Comments on: When the Sirens Sing, How to Avoid Giving in… http://alephblog.com/2009/09/19/when-the-sirens-sing-how-to-avoid-giving-in/ Helping Institutions and Ordinary People Invest Better by Focusing on Risk Control Fri, 25 May 2012 21:31:47 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Aaronhttp://alephblog.com/2009/09/19/when-the-sirens-sing-how-to-avoid-giving-in/comment-page-1/#comment-23398 Aaron Wed, 30 Sep 2009 03:23:36 +0000 http://alephblog.com/?p=2024#comment-23398 This is a good post. I like the nod to Kahneman/Tversky and avoiding losses. This is a good post. I like the nod to Kahneman/Tversky and avoiding losses.

]]> By: Retirement Saviorhttp://alephblog.com/2009/09/19/when-the-sirens-sing-how-to-avoid-giving-in/comment-page-1/#comment-23395 Retirement Savior Tue, 29 Sep 2009 14:33:55 +0000 http://alephblog.com/?p=2024#comment-23395 This is probably the best article I've read in months. Skepticism is more intellectually gratifying, but it is less lucrative. I guess if you are to wait for the all clear, the opportunity will already have passed. This is probably the best article I’ve read in months. Skepticism is more intellectually gratifying, but it is less lucrative. I guess if you are to wait for the all clear, the opportunity will already have passed.

]]> By: DaveinHackensackhttp://alephblog.com/2009/09/19/when-the-sirens-sing-how-to-avoid-giving-in/comment-page-1/#comment-23332 DaveinHackensack Tue, 22 Sep 2009 22:30:44 +0000 http://alephblog.com/?p=2024#comment-23332 I recently shorted BAGL, Aref, one of David Einhorn's holdings. You can read my rationale for that here, if you want: <a href="http://thehackensack.blogspot.com/2009/09/new-short-position-bagl.html" rel="nofollow">New Short Position: BAGL</a>. I recently shorted BAGL, Aref, one of David Einhorn’s holdings. You can read my rationale for that here, if you want: New Short Position: BAGL.

]]> By: Arefhttp://alephblog.com/2009/09/19/when-the-sirens-sing-how-to-avoid-giving-in/comment-page-1/#comment-23328 Aref Mon, 21 Sep 2009 21:38:48 +0000 http://alephblog.com/?p=2024#comment-23328 People often forget that being Short means accepting numerous interlinked elements, most of which that are not conducive to making money. 1. You can lose more on your Shorts than you can make. 2. Your problems get bigger, the more the price moves against you (whereas they get smaller when you're Long). 3. Because of this, the trend is not your friend! You can't just run your book unchanged as things work; as you become less Short as the market goes down (resulting in less exposure as you're proved right, unlike being Long). 4. I think it's fair to assume that people expect, generally, to earn > risk free from holdings stocks. As such, to profit from a net Short position, you already start in the hole absolutely (to the tune of the risk free+ any premium that may/may not exist). 5. A ton of psychological factors (people are really good at hoping thinks will be better soon, and this can last far longer/be more irrational than the reverse). People often forget that being Short means accepting numerous interlinked elements, most of which that are not conducive to making money.

1. You can lose more on your Shorts than you can make.
2. Your problems get bigger, the more the price moves against you (whereas they get smaller when you’re Long).
3. Because of this, the trend is not your friend! You can’t just run your book unchanged as things work; as you become less Short as the market goes down (resulting in less exposure as you’re proved right, unlike being Long).
4. I think it’s fair to assume that people expect, generally, to earn > risk free from holdings stocks. As such, to profit from a net Short position, you already start in the hole absolutely (to the tune of the risk free+ any premium that may/may not exist).
5. A ton of psychological factors (people are really good at hoping thinks will be better soon, and this can last far longer/be more irrational than the reverse).

]]> By: DaveinHackensackhttp://alephblog.com/2009/09/19/when-the-sirens-sing-how-to-avoid-giving-in/comment-page-1/#comment-23318 DaveinHackensack Sat, 19 Sep 2009 19:53:16 +0000 http://alephblog.com/?p=2024#comment-23318 I left you a positive comment on your "What is Going Right" thread, though it helped that two of the three stocks I mentioned in your <a href="http://alephblog.com/2009/09/04/tickers-for-the-latest-portfolio-reshaping/" rel="nofollow">Tickers for the Latest Portfolio Reshaping"</a> thread have been on a tear since, with one (which now comprises about 30% of my stock portfolio) more than tripling. I left you a positive comment on your “What is Going Right” thread, though it helped that two of the three stocks I mentioned in your Tickers for the Latest Portfolio Reshaping” thread have been on a tear since, with one (which now comprises about 30% of my stock portfolio) more than tripling.

]]> By: Josh Sternhttp://alephblog.com/2009/09/19/when-the-sirens-sing-how-to-avoid-giving-in/comment-page-1/#comment-23317 Josh Stern Sat, 19 Sep 2009 13:54:32 +0000 http://alephblog.com/?p=2024#comment-23317 David, I know what you mean. But I'm curious in this context about the role of absolute valuation strategies in what you recommend. Is it a) no role (relative valuation rules!), b) plays a role, but only within the 10% stretch band, c) matters, but one can always find a portfolio's worth of low absolute valuation stuff (if one doesn't worry about the implied adverse selection bias that when everything else is pricey, the cheap stuff is much more likely to be cheap for a good reason), or d) something else? David, I know what you mean. But I’m curious in this context about the role of absolute valuation strategies in what you recommend. Is it a) no role (relative valuation rules!), b) plays a role, but only within the 10% stretch band, c) matters, but one can always find a portfolio’s worth of low absolute valuation stuff (if one doesn’t worry about the implied adverse selection bias that when everything else is pricey, the cheap stuff is much more likely to be cheap for a good reason), or d) something else?

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