Bulls get bolder, bears wait patiently

Posted by Keith Hahn, May 30, 2007, 10:28am

bull bear.jpg This month, the number of shorted shares on the NYSE reached 3.1% of the total number of shares traded on the exchange. This is the highest percentage since 1931 (just to give you a sense of how long ago that is - in May of 1931 the Empire State Building had just finished construction). The bulls may carry the day though, as shares of the S&P 500 are trading at only 17.8x earnings on average, which is a far cry from the 32.8x earnings S&P 500 shares were trading at on average at the end of the last bull market. As short sellers continue to hold firm, they may continue to eat it, according to Bloomberg:

Hedge funds that focus on shorting lost 35 percent from September 2002 through the end of April, according to the Credit Suisse Tremont Hedge Fund Dedicated Short Bias Index. That compared with an 82 percent gain for the S&P 500 in the same period. The funds are the worst performers this year among 10 hedge fund strategies tracked by the Credit Suisse/Tremont Hedge Fund Index, dropping 1.1 percent.

Short Sales Break Record on NYSE; Market Bulls Get More Bullish [Bloomberg]

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Comments

Posted by , May 30, 2007 10:47AM

where is the hedge in a hedge fund that focussed on shorting?
sounds like just the opposite of a mutual fund

Posted by Give-up Agreement, May 30, 2007 11:18AM

This story misses the point. Today's trades, for the most part are more complicated than they were in 1931. Just because there's a high percentage of shorting doesn't mean that the funds are only taking short positions. A lot of these short positions are parts of highly structured trades that involve more than just straight short or long on equity. Unlike the above mentioned funds that "focus on shorting", most funds actually do hedge.

Posted by anonymous, May 30, 2007 11:22AM

Does the short interest data really go back all the way to 1931? I thought short interest reporting was due to the Securities Exchange Act of 1934, which didn't come into effect until 1934.

Posted by Anon, May 30, 2007 11:45AM

The real issue here is, this story is old news. It was in yesterday's (5/29) Bloomberg.

"...the Securities Exchange Act of 1934, which didn't come into effect until 1934."

Yeah, no shit asswipe, that's why it's called the Securities Exchange Act of 1934.

Posted by anon #2, May 30, 2007 12:16PM

Anon,
I think anonymous #2 was kinda adding that to make his point, not because he is an "asswipe"

Posted by Anon, May 30, 2007 12:30PM

Fair enough. But he can still be an asswipe, yes?

Posted by Anon #2, May 30, 2007 2:50PM

Of course he can be an ass wipe. I'm sure a huge one at that.

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