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TransparentAnalyst
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The Transparent Analyst is an investment professional in a buy-side environment. Previously, he spent four years working in a corporate finance role for a fortune 100 company. He is a recent MBA graduate and a Chartered Financial Analyst. He joined this site to refine his ideas on an open forum,... More
  • Why I Am Short Energy 0 comments
    Nov 14, 2010 1:19 PM | about stocks: ERY
    On Thursday, I made the decision to begin shorting energy. This was a purely macro call that I had been watching the last few weeks. The European situation had finally hit a point where I think the devaluation of the Euro is unavoidable, at least in the short-term. With oil approaching $90 a barrel, I felt comfortable taking a position after the recent run-up. China may also offer a catalyst if they follow through with the threats to curb inflation. I would like to point out that this call has nothing to do with commodities, which I would entirely avoid in the near-term. The perceived "monetary" based metals are far too risky to get short with the potential for risk aversion positions being established. 

    Summarizing my reasoning:
    • Sovereign issues - weakening dollar, macro weakness, fear trade
    • China inflation concerns
    • Oil is approaching the fear based price 
    I used an ETF to establish this position, ERY (3x leverage). The 3x leverage aspect will keep me in the short-term mind frame, which I believe makes sense for this kind of macro trade. Once the situation plays out, I plan on removing the position ASAP.

    Disclosure: Long ERY
    Stocks: ERY
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