Thursday, May 14, 2009

Answer to Query

I received a question about shorting stocks.  I have never shorted a stock.  I do not have a margin account.  I do not buy options.  I have never in my life borrowed money to buy a stock.  And the last time that I sent my discount broker a check to cover a stock purchase was in 1984. 

In other words, I am an old fogey.  I was an old fogey thirty years before I reached 57, my current age. 

The best hedge for a stock portfolio is to sell stocks. 

I have felt the need at times to buy the double shorts for a stock index to hedge my significantly reduced stock portfolio in 2007-2008, but I sold my last one of those in 2008.  I am constantly thinking, however, about using them to hedge a portfolio and the best way to do it. TWM vs. SDS: Hedging a Stock Portfolio with minimal small cap exposure

I do own one closed end investment company that goes long and short, symbol OLA, and information about that firm can be found at its web site.  I have close to 500 shares.  This is what the industry calls a 100/30 fund. Overview - Old Mutual/Claymore Long-Short Fund - OLA - Claymore Securities, Inc.   This was one of my mistakes, thinking that it might be some kind of  alternative investment for a bear market.  The fund does sell at a discount to its Net Asset Value, listed at$9.25  as of 5/13.  The distribution rate is around 20%, though that may be in for a hair cut. 

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