Interesting take. You should mentioned it to John Hempton :)
I find shorting macro way harder than fraud. I cannot predict where interest rate will be in three months time or where currency exchange will be. I can understand if a business model is profitable or not though.
Shorting fraud can be controlled by tight risk management: only few bps for each short and having many of them. You should allow any short position to triple on you. Also pair your short position with long equity indexes to cancel out any central bank liquidity pumps.
You can make money and survive in this way but it's hard living. And having a department reaserching fraud can be very costly. So, I dont do it. Never.
This is helpful, especially because it's practical. Thank you! Question about the carry: you wrote, "The heyday of short selling was from 2000 through to 2008, when the S&P dividend yield 2% on average, and the average carry was 4%. From 2008 onwards, the S&P dividend yield has again fallen back to 2%, while the carry proceeds has been zero. Short-biased funds over this period were basically liquidated."
The carry should basically be a competitive short-term (money market) rate, yes? ... so should increase in current regime ... Does the dividend yield have any influence (dividend gets rebated)? Thank you!
Russell, what do you think about the following from the resolution foundation correlating household costs / inflation to labor disputes? https://www.resolutionfoundation.org/comment/lengthening-picket-lines-and-the-great-british-bin-fire/
Absolutely loving your content Russell, would you be open to allowing us to share it with our 60k+ audience as well?
Interesting take. You should mentioned it to John Hempton :)
I find shorting macro way harder than fraud. I cannot predict where interest rate will be in three months time or where currency exchange will be. I can understand if a business model is profitable or not though.
Shorting fraud can be controlled by tight risk management: only few bps for each short and having many of them. You should allow any short position to triple on you. Also pair your short position with long equity indexes to cancel out any central bank liquidity pumps.
You can make money and survive in this way but it's hard living. And having a department reaserching fraud can be very costly. So, I dont do it. Never.
This is helpful, especially because it's practical. Thank you! Question about the carry: you wrote, "The heyday of short selling was from 2000 through to 2008, when the S&P dividend yield 2% on average, and the average carry was 4%. From 2008 onwards, the S&P dividend yield has again fallen back to 2%, while the carry proceeds has been zero. Short-biased funds over this period were basically liquidated."
The carry should basically be a competitive short-term (money market) rate, yes? ... so should increase in current regime ... Does the dividend yield have any influence (dividend gets rebated)? Thank you!
Really great insight into Short Selling dynamics.