Tuesday, November 6, 2007

The hapless shorts

It is unbelievable the amount of junk, rumour and innuendo that is being spread by the short hedge fund community. The NASDAQ 100 is prepared to melt up, and it seems that none of the "professionals" are prepared for it. Why are they all so negative? It's because the pros want this market down! It's not going to happen.

Monday morning, when the DOW gapped down 130 points, and the Naz 100 gapped down at 2190, I said we would have a 3.73% move on the Naz by Friday. Tomorrow evening Cisco reports. Where will the market be then? And where will the bears be then? Monday they were thumping their chest, instead of covering their shorts!

Yesterday, Doug Kass, of SeaBreeze Partners, who's been a bear, said that the day BIDU gapped up 10 points, and reversed would probably be the end of the NASDAQ move. Well, that happened today. What happened to the market? It rocked! To be fair, Mr. Kass brought in some of his shorts on the financials, and today said that the market could make a countertrend move. He should just cover all his shorts, now, and get on board. But that might not be intellectually rewarding!

Now you know why the market was full of these rumours. The "professionals" are not long, and they're also short. Here's an example of their games.

Blue Nile (NILE 74.68) reported earnings after the close, beating estimates by .02. The stock got clocked down to 64. It then rebounded over 20!!! points. Here's a bit of what I wrote on this stock on October 15th. Look at the shares owned by institutions, versus the shares outstanding. Who's selling the fake shares?


There is plenty of demand for the stock, from both shorts and longs, but Citigroup'sMahaney downgraded the stock on Friday to a sell but left his target at 88. He felt that NILE would miss revenue estimates, or be in line at best.

The only one that missed was Mark.

Today on the earnings call, Mark suggested to NILE that they would have problems with all their excess cash. He'll probably change his rating tomorrow. The time between his downgrades and upgrades, was the time for the shorts to cover, and other investors to build a position. But institutions already own more shares than the total amount of stock outstanding! And the shorts? They don't leave, until they're carried out on a stretcher.

And that they will.

(For a great primer on "fake" shares, go to the link below. "Wacky" Patty, as the shorts call Mr. Byrne isn't so wacky!)


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