John Lounsbury
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On Short-Sellers and Dishonest Executives [View article]
Good article. I like to "short against the box" in volatile markets for downside protection of long-term capital gains (and sometimes profit). Since I am shorting companies I already own, this is a good example of shorting that does not have the objective of "bringing down the company". In many cases, shorting against the box is a much more cost effective way to hedge than buying put options. The more volatile a stock, the larger the time value in the premium. Writing calls as a hedge provides limited protection, whereas, whereas selling short provides unlimited value protection. Finally, selling short has no expiration date.
Wall Street Breakfast: Must-Know News [View article]
Why is Apple down? Try valuation. Expected 2008 earnings are $5.20; 5 year expected annual growth rate 24%; high volatility (Beta = 2.88). If I assign 5% annual growth starting in six years and continuing forever, fair value today for AAPL is $44.
By the way, I own Apple. However, I do put short position hedges on that holding at every pullback. The potential for Apple to double keeps me an owner. The potential for Apple to go down 50-75% keeps me guarded.