No. of Recommendations: 4
I have written high-strike calls against essentially all my long Berkshire position, leaving me relatively neutral. But I'm stroking my chin, considering actually selling some of the long-term longs, which would leave me somewhat net short. Just considering, mind you.
The thing I've yet to figure out for this scenario ("net short") is how to hedge against inflation. Let's say someone who opts to go net short is correct, and a 10 or 20% correction happens in the proper timeframe. But at the same time inflation begins and in short order drives the prices of those assets up by 20%. And furthermore, interest rates rise commensurately which somewhat (only somewhat because I presume all very short-term instruments) reduces the value of the fixed income assets in which the money was stored. So you "guessed" correctly, but the strategy didn't protect you overall, AND you still need to make the second decision (when to get back in).
