Not Everyone Should Do It, But All Investors Should Understand How And Why

Inside Today's Issue

  • Essay: How To Short Sell A Stock

  • No Flows Into Gold

  • Stocks Up… S&P 500 Down

  • Intel’s Continued Decline

  • Chart Of The Day… British American Tobacco

  • Today’s Mailbag

Editor’s Note: Before you vote on November 3, Porter warns there’s one more urgent move you need to make – an investment he now calls “a core asset.” Because whoever wins, he believes a bipartisan pact could devastate the financial future of millions of Americans… and he wants you protected before the chaos ensues.

He reveals the name, for free, in his emergency election broadcast.… along with the three-step test he believes every investment you own must now pass, and the names and tickers of some of his favorite businesses.

We believe that we’re entering an era when the majority of stocks are likely to decline in value.

This is based on our long-running thesis that the artificial-intelligence (“AI”) boom is vulnerable to a significant unwind, which could ripple across the broader economy. And over the past several weeks, we’ve seen signs that this process may have already begun.

The epicenter of the AI “picks and shovels” trade, semiconductor stocks, has officially entered a bear market, down 22% from their June high. Other key suppliers to the boom, including memory makers like Micron Technology (MU) and Sandisk (SNDK) have dropped 30% to 50%. We’ve seen similar declines across the power suppliers like Caterpillar (CAT) and Vertiv Holdings (VRT). More recently, the declines are spreading into hyperscalers like Amazon (AMZN) and Alphabet (GOOG), which posted its single largest daily market loss following Q3 earnings this week.

For investors with the risk tolerance to take advantage of this broad market decline, I want to share insights for placing short sales. As I tell the members of The Trading Club, which I lead for Porter & Co., this could become a valuable tool for generating returns and hedging downside risks.

To be clear, we rarely recommend shorting stocks because, over the long run, it’s a tough way to make money. But in the right environment, a well-placed short can be a powerful tool for hedging a portfolio.

For a quick explanation… when shorting, you earn a profit if the price of the stock goes down. The best possible outcome with a short is a 100% return if the stock goes to zero. The worst possible outcome, though, is losing more than the value of your original investment. There’s no limit to how high a stock can go – and thus, no limit on the potential losses from shorting it.

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