U.S. stocks slide allows short sellers to smile again
The stock market’s long-suffering short sellers finally have something to smile about.
Investors who make a living betting that stock prices will fall are in a position to profit handsomely as the U.S. equity market sinks, with its biggest weekly plunge in more than two years last week and continuing to decline so far this week.
“Short-selling is the worst way to make money but recently I’ve had a change of heart and I think there are enough valuation obscenities to create an opportunity,” said prominent bear William Fleckenstein, who shuttered his short-only fund in 2009, but continues to invest money through another portfolio. “It felt like putting on an old, comfortable leather jacket.”
The short funds – who borrow shares and then sell them in hope of buying them back at a lower price – are hopeful that the bull market that has lasted more than 2,000 days, and has not experienced a 10 percent correction in three years, may be coming to an end.
Equity markets now look vulnerable, thanks to the winding back of U.S. Federal Reserve easy money policies, concerns about weak global economic growth, a plunge in the oil price, and fears about the spread of the Ebola virus.
“When short sellers play a more activist role there are times when markets just shrug it off but then there are times like now when people pay more attention,” he said.
Source: Reuters- U.S. stocks slide allows short sellers to smile again
