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The Deipnosophist

Where the science of investing becomes an art of living

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Name: David M Gordon
Location: United States

I manage my own portfolios as a private investor. Typically reticent, I make the occasional public appearance; for example, this interview for the Wall Street Journal. One purpose of this blog is to share potentially profitable investment ideas along with an understanding of the process of investing. Thank you for visiting. Please offer your comments on any topic.

11 May 2008

Are books overrated?

So, okay, not even 24 hours after sharing Charlie Munger's essay re his esteem for learning, especially generalized, comes Mikita Brottman, who argues that books get in the way of real life...
"There’s no question that, in terms of emotional development, books didn’t help me at all. For one thing, they gave me ridiculous ideas about romance. The Victorians had worried about such things. In the 19th century, novel reading was considered an especially inappropriate pastime for well-bred young girls. Romantic novels, it was believed, gave young women the impression that love was a wonderfully passionate affair, and that marriage would be full of excitement and emotion, not practical things like finances, housekeeping, and child-rearing. In other words, it was feared that young ladies who read romantic novels would be deeply disillusioned by the bitter realities of marriage."
Yes, I agree with Charlie Munger. But I also agree with Mikita Brottman. Do I, then, equivocate on the topic? Sheesh, I have lived a life reading and learning; enough time spent reading, in fact, to qualify as a recluse, if not a hermit. But before I descend into too much navel-gazing, I next read -- er, learned -- this item...
"Intelligence has long been viewed by scientists as a stable trait: Either you’re smart or you’re not, and nothing you do can change that. But a new study has showed that the brain is like a muscle, and will get more powerful with the right kind of daily exercise. Scientists measured the IQs of 70 volunteers, then put them through a brain “boot camp‚” consisting of memory tasks that increased in difficulty as the subjects became more proficient. After 19 days of exercising their memories and solving puzzles, the volunteers’ IQs were retested, and the results were striking. Every single participant made significant gains in “fluid intelligence‚” the ability to solve problems, use abstract reasoning, and be quick on their feet. The longer people trained, the higher their scores rose. “Intelligence has always been considered principally an immutable inherited trait,” study co-author Susanne Jaeggi tells The New York Times. This study “definitely challenges the old opinions."
So which is it to be...?
"Books aren’t all bad. If you’re a balanced, discriminating reader, the books you read can make you more interested in moral and political questions, more active, articulate, and engaged. Ideally, reading can help negotiate the tension between self and other, help establish a balance between you, the reader, as an individual, and absorption in the group. With me, it was the opposite. I read unconsciously, almost involuntarily. My inner life was rich, but it all stayed inside. I didn’t talk about the books I read because I didn’t know how. I could write, albeit in a fussy and pretentious style (which I can’t seem to entirely shake off, as you may have noticed). But to actually talk about what I read, I’d have needed a different voice, one that could cross over from private to public, from inner to outer worlds. In fact, I hardly had a voice at all. I went days without speaking as a teenager..."
Hmm, read the article below, form your own thoughts, and then decide for yourself... but be certain to share your comments with me!
-- David M Gordon / The Deipnosophist
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Why books are overrated

Believe it or not, people once considered reading to be a dangerous vice. Now it’s “what makes America great,” according to one slogan. Other book-promoting campaigns also try to persuade us that reading is sexy (“Get Caught Reading”), hip (“Get Real @ Your Library”), virile and productive (“Read and Grow”), and, of course, “fun-damental.”

So in-your-face, so taken for granted is this faith in the healing power of literature, it’s hard to believe such assumptions have emerged only in the last 50 years, postdating the development of all the other kinds of entertainment—cable TV, the Internet, hand-held videogames­—that now compete for our time and make reading look old-fashioned in comparison. And yet, as historians of mass literacy have shown, our indiscriminate faith in the act of reading would, not so long ago, have seemed gloriously insane.

For much of our history, in fact, reading was considered bad for you. Books, it was long believed, had hidden powers; they could cast a spell on you. And it’s not hard to see why. The earliest secular manuscripts, produced long before the advent of general literacy (and often the work of alchemists and magicians), must have seemed suspiciously cryptic to ordinary law-abiding nonreaders.

Have you ever seen that poster in the children’s section of bookstores showing a couple of bears flying through the air, clutching the strings of a colorful balloon, beneath the words “Books Take You to Wonderful Places”? That one always makes me wonder how long those unfortunate bears have got left before they come crashing back down to earth. It’s true, stories can take you to wonderful places. What the posters don’t tell you is that you can’t stay there, and for those children who spend their early years in the otherworld of literature, real life can come as a rotten letdown.

Consider poor old Jean-Paul Sartre. In his memoirs, the famous philosopher describes spending hour after hour as a child absorbed in his Encyclopedia Larousse, fascinated by each volume’s colorful evocation of fauna and flora, only to have all this wonder dissolve the day he first visited the Luxembourg gardens and saw how impoverished real plants and animals were in comparison. After all his reading, he found, “apes in the zoo were less ape, the people in the Luxembourg gardens were less people.” In retrospect, Sartre realized that he passed from “real” knowledge to its subject, finding more “reality” in the idea of a thing than in the thing itself.

“It was in books that I encountered the universe,” he recalls, “digested, classified, labeled, mediated, still formidable.” In contrast, the world outside books appeared messy, disorganized, and unimpressive. Could it ever possibly compete with the beautifully patterned, ordered universe contained in a favorite set of encyclopedias?

For me, the intoxicating moment came when I learned that books could take you to horrible places—horrible, that is, in a thrilling way: places on the other side of the looking glass where unimaginable nightmares came true, where little girls like me were kept in cages, had their heads chopped off, were cooked and eaten for breakfast. These scary stories both frightened me and aroused a strange, dark appetite that was difficult to satisfy.

Horror stories were my favorite. I couldn’t get enough of them. I loved the way they took me out of my own story, where nothing ever happened. It wasn’t so much that they put my own life in the context of others’ as that they annihilated it completely—at least that’s how it felt. I read every scary story and horror comic I could find, from H.P. Lovecraft to Lady Vampire, from Titus Andronicus to “Tales From the Crypt”—all the better if they included rats, ghouls, voodoo, vampires, and bodies chopped up and hidden under the floor. I became something of a ghoul myself, buried all day in my bedroom, the door barred with a piece of stair rail that had broken off the wall, making the stairs up to my attic bedroom a bit dodgy to climb. Which was fine, because the only people I wanted to see were already there: my friends Jekyll and Hyde, Mephisto, Dr. Strange, and—my closest pal—Melmoth the Wanderer.

Eventually, my mother gave up trying to coax me downstairs for meals, and, apart from school, the only time I left my bedroom during the day was to renew my library books.

There’s no question that, in terms of emotional development, books didn’t help me at all. For one thing, they gave me ridiculous ideas about romance.

The Victorians had worried about such things. In the 19th century, novel reading was considered an especially inappropriate pastime for well-bred young girls. Romantic novels, it was believed, gave young women the impression that love was a wonderfully passionate affair, and that marriage would be full of excitement and emotion, not practical things like finances, housekeeping, and child-rearing. In other words, it was feared that young ladies who read romantic novels would be deeply disillusioned by the bitter realities of marriage.

The first book that I read that had a really powerful impact on me was Wuthering Heights. It wasn’t the first book that made me cry (like most children, I wept copiously and predictably through Charlotte’s Web, Watership Down, and other books in which animals died), but Wuthering Heights was the first book to make me cry adult tears—tears caused by something, at age 15, I’d never experienced: broken love (if love was the right word for it). Whatever it was between Catherine and Heathcliff, I was utterly transfixed by it—a passionate connection, however sexless and spiritualized, that was stronger and more lasting than death, that couldn’t end or be destroyed because it was a part of nature, “like the eternal rocks beneath,” as Catherine says to the housemaid, Nelly. I started crying when I read this speech; I sobbed when Catherine went mad after her husband banned Heathcliff from the Grange; I blubbered and wailed when she begged Nelly to open the window to get just one breath of the wind blowing from the moor, where Heathcliff lay buried.

I often try to make sense of the impact this book had on me. When I first read it, I thought nothing was quite as rousing as a passion so strong you’d die for it. I was devoted to the idea of a doomed, hopeless love that was too late, no good, couldn’t work, but went on anyway because it just couldn’t be stopped. Looking back, I see how this impractical, otherworldly all-or-nothingness has a special appeal to inexperienced teenage girls. But at the time, when I was all wrapped up in it, what I wanted to know was whether things like this could really happen. I’d lie in bed and wonder: Did they happen in the “real world,” the same world I lived in? I had no reason to think so. It was only in books that people felt that way. In real life, people just got tired of one another, drifted apart, did their best, and got on with things. Personally, I hadn’t even met anybody worth going downstairs for—forget about dying. I was perfectly happy as long as I lived in the world of books, but whenever I tried to enter the real world, the spell was broken.

I was spoiled by other love stories as well, including the plain girls’ bible, Jane Eyre. At 16, with my greasy skin and tragic hair, I was immediately drawn to the inner life of the much-abused Jane, who quietly watches Mr. Rochester and carries on serving tea while cherishing “in her bosom” the secret hope that in the end, she’ll be loved for her quiet intelligence, for who she is—modest and penniless.

In the end, all her years of suffering do pay off and Mr. Rochester finally appreciates the special qualities of the bookish girl nobody ever looked at twice. In fact—rather miraculously—he’s been in love with her all along. That’s the money shot in Jane Eyre—the sadistic glee of the moment when Mr. Rochester takes for his wife not the superficially more appealing Blanche Ingram (as everyone expects), but his daughter’s governess, Jane, with her gray smocks, low forehead, and “plain figure” (does that mean flat-chested?).

Wrongheaded as I was, reading Jane Eyre convinced me that, if it could happen to Jane, it could happen to me.

Well, it didn’t happen. Nobody ever asked for my hand in marriage. Nobody even called me on the phone. I was caught in a vicious self-perpetuating cycle: The more real life disappointed me, the more I buried myself in books; and the longer I spent reading, the more remote grew the possibility of actual escape. Private fantasies were all I had, and the hours I spent locked up in the attic started to take their toll. It might be all the rage now to be pale and thin, but at the time it was the fashion to be rosy and tanned, not ill-looking and waxy like me.

Books aren’t all bad. If you’re a balanced, discriminating reader, the books you read can make you more interested in moral and political questions, more active, articulate, and engaged. Ideally, reading can help negotiate the tension between self and other, help establish a balance between you, the reader, as an individual, and absorption in the group. With me, it was the opposite. I read unconsciously, almost involuntarily. My inner life was rich, but it all stayed inside. I didn’t talk about the books I read because I didn’t know how. I could write, albeit in a fussy and pretentious style (which I can’t seem to entirely shake off, as you may have noticed). But to actually talk about what I read, I’d have needed a different voice, one that could cross over from private to public, from inner to outer worlds. In fact, I hardly had a voice at all. I went days without speaking as a teenager. Like a Victorian hysteric, I was paralyzed by fantasy, crippled by self-loathing, self-doubting inhibition—a problem that’s never completely disappeared, and probably never will.

The old superstitions about books aren’t groundless, in other words. They can cast a spell on you. They can change your life completely, and, once you’ve changed, you can’t go back. I, for one, would have been much better off if I’d listened to my dad and spent more time in the company of other human beings. All those years in the attic would have been far better spent learning vital skills: how to socialize, how to engage with others, how to be physical, how to live in the world.

Yes, books can take you to wonderful places, but they can also leave you stranded there, isolated from other human beings, even from your own experience of yourself.



From the book, The Solitary Vice: Against Reading by Mikita Brottman. ©2008 by Mikita Brottman. Used with permission of the publisher.

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10 May 2008

Nothing is off topic; it all connects

I clambered out of my safe cubby-hole ~10 years ago to share publicly my knowledge re the markets and investing; of course flack and guff came my way due to my tendency to share items that seem to range far off the mark of investing.

Except the many articles, etc do not veer off-topic; I believe everything connects, which explains, on one level, my esteem for the humanities, and why I share all this... seemingly unrelated stuff. From poetry to articles about mountain lions, they all are fair game, and germane to an investor who seeks consistent success.

Imagine my surprise, then, to read this essay by Charlie Munger, Warren Buffett's #2 at Berkshire Hathaway...

"... the subject of my talk is the art of stock picking as a subdivision of the art of worldly wisdom. That enables me to start talking about worldly wisdom a much broader topic that interests me because I think all too little of it is delivered by modern educational systems, at least in an effective way. The carrot part of this talk is about the general subject of worldly wisdom which is a pretty good way to start. After all, the theory of modern education is that you need a general education before you specialize. And I think to some extent, before you're going to be a great stock picker, you need some general education..."
and
"Well, so much for the basic microeconomics models, a little bit of psychology, a little bit of mathematics, helping create what I call the general substructure of worldly wisdom. Now, if you want to go o­n from carrots to dessert, I'll turn to stock picking ‑ trying to draw o­n this general worldly wisdom as we go. I don't want to get into emerging markets, bond arbitrage and so forth. I'm talking about nothing but plain vanilla stock picking. That, believe me, is complicated enough. And I'm talking about common stock picking. The first question is..."
Models and pattern recognition help us to recognize (investment) opportunity; modeling (mimicing) icons of success help us each to be successful.

I consider this essay also to be worthy of your time, which makes me two for two today. (Might as well attempt the hat-trick.)

-- David M Gordon / The Deipnosophist

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Top of the hill

Many observers, in my opinion, had entirely the wrong understanding re Microsoft/MSFT's bid to purchase Yahoo/YHOO; not so much the change for either Microsoft or Yahoo, or even MicroHoo (the combined entity), but the effect on Google/GOOG.

Would the creation of MicroHoo (call it whatever you wish) provide competition for Google? Would Google lose its way, while it devoted company resources to fending off this new challenge?

I believe Google hoped and preferred Microsoft to focus its attention on this proposed buyout and merger, if successful, for as long as possible. This would clear the way for Google's continued successes. And a widening lead ahead of its primary competitors.

Sure, Microsoft and Yahoo are also-rans in online advertising, but the space grows so rapidly there remains room for several worthy competitors to keep the game... honest. Distressingly, I learn that Google's reliance on algorithms rather than humans irritates many of their clients and even their advertisers -- albeit, of the mom & pop variety -- who decided to spend their advertising budget elsewhere; a reality that seems to trouble Google little, if at all. Yes, as corporate advertisers (especially those companies with a national footprint, and thus huge advertising budgets) move online, attracted by the comparatively low CPMs, Google's revenues remain sky-high. And growing. But that all is a topic for a different post.

Meanwhile, no surprise that I enjoyed
Rob Pegoraro's Washington Post article...
"Microsoft and Yahoo have often failed at that goal, in part because they've distracted themselves so often with big-picture strategic shifts. Microsoft has shuffled brands -- MSN, .net, Windows Live, Live Search -- for mysterious reasons, confusing customers in the process. Yahoo has wasted billions of dollars on acquisitions of smaller companies that it fails to capitalize on (anybody still use GeoCities?), like a kid who can't stop himself from breaking his new toys before he gets out of the store. So before Microsoft and Yahoo start talking about a recast merger or any combination with other Web firms, they ought to tend to more basic tasks. A few humble suggestions..."
I believe you, too, will enjoy Rob's article. Please share your thoughts after you read it.

Full Disclosure: Long Google/GOOG.
-- David M Gordon / The Deipnosophist

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09 May 2008

What do you think?

A reader (who prefers anonymity) sent the message below; I consider his (or her) technique interesting and creative.

I've been using a technique I find helpful in determining buy points on stocks that have pulled back after an extended rise. To illustrate, I will use the CMG chart. Take the 12/31/07 HIGH of 155.49 and subtract from it the 1/4/08 CLOSING price of 127.01, the first high volume close below the 50dma. Multiply the difference by 1.62 and subtract the result from the 12/31/07 high. Thus, 155.49-((155.49-127.01)*1.62) = 109.35 projected low. Actual low was 108.00 on 1/9/08.

Sometimes the original low price projection isn't hit for an extended period. When that occurs, I keep it in mind as the basing continues. Usually, however, I find the low occurs around this point, the price then rises above the 50dma, then falls back again. This is another chance to utilize this technique, as the high reached on the recovery above the 50dma can be used. I find the first signal the strongest, the 2nd signal useful, and the combination of the two useful as well.

In the case of CMG, note the pullback above the 50dma, establishing a high of 135.47 on 1/25/08. The first high volume close below the 50dma in my mind is the 2/7/08 close of 107.73. The fact that it closed below the 200dma is the reason for this higher volume and I must say I haven't paid attention to this before. Instead, I have focused on the high volume close that often occurs as the price falls below the 50dma once again. In any event, using the above formula and the high of 135.47 on 1/25/08 and the close of 107.73 on 2/7/08 results in a projected low price of 90.53.The actual low is 90.09 on 3/10/08.

Again, I use this method as a tool. I know I don't have to tell you nothing is perfect. I do find this helpful, however, and hope that this may help you in some way.

Finally, another price point I find very intriguing is when a good (subjective) company's stock price reaches 21% below the 200dma; this ties in with timing as well. I think I have mentioned that I believe some of what I do involves, perhaps, a sliver of your "tyme" concept.

Your comments are welcomed... For example, does this methodology withstand your rigorous (back) tests?

Thank you,

-- David M Gordon / The Deipnosophist

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01 May 2008

The Yield Curve

Bill Luby offers yet another crucial perspective for investors.

-- David M Gordon / The Deipnosophist

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29 April 2008

The customer always comes first

I have remarked about Going Private (permanent link in sidebar), but today's post takes the cake and the icing; loaded, as it is, with intelligence, insights, understanding, and wisdom. And all to share the writer's bullish perception of Apple/AAPL.

As you know, I have been bullish on Apple/AAPL for several years; Apple/AAPL has been a Core Opportunity for almost as long. No surprise, then, that I agree with Ms Private Equity.

"I admit, grudgingly, to owing an iPhone. I bought it in time (that is to say foolish - early enough) to have Mr. Jobs give me one of those $100 "Sorry I screwed you on the price" rebates. I also have to admit to owning a top of the line 15" MacBook Pro (I bought after the latest upgrades - watching a colleague run Excel on a Windows XP instance isolated from the rest of his system and displayed in a window on his OS X desktop was the last straw). Before that, I had two white, Intel MacBooks. This is unusual, because three and a half years ago, I never would have bought Apple. This last, that new Apple owners almost find themselves surprised to own an Apple, seems a common trait among the, admittedly small, sample of Apple owners I have encountered. I've watched four or five people who swore they would never own an iPhone give in, buy them and proclaim, in such similar tones one wonders if The Amazing Alexander works for Apple now ("I loved it. It's much better than PC. I am going to buy it again, and again and again..."), that it is the best phone they have ever owned. And this is where I began to wonder, why the near epiphany in reaction? Now I think I know.

Why this reluctantly amazed reaction among iPhone buyers?

Because the definition of "phone" created by hardware and network providers today is so limited.

Why have so many Macintosh buyers had the same reaction?

Because the conventional definition of "laptop" or "operating system" or "computer" created by hardware and software providers today is so limited. Because these companies hate consumers, hate their desires, hate their needs and, consequently, make sure that the conventional definition of, e.g., "laptop," or "phone" is very limited.

Why is this? I blame Michael Eugene Porter..."
This essay merits your attention on many levels, irrespective of whether you already are long Apple/AAPL, or bullish or bearish on the company or its shares (but with no position). The writer's irreverent wit, there for all to enjoy in this commentary, help make it the special treat that it is. That rare ability, to be both edifying and entertaining, and concurrently, makes Private Equity a must-read for all serious investors. And, of course, there are those insights!

Full Disclosure: Long Apple/AAPL.
-- David M Gordon / The Deipnosophist

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22 April 2008

"Misery" seeks solution, not company!

Spring 2008 must be the worst allergy season in many years, as everbody I know who suffers from allergies (allergic rhinitis) suffers especially bad this year. I, too, suffer from seasonal allergies, and this Spring (the past ~6 weeks) is the first attack in 4 years sufficiently severe to fell me, so the allergans must be bad.

Unlike everyone else, however, I am a big baby; I especially detest the loss of productivity as my nostrils and eyes open wide and the water cascades without pause, my face swells up and my right eye swells shut, and ...

But the symptoms are universal; it is the remedy that interests me. I have tried seemingly everything, from allopathic to homeopathic; drugs such as Zyrtec and Claritin (both drowsy and non-drowsy formulations), etc, nasal steroids such as Veramyst and Astelin, to the little genie pot to open and clear my nostrils, etc. None work (for me).

I want relief now, so that I can stop my whining, and resume my work. Please share the remedy that works for you, no matter how far-fetched. (I will try anything!)
-- David M Gordon / The Deipnosophist

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The market rally... or is it only a handful of sectors?

"The Energy and Materials Rally" is yet another interesting insight from Bill Luby, as he shows once again that charting is only a sub-set of technical analysis...

"... the leading sectors over the past month – energy (XLE) and materials (XLB) – are not the sectors that typically are able to lead a sustainable rally..."

Bill's site, Vix And More, (for which a permanent link is in the blogroll) is well worth the time for all serious investors.
-- David M Gordon / The Deipnosophist

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18 April 2008

An Unintended Caesura

Although my absence from blogging passed with nary a comment, I recognize you love me; you really do. Yes, I could offer the usual whines that (my) life interfered with sharing my comments and perceptions re the markets, but will not. (Though true.)

Investment opportunities abound, as always. For example, I shared with you ~4 or 5 weeks ago that I would purchase Google/GOOG at $420; I hope you purchased then as well. Especially in light of yesterday's earnings 'surprise' -- that catches in its net one well-known money manager and newsletter writer who, only days ago, made the wrong recommendation, "sell" -- and today's rapid ramp up in its share price.

btw, allow me to reify a plug for Rob Hanna's market insights (Quantifiable Edges); I appreciate his methodology and perception of the markets. Note, for example, Rob's comments from just this morning...

"... traders focus too much on pattern recognition and therefore only look at price ... Looking at price and price-based indicators is like looking at the Grand Canyon on a black and white TV. You can see it, but throw in volume and maybe you’ll get some color. Breadth could get you HD. Sentiment gives you surround sound. Add some intermarket analysis like Dr. Steenbarger employs and some historical studies like I prefer and you might actually get to view it for real..."

Hmm, ain't that the truth?

While I consider possible topics for future posts, please ask whatever is on your mind. All questions welcome, and on any topic, especially as your questions should help inspire my creative juices.

Full Disclosure: Long Google/GOOG
David M Gordon / The Deipnosophist

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30 March 2008

A chrestomathy of sorts

Well, if it is not one thing, then it is another. And while I might not be here blogging away as usual, the markets continue... to open, to trade, and to trend. Which, I suppose, proves the point I make in post after post.

And while I lacked the time to write comments re the markets, I continued to share via other methods; specifically, this blog's sidebar. This post shines the spotlight on four excellent sites that merit your attention; there are many, many others. Find them all in the sidebar on the left side of this page.

1) Portfolio Management and Financial Tutorial
"Asset Allocation and Portfolio Management are the process of determining optimal allocations for the broad categories of assets that suit your investment time horizon and risk tolerance."

Excellent primers and tutorials that offer the rudiments, and more, of money management.

2)
Quantifiable Edges
"Assessing Market Action With Indicators And History"

Another excellent site. This one analyzes (current) market conditions via filters that sometimes are statistical, sometimes scientific, but always historical; indirectly squashes 'analysis' founded on emotional responses.

3)
Going Private
"The Sardonic Memoirs of a Private Equity Professional"

The author's insider insights into markets, both private and public, are dependably spot-on correct. "Sardonic," yes, but also irreverently witty, and many times laugh-out-loud funny.

4) Phil’s Favorites
"I’ll be posting interesting reading material for Phil's Stock World from a collection of Phil’s favorite websites"

In truth, this excellent site wholly is the result of Ilene Carrie's vision. Ilene saw the need for a site that was more than a mere repository of links to that day's articles and commentaries of interest, so she created a sorta-kinda chrestomathy. (Not literally, but darn close!) Ilene's site has become more than a must-read for me; it is indispensable.

Please share your favorite sites as a comment reply, or email them (along with a brief description of why you like it/them).
-- David M Gordon / The Deipnosophist

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20 March 2008

An incomplete list of my investing rules

"I don't know if you trade any SPY or similar, but on the chart you posted, would you have carefully noted the breech of the primary trending late July 07 (before the Aug 16 low!), perhaps bought off of support, and then sold at a primary trendline retest mid Sept or early October?"

Eric's question includes several misperceptions about my methodology (not Eric's fault, but mine); thus, his question inspires me to offer more information than it requires. (Sorry, LOL.)

Rules for my methodology include, but not limited to...
Long side investments only.

- Rising market trends typically endure for 2/3 of a given epoch (a measurable interval between two time points; specifically, a beginning and ending), whereas declining market trends typically endure for 1/3. I attempt to be on the 'right' side of the then-current trend.
- What better time than during a general market decline to perform due diligence on my investments and opportunities? (Especially for a long side only investor.)
- Balance. I seek balance in my life via pursuing other interests. General market declines offer the opportunity to enjoy the gains from the previous up trend. Too, I suffer no need to be all things to every market climate.

No options. Options are not a method to invest, although many shrewd investors develop savvy techniques using options to obtain their investment positions.
No mutual funds. Each investor can create his or her own mutual fund -- without the ridiculous expenses and fees.
Company shares exclusively. I seek intellectual excitement, in addition to the possible profits, if I risk my savings. Finding companies that lead their industry in advance of Wall Street satisfies this urge.
Management is crucial. True talent in the executive ranks is rare.
Fundamental and valuation measures are key, but not crucial. Most such measures fail to reveal as much as their proclaimers believe they do.
Charting and technical analysis tell me only when to buy, not what. I have zero use for any person who claims the role of professional investor but refuses to use all the tools available.
Invest in companies, not general market direction. I consider company shares to be the true investment whereas 'investing' in market averages qualifies more as a directional bet, expressed as a function of time. But that is just me.

This all is just one person's investing methodology, mine; inappropriate for everyone else. We each seek more information and understanding about our investment opportunities; I believe we should know most everything before we invest. (Investigate first; then invest.) I must note that when I post to this blog about a company/stock, it does not follow that it qualifies as an immediate purchase, no matter how compelling I, or anyone, makes the opportunity seem.

Back to your question. After all the foregoing commentary, it should be no surprise that I do not "trade the SPY or similar." As for those trend breaches and tests -- How do you know they would not continue in each direction, except in retrospect?

Here is a test. Print a daily basis bar chart of anything -- stock, market average, etc -- but one with which you have no familiarity. Take a piece of dark paper and cover over the chart. Now reveal the chart one bar at a time. Ask yourself as you reveal each daily bar, "What action do I take today -- buy, sell, or hold?" This exercise on the hard, right edge of the chart should reveal many core lessons re chart action, and your real time interpretation of same. Market oscillations will no longer appear to be random. (Such as Tuesday's big rally, which, considered alone, did nothing to change the market's setup.) The exercise also will help you develop a set of chart patterns that you can rely upon; you will know how the pattern fulfills itself based on historical precedent. You will seek them out for your favored opportunities. Ergo, the market comes to you (your price and value) rather than you chasing after the market's runaway express.

Finally, and more valuable, the exercise will reveal your core truth as an investor.
-- David M Gordon / The Deipnosophist

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17 March 2008

A smile for a gloomy day

We all welcome a chuckle at any time, but especially today.

The cartoon below did precisely that for me... Made me chuckle, don'cha know! (Thank you, S!)

[click on cartoon to enlarge]



-- David M Gordon / The Deipnosophist

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