Author Topic: Is it crazy to short the technology sector now?  (Read 2395 times)

VolcanicArts

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Is it crazy to short the technology sector now?
« on: June 10, 2017, 10:53:42 PM »
Does anyone think that it would be completely off the wall to short the tech sector at this point? All you seem to hear these days is about the billion new tech advancements coming out. A lot of these companies have great products and start up ideas, but produce few if any tangible products and there are so many competitors now. Also it seems like companies like aapl are eventually going to run into the problem, where they can't produce a better product (for example you can only tweak a phone so much that at some point you can't really improve it much more so people might buy the new phones at a slower rate or not at all). Anyone have thoughts on this?

gooki

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Re: Is it crazy to short the technology sector now?
« Reply #1 on: June 11, 2017, 02:55:00 AM »
There's more to technology than cell phones.

The AI revolution is coming, yes there are a lot of competitors, but there will be market leaders, and some of the wealth efficiencies that AI brings swill be transferred to these market leaders.

The second electric revolution has started (transportation).

If you're going to short something, it'd be fossil fuel power generators, oil companies, and vehicle parking.

davisgang90

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Re: Is it crazy to short the technology sector now?
« Reply #2 on: June 11, 2017, 04:26:10 AM »
Sounds like timing the market.

I recommend you invest in market index funds at your AA and let it ride.  Yes it is boring, but you can't beat the index over time.


aceyou

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Re: Is it crazy to short the technology sector now?
« Reply #3 on: June 11, 2017, 04:50:39 AM »
Sure, to short the tech market you just have to do a couple really simple things. 

1.  Know that it'll tank.
2.  Know which part of.it will tank.
3.  Know when the bubble will burst.
4.  Know approximately how much and for how long it'll drop.

I always get stuck on #1 and find all those steps really tough, so I just stick with vtsax.

Gondolin

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Re: Is it crazy to short the technology sector now?
« Reply #4 on: June 12, 2017, 10:13:31 AM »
Yes, it's crazy, especially if your example is that one day Apple will run out of new tech. A cursory look at Apple products will reveal that Apple's success is 90% driven by branding and marketing and maybe 10% by technical innovation.

It's fair to question if info-social companies which produce no physical product (Twitter, Snapchat) will be able to monetize the supposedly infinite value locked in their userbases. Some will, others won't. Hard to guess which will be which.

PizzaSteve

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Re: Is it crazy to short the technology sector now?
« Reply #5 on: June 12, 2017, 11:53:12 AM »
Does anyone think that it would be completely off the wall to short the tech sector at this point? All you seem to hear these days is about the billion new tech advancements coming out. A lot of these companies have great products and start up ideas, but produce few if any tangible products and there are so many competitors now. Also it seems like companies like aapl are eventually going to run into the problem, where they can't produce a better product (for example you can only tweak a phone so much that at some point you can't really improve it much more so people might buy the new phones at a slower rate or not at all). Anyone have thoughts on this?
Yes.

Only 2 ways to short, covered or naked.

Covered shorts throw away your growth and upside during the short period.  It is like changing your asset allocation to 100% bonds for the amount you risk. If you want out of the market, why not just sell your position and be done with it.  Personal example.  I wrote covered calls for income on a stock.  Made   6 dollars for 1 year calls at 30 when stock at 24.  That stock went to 130 that year and i kicked myself.  Not only did i lose the 100 dollars per share of upside, i couldnt even close the position out as the options were execercised early, so i had huge capital gains tax to pay.

Naked shorts exposes you to huge losses for the upside risk, in exchange for a fixed return.  It is like taking out a morgage to gamble.  This does not fit most peoples asset allocation plan.  Care to take that 100 dollars per share gain as money you owe someone instead of a lost opportunity?
« Last Edit: June 12, 2017, 11:56:16 AM by PizzaSteve »

sol

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Re: Is it crazy to short the technology sector now?
« Reply #6 on: June 12, 2017, 12:05:24 PM »
I think it's dumb (bad idea), but not crazy (insane or illogical).

There is always someone who thinks the market is about to crash.  We need those people to keep the market in balance, to drive down equity prices so that I can buy future earnings at reasonable current prices.  I can't make a profit in the market if everyone thinks the economy will continue to grow, because there would be no more risk arbitrage. 

So, I wholeheartedly encourage you to make bad market decisions.  Please bet against the previously unstoppable force of American capitalism.  Plan for widespread economic collapse.  Sell me your stocks at a discount, and buy gold instead.  Every once in a while your plan will be profitable (assuming you buy back in after the drop), but most of the time people on your plan will only help people like me get richer and richer.

Do you think you've identified a coming collapse before everyone else? If yes, you are a genius and about to be rich.  If no, you are about to forfeit future profits to me and the rest of the buy and holders.
« Last Edit: June 12, 2017, 04:41:31 PM by sol »

Scortius

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Re: Is it crazy to short the technology sector now?
« Reply #7 on: June 12, 2017, 02:33:10 PM »
I would love to short the start-up VC scene.  I still think there's a lot of dead weight out there.  But, you can't short start-ups, you can only short public companies.  I would absolutely not short the public tech market.  It's not going anywhere.  I believe the next 30 years will see some incredible new technological advances based on the rapidly emerging big data scene (at the very least).

acanthurus

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Re: Is it crazy to short the technology sector now?
« Reply #8 on: June 12, 2017, 07:25:48 PM »
If you haven't been reading the 10Ks and Qs and built up a valuation model for what you want to short based on expected future cash flows, then no, you should not short. Even then it's pretty risky. I've done it once and my experience was that an extremely illiquid options market significantly reduced profit (made about 60% overnight with an earnings play on a bullshit smallcap tech company). I risked all of $250 and proved to myself it's not worth the effort or risk. Really exciting though, Vegas has nothing on a leveraged short.

scottish

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Re: Is it crazy to short the technology sector now?
« Reply #9 on: June 12, 2017, 07:47:27 PM »
I think it's dumb (bad idea), but not crazy (insane or illogical).

There is always someone who thinks the market is about to crash.  We need those people to keep the market in balance, to drive down equity prices so that I can buy future earnings at reasonable current prices.  I can't make a profit in the market if everyone thinks the economy will continue to grow, because there would be no more risk arbitrage. 

So, I wholeheartedly encourage you to make bad market decisions.  Please bet against the previously unstoppable force of American capitalism.  Plan for widespread economic collapse.  Sell me your stocks at a discount, and buy gold instead.  Every once in a while your plan will be profitable (assuming you buy back in after the drop), but most of the time people on your plan will only help people like me get richer and richer.

Do you think you've identified a coming collapse before everyone else? If yes, you are a genius and about to be rich.  If no, you are about to forfeit future profits to me and the rest of the buy and holders.

Trump is going to MAGA.   Of course you shouldn't short American stocks.   Huh.