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Why My Shorts Are Missing
When a WWII era B-17 heavy bomber came on the market a few years ago, I had to buy it. The previous record price for a B-17 was $1.5 million, and this faded warplane needed at least $3 million worth of work, not flying since it appeared in the TV series, Twelve O’clock High, during the sixties. During the war, my dad volunteered as a tail gunner on one of these because he was “bored”, not learning until later that the position incurred the greatest number of fatalities of any in the Army Air Corps. It seems they always had openings.
I dropped out when the price hit $2 million. I learned later that I was bidding against Paul Allen, Bill Gates’ former partner and a co founder of Microsoft (MSFT), who paid $3 million, and was willing to do anything to get this one aircraft. Of the 12,275 built, there were only 17 left in flying condition, and this specific plane was built at the factory in Seattle where Paul was building a museum dedicated to local aviation.
I heard he ended up spending $6 million on repairs, returning it to the condition the day it rolled off the assembly line in 1943. I consoled myself to logging a few hours in a similar plane as the pilot in command, impressing every subsequent flight examiner of mine to no end. These things were built to carry 10,000 pounds of bombs, so when you take off empty, with quarter tanks, they rise like giant box kites, the huge wings delivering lazy sweeping turns. Moral to the story” never bid against Paul Allen.
Today, I find myself up against another big spender with unlimited funds named Ben Bernanke of the Federal Reserve. The amount of money he is willing to inject into the economy is thought to range up to $2 trillion, to be disbursed in convenient, bite sized $500 billion chunks. Rumors swirl daily in the Treasury pits that the money is already hitting the market, emboldening traders to take the ten year to a mind boggling 2.36% yield yesterday.
I often get asked the question that, if I am a hedge fund trader, where are my shorts? I haven’t been short the S&P 500 since May, when the flash crash took me out of my position for a tidy profit. I ran a short for a while in the for-profit education stocks which turned into a home run (click here for “Hedge Funds Are Now Targeting For Profit Education” at http://www.madhedgefundtrader.com/june_2__2010.html ). My other shorts turned out to be bombs of a different sort, stopping out of my positions in the yen and the (TBT) as losers, reminding me of how mean, short, and brutish life can be.
Given the insane prices now being paid for 30 year bonds and the Japanese currency, I have to admit to being tempted daily to reestablish my shorts there (click here for “A Visit to the Insane Asylum” at http://www.madhedgefundtrader.com/october-6-2010.html ). I wouldn’t mind taking a bite of the big money center banks, as they are carry more toxic waste on their books than the Love Canal. Constant new natural gas discoveries make this energy source a perennial loser.
But as long as the Paul Allen of the Federal Reserve is bidding against me for all asset classes, I am not inclined to short anything. There is no law that says you always have to have a position, no matter what your broker tells you. Tell me that QEII has been cancelled, or that the recovery is starting on its own without any assist, and then we’ll talk.
Over the weekend, I took the kids to the Berkeley Hills to watch the Blue Angles execute their daredevil maneuvers as part of the Fleet Week festivities. What did I see through the binoculars moored at Treasure Island, but Paul Allen’s yacht, the Octopus, a 413 foot monster boasting two helicopters and rated as the world’s ninth largest privately owned yacht. It made the Oakland Bay Bridge nearby seem like a toy Erector Set in comparison. It then struck me that there is no better sound that four gigantic 1,200 horsepower supercharged Wright Cyclone engines rattling your teeth on a takeoff roll in a B-17. I hope to see that plane on my next trip to Seattle.
To see the data, charts, pictures and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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I totally agree.... I NEVER fight the fed.....
Luckily for MHFT the only other bidder on the plane was Walter Mitty.
You CAN fight the FED. It's guerilla war though. Go in short, take a small profit and quickly leave. If enough folks do that then you'll bleed him dry.
The Fed is debasing the dollar, this is the only reason that equities are going up. Anyone trading stocks has become a currency trader, and most don't even realize it. The S&P has not produced any real returns during the run up since September 1. So you could still short, but go long gold as a hedge as the FED continues to debase the US Dollar.
Covered your Silver shorts yet MHFT?
I feel for you, even though you are wealthy enough to bid on a $3 million plane.
So we've arrived at the place those dead white guys warned us about. The central bank is appropriating public wealth without the bothersome formalities of a public debate or votes in Congress. At least Hank Paulson tried to dress it up with a cover story (tanks in the streets), but now it's just "STFU, we're in charge here".
Banana republic time.
"those dead white guys" A good hard LOL. Thanks.
And I am even selling my gold stocks :)
Markets confused as hell here. Looking a little crashy.
stupid as ever.. must be kind of tired of already...
#big spender with unlimited funds named Ben Bernanke of the Federal Reserve.
HUGE MISTAKE... paul Allen's money are HIS.. Ben's money are not even his or ours ..
ITS #UCKING PRINTED... or computer generated...
alx