Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
I have come to realize you are one clever investor as most retail investors do not follow short interest. I do follow it through referencing the etf, SPY. My source is showing 2.6 days to cover. I have linked my source for you and others to view.
Thanks for thinking I am clever, but all I did was look up SPY on the Merrill Lynch site as to its ytd to compare to some of my funds, and there it was, staring at me. I knew it looked out of place, so thats why I posted it. I do like researching, and do it all the time. Now that I am retired, have more time to do it. I do look for amount short when I am thinking about investing in a stock, a part of my overall research, but this one really stuck out.
You are most welcome for the link. I hope you will continue to post information as you discover things you feel important on the markets and investments. For me, information is what I key off of concerning my investments and the positioning of my portfolio.
To be clever is not so much being smarter than others but having good wisdom. Wisdom comes through experiences … and, again not to many average retail investors follow short interest. I think those that do follow short interest on the market are being clever, and perhaps even might being said to being “slick,” Slick.
Nice to have you, bee and others on the board who, at times, bring some perspectives forward that perhaps are known about but often get overlooked. Short interest has not been brought up on the board for sometime even though it is known about. I feel it is an important aspect of valuation and something that bears being looked at especially in an overvalued and overbought market. Hey, when the short interest gets high, say 34%, the “Bears” have come to town by my thinking. I am certainly glad I have now positioned somewhat defensively within my own portfolio by holding a good amount of Cash, being overweight in the defensive sectors, and by having dialed back my allocation to equities over the past year(s) plus owing some flexible type funds that can adjust their allocations and can even short when their managers feel market conditions warrant.
My own research and technical analysis reflects that the money flow has been in a decline on the etf SPY since the week of November 4th. The MACD gave a sell signal the week of November 25th. The Relative Strength Index has gone form a reading in the mid 80’s to the mid 50’s all within the past couple weeks. And, just in this week or so, the price line has started to fall from a high of around 1813 to ….. but, rallied and rebounded as of Fridays December 6th market close. And, with your reporting that the short interest is in the 34% range well it just fit right in with what I was seeing and did not surprise me. With all this, I feel caution is most warranted at this time. Even though the markets can move higher there is going to have to be some good 4Q2013 corporate earnings and revenue reporting come January to support the current valuation. And, I feel our elected in Washington are going to have to come together on the budget and debt ceiling; otherwise, it will not be good for the economy or the markets, if this lingers on. And, then there is the new fed chairperson taking over and with the big tapper question. No doubt, there are many other things that can drive the maket's direction.
Reply to @Derf: Hi Derf, Here's what I came across:
"Short-Interest Ratio The short-interest ratio is the number of shares sold short (short interest) divided by average daily volume. This is often called the "days-to-cover ratio" because it determines, based on the stock's average trading volume, how many days it will take short sellers to cover their positions if positive news about the company lifts the price.
Again, let's assume Microsoft has a short interest of 75 million shares, while the average daily volume of shares traded is 70 million. Doing a quick and easy calculation (75,000,000/70,000,000), we find that it would take 1.07 days for all of the short sellers to cover their positions. The higher the ratio, the longer it will take to buy back the borrowed shares - an important factor upon which traders or investors decide whether to take a short position. Typically, if the days to cover stretch past eight or more days, covering a short position could prove difficult."
Finally, What happens when you own all outstandinding shares of an OTC stock company, then you find out millions more exist and are being used to naked short your company's stock...CEO story: euromoney.com/Article/1001047/Title.html
Whenever Shorting is mentioned I am reminded of what happens when shorting rules are illegally manipulated...referred to as Naked Shorting:
"Naked short-selling involves selling shares without first borrowing them, a violation of Regulation SHO that requires people making short trades to ensure that they will buy or borrow stock they don't own to ensure delivery within three days of a trade."
An Academic style presentation by (Patrick Bryne) which covers naked short selling. Presentation is broken up into smaller video segments through youtube...here's the first part: youtube.com/watch?v=gpWzOjB8qtU
The days to cover are on the rise. As of my last check the days to cover for the etf SPY has gone form 2.6 to 3.2 since this thread was started by slick on Dec 6th.
I have provided a link for those that might be interested in following its short interest.
Reply to @Bud: Ha! Well, would still appreciate any insight from the board on how info like this is best used. For example, I've been interested in CHE for a while, especially after the recent lawsuits, which if turn-out false, present a buy opportunity. But I've been spooked by the high short ratio...so far anyway.
Reply to @Charles: Iam not sure if this is the information you seek. It explains how much of a company's shares can be shorted based upon the shares in float. If not, it might provide information for others to better understand the topic.
Reply to @Charles: Charles, make sure you watch video on Phantom shares, from bee. It makes me want to throw my hands in the air & holler !!!!!! Also I've read in prospectus that some funds allow their shares to be borrowed & used for shorting. I was wondering who benefits from this, the mutual fund company or the shareholders?
I thought I’d provide an update on slick’s Dec 6th post on short interest. It seems the volume on the S&P 500 Index picked up last week after the fed’s announcement and the days to cover are now at 3.2 as of market close on Friday up 0.6 from the Dec 6th post. I have provided the link to my source of information for your viewing.
This might be helpful to some and others probably not. My thinking is that when short interest starts to rise and the days to cover increase then this is a bearish indicator or some might be hedging their positions with the markets being at higher valuations.
Reply to @Charles: Sorry Charles for the delay. For the small investor the amount of shorts on a given stock or index means very little. The big institutional investors use shorts as arbitrage play. Regards, Ted
I will attempt to answer this by selecting a fund to study NLSAX, Neuberger Berman L/S Fund. I have linked its Morningstar Quote Sheet. Under Asset Allocation … Notice that there are % Net, % Long, % Short columns with percentage amounts listed for each area. With this, for the fund to short somewhere it has to be long somewhere else but overall it will have to net out 100%. In NLSAX’s case I compute the total long positions to equal 122.97% and the total short positions to equal 22.96% thus netting about 100%. I take it the sum variance is due to rounding. Also, notice under the other asset area the fund is net short -6.81% while only being long 0.25%. This is because of the use of derivatives and/or "other" short positions.
Reply to @Derf: The shareholders because income from such loaning goes to the fund. That in turn can be used to offset the expenses and without such income the returns of the shareholder could be lower for the same set of expenses. But, I am sure some mutual funds are charging higher management fees so take out that income.
Evaluate the fund/manager based on total expenses and total investor returns.
Comments
Probably.
I have come to realize you are one clever investor as most retail investors do not follow short interest. I do follow it through referencing the etf, SPY. My source is showing 2.6 days to cover. I have linked my source for you and others to view.
http://shortsqueeze.com/?symbol=spy&submit=Short+Quote
I was wondering your source of information ?
Old_Skeet
You are very welcome. I hope you find it beneficial.
Old_Skeet
Thanks for thinking I am clever, but all I did was look up SPY on the Merrill Lynch site as to its ytd to compare to some of my funds, and there it was, staring at me. I knew it looked out of place, so thats why I posted it. I do like researching, and do it all the time. Now that I am retired, have more time to do it. I do look for amount short when I am thinking about investing in a stock, a part of my overall research, but this one really stuck out.
Thanks for posting the link.
One of many links:
finance.yahoo.com/news/struggling-sears-spin-off-lands-160850314.html
You are most welcome for the link. I hope you will continue to post information as you discover things you feel important on the markets and investments. For me, information is what I key off of concerning my investments and the positioning of my portfolio.
To be clever is not so much being smarter than others but having good wisdom. Wisdom comes through experiences … and, again not to many average retail investors follow short interest. I think those that do follow short interest on the market are being clever, and perhaps even might being said to being “slick,” Slick.
Nice to have you, bee and others on the board who, at times, bring some perspectives forward that perhaps are known about but often get overlooked. Short interest has not been brought up on the board for sometime even though it is known about. I feel it is an important aspect of valuation and something that bears being looked at especially in an overvalued and overbought market. Hey, when the short interest gets high, say 34%, the “Bears” have come to town by my thinking. I am certainly glad I have now positioned somewhat defensively within my own portfolio by holding a good amount of Cash, being overweight in the defensive sectors, and by having dialed back my allocation to equities over the past year(s) plus owing some flexible type funds that can adjust their allocations and can even short when their managers feel market conditions warrant.
My own research and technical analysis reflects that the money flow has been in a decline on the etf SPY since the week of November 4th. The MACD gave a sell signal the week of November 25th. The Relative Strength Index has gone form a reading in the mid 80’s to the mid 50’s all within the past couple weeks. And, just in this week or so, the price line has started to fall from a high of around 1813 to ….. but, rallied and rebounded as of Fridays December 6th market close. And, with your reporting that the short interest is in the 34% range well it just fit right in with what I was seeing and did not surprise me. With all this, I feel caution is most warranted at this time. Even though the markets can move higher there is going to have to be some good 4Q2013 corporate earnings and revenue reporting come January to support the current valuation. And, I feel our elected in Washington are going to have to come together on the budget and debt ceiling; otherwise, it will not be good for the economy or the markets, if this lingers on. And, then there is the new fed chairperson taking over and with the big tapper question. No doubt, there are many other things that can drive the maket's direction.
Please keep posting those findings.
Have a good weekend … and, “Good Investing.”
Old_Skeet
Thanks, Derf
"Short-Interest Ratio
The short-interest ratio is the number of shares sold short (short interest) divided by average daily volume. This is often called the "days-to-cover ratio" because it determines, based on the stock's average trading volume, how many days it will take short sellers to cover their positions if positive news about the company lifts the price.
Again, let's assume Microsoft has a short interest of 75 million shares, while the average daily volume of shares traded is 70 million. Doing a quick and easy calculation (75,000,000/70,000,000), we find that it would take 1.07 days for all of the short sellers to cover their positions. The higher the ratio, the longer it will take to buy back the borrowed shares - an important factor upon which traders or investors decide whether to take a short position. Typically, if the days to cover stretch past eight or more days, covering a short position could prove difficult."
Source:
http://www.investopedia.com/articles/01/082201.asp
Also, a good interview on shorting... Interview with Patrick Byrne on Financial Sense Newshour back in 2007 (listen to this through one of the audio links):
financialsensearchive.com/transcriptions/2007/0331.html
Bloomberg Presentation on Phantom Shares:
vimeo.com/42321845
Finally, What happens when you own all outstandinding shares of an OTC stock company, then you find out millions more exist and are being used to naked short your company's stock...CEO story:
euromoney.com/Article/1001047/Title.html
"Naked short-selling involves selling shares without first borrowing them, a violation of Regulation SHO that requires people making short trades to ensure that they will buy or borrow stock they don't own to ensure delivery within three days of a trade."
RecentArticle on Naked Shorting: SEC Fines Charles Schwab's (optionsXpress):
reuters.com/article/2013/06/10/optionsxpress-penalty-sec-idUSL2N0EM0V820130610
SEC does occassionally prosecute Naked Shorting:
sec.gov/news/press/2009/2009-179.htm
An Academic style presentation by (Patrick Bryne) which covers naked short selling. Presentation is broken up into smaller video segments through youtube...here's the first part:
youtube.com/watch?v=gpWzOjB8qtU
I have provided a link for those that might be interested in following its short interest.
http://shortsqueeze.com/?symbol=spy&submit=Short+Quote
Old_Skeet
Regards,
Ted
http://wsj.com/mdc/public/page/2_3062-nyseshort-highlites.html
Iam not sure if this is the information you seek. It explains how much of a company's shares can be shorted based upon the shares in float. If not, it might provide information for others to better understand the topic.
http://www.investopedia.com/ask/answers/05/shortexceed50.asp
Old_Skeet
Let's hope short sellers get squeezed today
Also I've read in prospectus that some funds allow their shares to be borrowed & used for shorting. I was wondering who benefits from this, the mutual fund company or the shareholders?
Stay warm, Derf
I thought I’d provide an update on slick’s Dec 6th post on short interest. It seems the volume on the S&P 500 Index picked up last week after the fed’s announcement and the days to cover are now at 3.2 as of market close on Friday up 0.6 from the Dec 6th post. I have provided the link to my source of information for your viewing.
http://shortsqueeze.com/?symbol=spy&submit=Short+Quote
This might be helpful to some and others probably not. My thinking is that when short interest starts to rise and the days to cover increase then this is a bearish indicator or some might be hedging their positions with the markets being at higher valuations.
Have a good weekend … and “Good Investing.”
Old_Skeet
Regards,
Ted
I will attempt to answer this by selecting a fund to study NLSAX, Neuberger Berman L/S Fund. I have linked its Morningstar Quote Sheet. Under Asset Allocation … Notice that there are % Net, % Long, % Short columns with percentage amounts listed for each area. With this, for the fund to short somewhere it has to be long somewhere else but overall it will have to net out 100%. In NLSAX’s case I compute the total long positions to equal 122.97% and the total short positions to equal 22.96% thus netting about 100%. I take it the sum variance is due to rounding. Also, notice under the other asset area the fund is net short -6.81% while only being long 0.25%. This is because of the use of derivatives and/or "other" short positions.
http://quotes.morningstar.com/fund/f?t=nlsax®ion=USA
Hope this helps.
Happy Holidays, Merry Christmas … and, Good Investing,
Old_Skeet
Evaluate the fund/manager based on total expenses and total investor returns.