5 ms·
The valuation on this stock is insane. However shorting it is also insane.
by samfisher83 6y ago
The valuation on this stock is insane. However shorting it is also insane.
- StavrosK 6y agoWhat word would you use to describe thinking that those sentences can both be true at the same time?
- deleted 6y ago[deleted]
- kod 6y agoSane. "There's too much risk either direction, stay away from it" sounds pretty sane to me.
- OldHand2018 6y agoHow about the famous quote: "The markets can stay irrational longer than you can stay solvent"
- ABeeSea 6y agoThe one where shorting requires debt and a massive risk premium on the time value of money. Not to mention the unlimited risk piece. The two bets aren’t symmetric
- deleted 6y ago[deleted]
- CrazyStat 6y agoA recognition that the market may continue to be irrational for a long time, so even if you believe a company to be extremely overvalued it may be unwise to short it unless you have infinitely deep pockets. If you insist on a single word, may I suggest "experience."
- gpm 6y agoAnd even if you have infinite money, a short squeeze in the meantime can mean that you permanently lose money on shorting the stock before it goes down.
- david_draco 6y agoVolatility, or Uncertainty
- Lazare 6y ago"Realistic"? Shorting a stock is not a pure mathematical bet that a stock will, in the fullness of time, be viewed as overvalued, it's a concrete bet about prices in the near term. :) Plenty of people called the 90s dot com bubble, shorted tech stocks, then lost everything because the bubble kept going until they ran out of cash to make short bets. Same with the housing market more recently. If you could magically know that Company X's stock is overvalued, and that it WILL collapse at some point, but you couldn't figure out when, just a vague "sometime in the next 10 years", going long would be a good way to lose money (it will collapse eventually), but going short would also be a good way to lose money. Timing matters just as much as direction.