The shorts have gotten crushed out of the markets and
today's article on the subject has the proof. The chart from that article has been reproduced below. In short, the shorts have gotten nearly wiped out of the investing landscape. Just when they should be the most active, 90+% of past bears, maybe 95% of them, have gone the way of Hugh Hendry. This represents a social extreme, one in which society has capitulated to the power of big government and big corporations and big banks. They got all the breaks, they got all the laws passed in their favor, they got all the falling interest rates with which to leverage up long.
But now the bear mania chart is complete; it has gone below its starting point. The expectation now is for a reversal. When things begin to break down it won't take long for bears in bulls clothing to resurface but of course most of the profits will have been made by those who were short before the herd of bears arrive.
It's interesting that the Rydex Assets line continued to decline through the 07/08 bear. I would expect it to increase as 'short' holdings would have spiked up.
ReplyDeleteW/o knowing the underlying data, the only thing that would explain the pattern is that the shorts during 07/08 crisis kept taking their winnings off the table during each spike down.
Have a good weekend.
-TJ