Yell and Roar, but Sell Some More (Part Deux) - 05/03/11

Fundamental signs suggest that the investor should leave the crowd, and I am now at my largest short position this year.

Last evening's closing column was a downbeat one and "bears" repeating (especially since I am currently in the dentist's chair for the next hour or so):

Despite nearly no one willing to fight the very strong tape, I am growing increasingly cautious on fundamental grounds and on technical (and "feel") grounds.

Color me more bearish as I feel more willing to expand my short exposure -- and I am putting my portfolio where my words and analysis are.

While I am currently net short, I am not over-the-skies short ... yet. (Like Dr. Bobby Marcin, I am trying to "time" the short opportunity (as best I can!) with the knowledge that the bullish trend still may remain intact.

I don't buy for one moment the near-universal chorus of optimism (Warren Buffett, Jack Welch, Laura Tyson et al.) today that a big unknown has been removed (or that the "event" will have a profoundly positive impact on our "collective psyche"), as I believe we are in the same uncertain geopolitical mess we were before Bin Laden's death.

As such, I am odds (though respectful) with what Jim "El Capitan" Cramer said on CNBC this afternoon. I don't think the buoying of sentiment following Bin Laden's death is a picture of the next consumer confidence survey. And I know it doesn't address the non-traditional headwinds that challenge a further (and possibly maturing) market advance or the smooth and self sustaining domestic economic recovery that forms the basis for the bullish case.

Yell and roar, if you will ... but sell some more!

For the last 12 months, the crowd has outsmarted the remnants, as the pressure not to be short has grown as intense as I can ever remember for the hedge-hogging community. Investors for whom I have much respect, such as Whitney Tilson and Greenlight's Dave Einhorn, have chimed in with a collective "fuhgettaboutit" and have taken down their short books. Even Gluskin Sheff bearish strategist David Rosenberg recently threw in his bearish towel.

While it has paid to be part of the bullish crowd, I see fundamental signs that suggest the investor should leave the crowd, and I am now at my largest short position this year. Should share prices continue to ascend (and the emerging negative data points as I see them not change), I will get shorter based on my assessment of the slope of economy and my expectations of corporate profits.

I recognize, as Warren Buffett once wrote, that "as a group, lemmings have a rotten image, but no individual lemming has ever received bad press."

Nevertheless, for now I am willing to step out of the crowd, though it feels like, at times, I might be closer to the cliff!