The Deipnosophist

Where the science of investing becomes an art of living

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Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

02 August 2006


Okay, I have taken some time away to give thought to this notion of "betrayal." As introduction to my thoughts, this snippet from a private email:

"You've got a tricky situation which I could argue from about 99 different points of view. At the end of the day, you are not a paid service offering investment advice. You are blogging your ideas. If others wish to trade based on your ideas you can't stop them, nor can you hold their hands in real time -- even if you could hold their hands, what would you do -- send out email alerts? That would put you in the position of offering advice (for free) which might even edge you into murky legal waters (a subject for securities lawyers, not one I'm expert in). I suppose that you could have posted right after you executed your own trades, but I don't see that you had a moral obligation to do so given that you have not promised anyone that you would do so in the first place. I know you are genuinely trying to help people by sharing your knowledge, but as we both know, no matter how good the tutelage is, one must pay one's own tuition at the University of Wall Street if one wishes to learn the art of the trade. I don't mean to sound harsh, because I can sympathize on a simple human basis with those who held their positions into the earnings and did nothing and found themselves down 30%, but you had warned them very clearly that 32 was critical support and your stop-loss. You had also warned them that earnings were coming and that the stock had the potential to break decisively one way or the other. They needed to monitor the situation into the close and in the after-market trading, and be prepared to act. I grant that few, if any of them would have had the experience that you have, or I might have, to act preemptively based on intra-day action, but they certainly don't need much experience to watch their screens and enter sell orders when 32 is breached. I watched the tape myself. I was quite curious as to what would happen although I had no position. There appeared to be plenty of time to get out at decent prices unless you were trading at institutional levels, certainly not the case for your readers. I guess I'm writing all this to try and say that I don't think you wronged anyone. But perhaps you didn't realize the degree to which you had the potential to effect people's real economic lives..."
I stated on the 26th that post might represent my final post re RACK. The implication is that, should it breach $32, then I considered that post to represent the concluding post, and its “From inception to conclusion” sentiment. The post on the 27th represented an entirely different topic – one in which I was wrong and how I handle that situation. Unfortunately, I chose RACK as its subject, thereby possibly sowing unnecessary confusion.

Yes, I could have provided an update during market hours that I was selling, and in retrospect I might revise that decision. Certainly I will pay heed to this possible situation in the future, and take appropriate measures. Then again, and as the letter writer suggests, I cannot alert readers to every squiggle in the price; of course, I thought then and think now the information in the post of the 26th to have been sufficient. I alerted to event, price, and time; the requirement to sell on the breach of $32 remains yours. And as the letter write notes, “There appeared to be plenty of time to get out at decent prices.

I made two purported 'errors' (three, if you include the supposition that RACK would hold at $32-34) -- one of omission, the other of commission:
Omission: I did not post here during the trading day that I sold;

Commission: I confused readers by writing a post about how I handle the situation in which my analysis was wrong.

That second 'error' was using RACK as the subject of that post. (I had thought about this issue in advance of writing, and thought it to be a good idea. Obviously, I thought wrong.)

Re the first 'error' -- I rarely post re my every buy and sale, as few people trade as rapidly as me. (Some trade more rapidly, of course.) That I sold a few $$ above the stop was the subject of the second 'error' -- the art of the trade.

This blog is about the process of investing; as such, I share rules for successful investing. The more experience one gains as an investor -- in fact, in any endeavor -- the more frequently he or she knows when and where and how to break those rules. Thus, my post of the 27th.

Promises often are empty, goals and objectives often fungible, so I will say only this: I will learn from these presumed errors, as we must from all errors in all aspects of life.

-- David M Gordon / The Deipnosophist

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