 Good day, fellow investors. I have discussed a little bit about shorts, but today I'm going to talk about why you shouldn't be short. So seven reasons why shorting is dangerous and why you can get burned when shorting. And then you're going to see, okay, is shorting something for me or I should better rebalance my positions, manage my risks by being in cash and stock. So balance between stocks and cash. Let's start with the first reason why you shouldn't go short. So first thing, when you are long, you have time, you have nature, you have economics, you have inflation, you have everything working for you. When you are short, you have time, you have economics, you have nature, you have dividends, you have inflation working against you. And that's the key for going short versus long. Because with short it's all about timing and only good timers can be good shorters because in the long term the market will go up, dividends get reinvested and everything growth, SAP 500 earnings grows, general companies grow, governments grow, countries grow, everything grows and the human race is in its nature is to grow. So if you are short, you're betting against the human race, you're betting against dividends, reinvestment, takeovers, whatever can happen. And that's the first reason it's unnatural to be short and from a long, long statistical view it's not profitable. That's it. So that's number one. If we take a look at the SAP 500 earnings through history they went only, only up and these are inflation adjusted I think. So up, up, up, up and up. Try to be short that. There are times where you see those earnings really decline a lot of them. So you have to have a strategy to take advantage of those dips and that's the key in shorting strategy and timing. Number two why people shouldn't be short is that when you really short a stock the risks are unlimited and the gains are limited. You can only make 100% when you short a stock. Not by buying a put option but by really selling a stock short, by borrowing a stock, selling it on the market, rebuy it and returning it you can only make 100%. However if that stock explodes on the upside you might pay five times what you got when you sold a stock which means unlimited risks, limited gains. Let me show you an example of a short squeeze. The best example of a short squeeze is the 2008 Volkswagen case. In 2008 Porsche owned 31% of the company and they wanted to take it over. They first said that they are not interested in taking it over, they're just holding it to be protected in case that Volkswagen takes over the company. Nevertheless lower section held 20% and index funds had another 6%. 13% of the stock was short and then on October 26 2008 Porsche revealed that the company increased its stake to 43% plus it had options to increase it to 74% thus take over Volkswagen. When you sum things up 74% owned or controlled by Porsche 20% owned by lower Saxony which they would not sell on the market and 30% short makes 107% of the company. This means that those 13% of people that held stocks short they couldn't cover their position in case the stock went up. When Porsche announced that they have increased their stake in Volkswagen then shorts had to run for cover then margin scores came in and they were forced to buy at whatever price. The stock went from 200 in a day to above 900 and this is called a short squeeze. Number three when you are short a stock and the short issue is a dividend you are paying the dividend from your account to the holder of the stock so again as I said dividends work against you but in the long term dividends and inflation work for you if you are long. So again a reason not to be short or at least to do it very smartly. In a recent video about Stanley Druckenmiller I discussed how he was mostly wrong from the macro micro whatever he did in 2017 he was wrong. However he will end up positive single digits which is not good for him. However he will end up positive and that's the key so even if he bets short long he does a lot of things he makes it so that his risks are limited his timing might be wrong but therefore his risks are limited. So you really have to see okay if I'm going short am I managing my risk that's the key and then you compare it to the upside and then you don't have to do anything you don't have to go short all the time and that's what differentiates great traders and amateur traders amateur traders they think they have to trade trade trade trade trade to make money professional traders they know when to trade to take advantage of what's going on and if they are wrong they know how to limit their risks. Number five the situation financial situation in the US is getting normalized the Fed has started to hike rates but in Europe the european central bank is still buying bonds and in Japan the bank of Japan is still buying stocks so if you are short you're going against central banks plain and simple so you have to really be careful to go against people that can just print money and buy assets and inflate asset prices so dangerous to go short in such an environment. In addition to central banks also politicians have an interest in the stock market everything is about stocks higher asset prices much more confidence much more employment much more everything and that's also why Donald Trump tweeted more than 60 times about the stock market since he got elected he might not have anything to do with this but nevertheless he praises himself for having pushed stocks up from 18 500 points to 25 000 points so six trillion in dollars added and he will do whatever it takes to keep the rich richer so it's again a bet against federal banks and Donald Trump. Number six you have to put some collateral and if the people lending you the stock retreat pull their stocks back to sell them or do whatever and the broker cannot find stocks to replace then you're forced to buy in and cover your position which might be at a very higher price so you're not really in control when you are going short. Number seven it takes really a lot of knowledge a lot of time and nerves of steel you really should know what you're doing and whatever happens you should know how to react to that which takes a lot of time and that's why the amateur do-it-yourself investor shouldn't go short because you simply don't have the skills the time and the mindset to do that so very very dangerous. Now I'm looking forward to your comments if I have convinced you not to go short that's good because that's a dangerous game but this will also help you in okay where are the risks in the positions that I'm long so it's not about shorting it's also about managing risk on the long side nevertheless if you are still interested in shorting the next video will be about the mechanicals of going short or buying put options to see what better fits your portfolio because shorting is one thing but hedging might be very very important now so not going short but hedging your portfolio might be the best thing we can do now. Thank you for watching I'll see you in the next video