I cannot agree with you I have reduced my holding substantially. If the long portfolio generated a 20% return and the overall generated around 2% the short balance did pretty badly.
I don't think it's as JB says - I seem to recall that the used to have a person who was considered unbelievably good at the shorts. I think they left the industry so no longer with Watermark. That must have been a few years ago and really I don't think the short portfolio has done what it should have.
The JB model - my opinion - doesn't mean that the neutral long and short should generate zero. It says that you are wasting your time. The long portfolio should have a few points better than the shorts - it is really about stock picking. Really with his model I would expect the net neutral position to generate at least a 6% return. If your longs are generating 20% then maybe you are just not able to pick shorts... If the shorts are costing you 18% then you are picking badly - That's my opinion.
ALF Price at posting:
$1.18 Sentiment: None Disclosure: Held
