P.T. Barnum is famous for saying "there is a sucker born every day" and that quip could probably be applied to me when you consider I'm down nearly 30% of my original investment in only three and a half months. But you must consider I'm playing with fire when I'm in ETFs that are leveraged 200% and 300% to the downside. The game I'm playing is financial Russian Roulette with heavy bets that I don't put the bullet in my temple. Believe it or not, I am primarily a value investor. I don't agree with the Efficient Market Theory where investors believe that stocks are always fully priced and you can never beat the market. I'm from the school that stocks go on sale and can also become overvalued and this holds true for the indexes like the Dow Jones Industrial Average and the S&P 500, too.
The historical average for the Price to Earnings Ratio on the S&P 500 is 12 according to Jeremy Siegel and the Standard and Poors Web site's 2009 projection is very high with an estimate of 20. The market has risen for seven straight months with no correction greater than 4% until yesterday when it hit 5%. This is unheard of after a 60% gain and I know that John Maynard Keynes said "the market can stay irrational longer than you can stay solvent", but I'm willing to take my chances. I'll stick with my short positions and take the ribbing and peer pressure that goes along with going against the grain.
I know there are a lot of hucksters in the market and I may very well be one of them, but I've been through two major crashes in twenty years and stayed long when all of the potentates said it was different this time, to hang in there because stocks would keep going up. I went against common sense and ran with the herd. Oh, it was sweet when my portfolio was climbing, but boy did it hurt when I clung to my holdings and watched my profits fall into the abyss. Not this time. No thank you. It is time to circle the wagons.
To the uninitiated, short selling can be considered Un-American. You are betting against your country and countrymen. I'm a firm believer in the American Way, the American Dream, God Bless America and most importantly, the American Business Cycle. Approximately every forty years we get a purging of the bad debt in the monetary system and we go into deep recession or depression. It happened in the 1890's, 1930's, 1970's and now the chickens have come home to roost. The stock market is a big casino and if you don't think so, just look what happened to your portfolios in 2000 and last year. It's not like putting your money in the bank. You are taking a calculated risk when you buy securities. Buying, selling and shorting stocks is a zero sum game. There is a winner and loser on every trade. It's is just the way the system works and by no means is selling a stock short Un-American.