By Michael Connor
NEW YORK (Reuters) - U.S. equity short sellers are rooting for a Republican sweep of Congress in U.S. elections on Nov. 6, which are seen as partly a vote on President Donald Trump's pro-business policies, a leading Wall Street short seller said on Monday.
Brad Lamensdorf, a portfolio manager and advisor to the AdvisorShares Ranger Equity Bear ETF, also said in an interview in the Reuters Global Markets Forum online chat room that electric car maker Tesla Inc (O:TSLA) was too risky for his portfolios betting on stock market losses, while the buoyant U.S. oil sector was ripening as a bet for bears.
Here are chat excerpts:
Question: Each day, it's more difficult to predict whether or not the GOP (Republican Party) will be forced to share power in Washington. Which scenario is best for shorts?
Answer: Markets act the best when the Senate and Congress (House of Representatives) are split; that way nothing gets done, and the environment stays more consistent. As a short seller I want more volatility. So, I would like it for the Republicans to get both.
Q: Are U.S. stocks vulnerable to a major selloff?
A: The price-to-sales is at an historic high. Sentiment is bullish for the most part. Consumer confidence ... shows everyone is very bullish too. It all points to more disappointment for the markets next year.
Q: Do you own any Tesla, the electric-car maker that is a well-known short?
A: Tesla is troubled but it’s too watched; so we stay away. The borrowing (costs) also stays high, so we like more stealth names to short. When shorting a stock, you want people to not have any hope and sell and keep selling. (Tesla CEO Elon) Musk can keep hope alive, and that is bad for a short seller.
Q: What is your read on oil and its heavy debts among frackers?
A: We have not been short oil for 3-4 years but I’m starting to like it now, and I am looking for shorts. Sentiment is quite high but there is a bottleneck in the Permian Basin right now. And in 6-18 months, it’s going to gush! At the same time, NOAA has come out and forecasted a warm winter. A double bang for oil bulls.
(This interview was conducted in the Reuters Global Markets Forum, a chat room based on the Eikon platform.)