Why Not Just Go Short?
Over the past few weeks, I have had more than a few questions asking "why not just get short?" You suggest a "baseball season of frustration is upon us." On Fast Money you said "don't buy xyz here, wait." Joe come on - just sell them short!
Have I ever shorted individual stock names, stock indices or futures? Yes. Would I encourage one of my dearest friends to adopt that strategy? Absolutely not, unless they plan on dedicating slightly more than the 90 hours a week that I dedicate to the capital markets. Trust me, my colleagues at Virtus know what time I am writing this blog.
At the beginning of this year, I penned my plan to drive three speeds: underweight, market weight, and overweight. I encourage investors to do the same. Understand your personality, your plan, and implement your strategy with risk management as your top priority. That is why the three speeds are so important. If you drive in just one of those speeds for the whole year, you are destined for underperformance, especially this year. Anything is possible, but I wouldn't expect during this baseball season of frustration to spend significant time at overweight.
This past week in Vegas I was relaxed. My sole overweight, gold, was chopped to underweight before I flew out on Tuesday. I guess "The Liquidator" in me remains because at the SALT Conference I could tell by the faces, body language, and trips to the hall for cell phone calls, just who remained overweight. Across the board, I have been underweight this month. After Friday's close, I would suggest my portfolio is moving back toward market weight.
I am moving my investments back toward market weight - plain and simple - because I have a point of reference to tell me if I am wrong. By the way, my gut tells me that I am probably wrong, but I must stick to my game plan - hard to do sometimes - we spend most of our energy questioning the plan and attempting to sabotage it. The reality is that everybody, and that includes some of the biggest and best, gets it wrong from time to time when analyzing how or where to invest capital. The key is admitting rather quickly when you are wrong and reducing risk. Here is my point of reference for the S&P 500 Index.My Point of Reference Source: Bloomberg