unit of Great Britain's United News & Media PLC. He is kind enough to share his ideas, thoughts, and investment strategies with anyone, including you at no cost but a few minutes of one's time. Yet, you look as if you are waiting to pounce on every opportunity you think you have to slam him. All that would have been OK if you had anything of value to offer, which you have not done so far. You want to act like you have money and you are a great investor. So, tell us, Fred789. What are your accomplishments? How big is your portfolio? What have you done to help others? Where is your blog or column? Can we take a look? How much time do you spend thinking and writing every day, like Harry does?
Like someone else suggested, if you find nothing of value from Harry''s blog, why do you even bother spending a single minute of your time reading it or writing your insults?
I suggest that you buy yourself a mirror for your next birthday as a gift to yourself and the rest of us who enjoy Harry's blog. Perhaps it will help you open your eyes and grow up.
FYI- I was in an industry that was the focus of a couple of Harry's magazines as well as the trade show which is how I know about Harry. I was a subscriber as well as an attendee of the trade shows until I sold my business in '99, a couple of years after Harry and his partner sold Telecom Library. So, my words above are not a result of a Google search but based on first hand experience and knowledge.
Shorting is not anti-American. Ask Jim Chanos, the world's most prominent short seller. By alleging that short-selling is somehow unpatriotic, you are merely displaying your ignorance of the way the market functions. I suggest you take a relook at the strategy. Btw, Sir John Templeton, at the ripe old age of 87, shorted tech stocks in 1999/2000 and made several million dollars.
Man, I hope the blonde kid in the video is OK! gets an elbow in the gut and then a bookcase falls on him!
Economy changing? See Schumpeter's theory of creative destruction as the driving force of capitalism.
Shorting with stops may be ok but buying or spreading puts is a much easier way to play a long term “logical” short.
Can you explain exactly what you mean, please, along with an example or two?