Short selling is fun. And if you can do it well, you will seem like a magician. I like short selling - particularly the way I like to do it - which is to focus on where consensus longs are positioned, and then waiting for the right moment to pounce. Over the years, I have learnt the best shorts are the ones that people will buy all the way down. What I mean by that, lets say an asset or security falls 10%, the owners, rather than being alarmed, buy more! Japanese shares in the 1990s had this feature, as did the dot com bust. The Eurocrisis saw many fund mangers buying Italian debt as it looked so cheap, and in the most recent example, Chinese tech has consistently being bought. Do you remember the FANG era of investing had a Chinese equivalent of BAT - the A being Alibaba? Investors bought this sucker all the way down.
Why do I mention this? Well like everyone else, I saw the re-election of Donald Trump as bullish for stocks and for bitcoin. I think this was partly policy based, but also partly based on what happened to investors who were not bullish in 2016. Career risk is now a big issue for most professional investors - as outperforming the S&P 500 has been very difficult in recent years. But one thought kept coming into my mind. If this was the top in asset markets, everyone would be buyers at lower prices. No one has the guts to short sell this market anymore. Historically, that is the time to short sell - and lo and behold - my short book had its best month for a long time in December.
