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Low S&P 500 Short Interest is Another Sign Stock Investors Are Overly Complacent

Low S&P 500 Short Interest is Another Sign Stock Investors Are Overly Complacent. As you can see from the chart below, median short interest on the S&P 500 as a percentage of market cap is the lowest in years.  And that  means hedging against a downturn by shorting also is at its lowest in years. Why has that happened? As the stock market continues to move up an increasing number of investors are becoming convinced that there’s no downturn in sight. So, there’s no need to protect their financial well-being. Since investors historically are wrong about calling market tops and bottoms, for us, this is another warning sign among many we’ve talked about in recent weeks to take defensive measures, including cashing out on stocks with big appreciation.  Which is what we’ve done in the long/short portfolio we manage. (See this week’s LMTR sentiment update)

Low S&P 500 Short Interest is Another Sign Stock Investors Are Overly Complacent
Low S&P 500 Short Interest is Another Sign Stock Investors Are Overly Complacent

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Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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