Solar Shorts Keep On Rising Even As Oil Surprises

When a particular investing theme gets hot, I like to check in on what the shorts think about it. Folks are fond of scapegoating shorts for bringing down stocks and even whole markets, but in general, they tend to conduct much more rigorous analysis than most promoters of stock. Shorts have much more to lose than longs, and they do not have the luxury of falling back on long-term thinking to cover up for short-term mistakes. I tend to learn a lot from them that otherwise would not see the light of day.

For example, when I noticed in early June that shorts in the stocks of homebuilders were still holding firmly onto their positions, I finally retreated from my insistence that the risk/reward was poor for these short positions. I took on the analysis because Centex (CTX) was threatening to become the first homebuilder stock to re-establish new 52-week lows. I then predicted that the rest of the sector would soon follow, and boy did it ever crumble.