In this stock market update I show you all of the stocks I am short selling right now and explain why. I do not think the stock market is about to crash and am not trying to bet on some massive decline. I am still long more stocks than I am short, however I am now operating more like a hedge fund than a momentum Robinhood trader, meaning that I am both long and short stocks. The original hedge funds of the 1940’s did that to limit their risk and also to make their returns more dependent on their stock picking abilities than the direction of the overall stock market. The best way to make money in the markets is to be long stocks inside sectors outperforming the market. However, betting against stocks lagging the market is a way to limit risk in sideways to down markets.
The Cathie Wood ETF is made up of many stocks that are highly valued and are now lagging the market. She got a lot of media attention last year as her fund went up and does a great job of hyping people up about new technologies and things like crypto currencies, but in the long-run earnings and valuations – the price you pay when you buy a stock – do matter.
-Mike
