So You Want Stock Tips?
NY Times writer Danny Hakim presents a great example of the folly of stock tips:
“Jonathan Mirin says he first heard about Wave Systems from a guy named Jerry. “This company’s selling for a dollar a share,” Jerry told him. “In a few years, it’ll be going for 500.” In those days - the late 1990’s - Mr. Mirin was a struggling New York actor in his late 20’s and a teacher in the public schools. The way he tells it, Jerry was a fellow teacher who told him over a cafeteria lunch one day that he had once been a big-time investor: “Limousines, jets, the whole thing.” Yes, he had lost everything in the crash of 1989, but now he was back in the game and had a hot tip to share. “I felt like I had received this tip, and I’d better make the most of it, because I don’t travel in circles where I get tips,” Mr. Mirin said…Mr. Mirin was not alone…Among the faithful was Joe Trippi, who later managed Howard Dean’s presidential campaign…”When it started going up, I figured, well, my theories are confirmed, and my friends would say, ‘You know, Jon, everyone’s a genius in an up boom cycle,’ ” he said. “I thought that for Wave to be doing this, someone must know something…”And then when it started going down, it was stubbornness: ‘I’m not going to admit that I’m wrong.’”…Founded in 1988, Wave has never reported a profit for even a single quarter, and it has lost more than $260 million. During the bubble, profit-free technology companies often won investors’ favor, but they generally could at least boast of substantial revenue. Not Wave. In its latest quarter, it reported revenue of $6,300.”
The Trend Following message is boring. It is not flashy. Trend Followers will never have fun and exciting stories to tell at cocktail parties. But isn’t that the issue: do you want to impress your buddies or do you want to trade for profit like the great traders of the last 30 years?
