John Fichthorn and his $500MM Dialectic Capital hedge fund may not be household names, but in a time when "fighting the Fed", i.e. trading on fundamentals and not on the Fed's balance sheet, is heresy, John may be the biggest bear around, maybe even bigger than Faber. He revealed as much in an interview earlier when he said that the current trading environment may be the shorting opportunity of a lifetime. To wit: "we think the [shorting] opportunity with any kind of reasonable timeframe now is really the best we've seen since starting our firm ten years ago, and really since i've been doing this since 1995, and i was a short seller in the middle of the internet bubble, and in many ways, this is more compelling because it makes less sense."
Fichthorn notes the obvious that "easy money drives bubbles, but here you have a bubble that is largely driven without fundamentals in certain areas, and so, you have this crazy bifurcated market where you have incredibly cheap stocks and incredibly expensive stocks, really inside the same sector. And when this easy-money period ends, and maybe even before, as we see the fundamentals starting soften, you'll have the opportunity to make a lot of money on the short side...seeing the lack of momentum is a sign that, you know, the ship is starting to waiver."
Some of Fichthorn's favorite sectors to short: 3D printers and solars: "this is a bubble that's happened three times in the past. This isn't the first time you've seen a 3D printing bubble. The industry has been around for 20 years.... We think the chinese solar companies and even some of the other ones are bigger shorts, although first solar will have its day of reckoning, as well. But the Chinese solar stocks, and the whole group, is up 300% this year. You know, this is a bubble that also, like 3D printing, has burst in the past. it blew up in 2011. And today, capacity is in the 60 gigawatt range and demand is below 40 gigawatts. You can't have a supply/demand imbalance like that and make any money and so, ultimately, the stocks will do exactly what they did in 2011, and they're going to correct again."
He is right, of course. The only problem is that many other shorts have been right positionally, but were off by a month, or a year, and ended up blowing up. And in the new normal, in which shorting a stock, an industry or a market is also betting against the insanity of a few delusional academics with a money printer, the odds have never been higher.
At the end of the day, however, only one thing matters for people like John and his peers: the P&L at the end of the day, the month and the year. We wish him the best of luck.