After reading about Jim Rogers and the internet bubble that burst in 2001, I’ve come to a conclusion that it’s way too dangerous to short a bubble. Here’s the simple reason.
When the market are in the final crazy stages of bubble mode, no one knows how much higher the market can go. Because investors are going crazy at this stage of the bull market, no one can predict when the bubble will burst. It may end in 4 hours, it may end in 4 days, or it may end in 4 weeks. No one knows. This is precisely why it’s too dangerous to short a bubble. One can easily be wiped out in a short, especially when you’re shorting a market during it’s bubble stage. All it takes is a few more days of a rising market to wipe out your short positions.