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Excelente texto, Ulisses.

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[Ulisses Pereira]

"Doctrinaire Shorts Take Pain on Amazon"

By James J. Cramer
04/25/2003 10:59 AM EDT

"The flaw in the doctrinal short hedge fund model is showing with the trading in Amazon. It's the doctrine that says "We have to short overvalued stocks at all times."

No sooner did I post my Columnist Conversation note last night about how I am amazed that hedge funds keep shorting these stocks that a bunch of hedge fund managers emailed me that, to paraphrase, of course they had to sell 200-times-earnings stocks. What else were they going to short?"


Sorry, but that's theoretical book logic. That's the logic of the school boy, not the street boy. And the street boy always wins in this game. Let me explain.

If you had shorted just overvalued stocks in the 1990s, you would be out of business. You would have had the high "moral" ground, but you wouldn't have any investors left. Yet the goal of the game is to make money for those investors, not to be "theoretically" right.

When I saw Amazon's number last night, I immediately reacted by asking "Who could be dumb enough to short that?" because I understand the way the market works. You can't short stocks that are doing better than expected until the cohort that buys stocks like that, the Janus cohort, goes out of business. Until then, you have to deal with the "corruption" of the pricing mechanism of the market.

That's why I always shorted crooked companies or companies that were going to miss earnings and avoided "crowded" shorts where everyone had the same information. Once the stock is no longer better than expected, you'll get plenty of chances to short it.

My career was made by missing the exact tops and the exact bottoms. If you insist on being short the exact top of Amazon, you are playing a very dangerous game, much more dangerous than most of your investors are willing to play.

How strongly do I feel about this stuff? Read my autobiography, Confessions of a Street Addict, where my partners rebelled at my insistence that the stocks I owned had great value. They wouldn't give me a chance to see the value come out. That was reality.


Some of you think that this is a game where heads comes up 50% of the time, where the dealer always busts with 16, where double-zero comes up only once in 38 times. Sure, sure. But in the small scheme of things, heads can come up 100 times in a row and you will be wiped out before it reverts to 50-50.

That's all that matters. "

(in www.realmoney.com)