Monday, May 26, 2008

Rethinking Shorting Stocks

Peter Schiff argues in his book crash proof that when you short sell a stock, you are exchanging shares that probably have some value for dollars which have no value. Instead, he recommends borrowing dollars, which are decreasing in value, and investing them in assets such a foreign stocks that pay dividends to cover the interest and which may increase in value.

Voltron says: Many financial stocks probably have negative value. While I don't agree that dollars have no value, they certainly can go down in value very quickly, so I generally agree with Peter Schiff that you don't want to be caught holding dollars in a margin account. I'm going to switch gears and start buying DKA, DBU and DBN on margin (borrowed money).

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