TLC, I can state 100% truthfully that anyone who followed Tony's advice to the letter did well in ADSP, although it was indeed a heart stopping experience. There were a few folks who chose to ignore his advice on allocation, and as a result were wiped out.
"What would you say to someone who followed your advice on Wednesday, had 40 grand in their account, and shorted 7,000 shares at a average of 11 bucks and then woke up on Friday to see it trading at 22 and going higher and covered immediately? What would be your advice to that person?"
How about, 'are you friggin' out of your mind'? Not to speak for Tony, but don't you think it's a wee bit risky to put almost 200% of one's account into one position? People who do that either get very rich or very poor very quickly. My advice to anyone who allocates in that manner is to stick to lottery tickets or casino gambling as an investment vehicle. The fact is that anyone who follows Tony's advice would NEVER overallocate like that. Anyone who does overallocate like that is NOT following Tony's advice. The fact is that Tony recommends splitting your trading port into 5 (aggressive) to 10 pieces. Let's assume the aggressive 5 piece portfolio to find out how much danger someone who actually followed Tony's advice was in. First of all, the call Wednesday was for 12 to 13, not 11, and was a 20% call. A 20% call means that you put 20% of one of the 5 pieces, or 4% of the port into that position. Let's assume a 20k allocation. 20% is $4000, or 333 shares. The next call on ADSP was 20% at 20, in the Friday premarket. A lot of folks don't have premarket trading, and Tony cancelled the call when it became apparent to him that the stock would run. But I'm going for worst case here, so we'll put another $4000 at 20, or 200 shares. Total short 533 shares averaging 15. The next call is 25% at 30. That's 166 shares for a total of 699, average is now 21.66. The final call was "as much as you want" at 56. Since there's 35% left, I'm going to go with that, and I'm only going to give an execution price of 50 to the final piece. That's 140 more shares. Total position is 839 shares, average is 23.81. The most someone would have been down who actually followed Tony's advice would have been down $26,867, at the peak. That peak also didn't last very long, and by the close the deficit was down to just over $11k. While being down 26.87% is no walk in the park, the fact is that ADSP was an extremely unusual situation, by several orders of magnitude. The stock has no business in the double digits, much less running into the 50s. But the plain fact is, no one would be wiped out by a hit of 26.87%. Hurtin' for certain, but not anywhere near wiped out. It is completely unfair to point to those who chose to ignore Tony's advice as victims of that same advice. Actually, it's a mutually exclusive concept.
It's interesting to engage in these exercises in hindsight investing as you have done, but anyone can look at what happened and see what the best course of action would have been. If I could get ahold of next week's WSJ, I'd be a rich woman indeed. The fact is that no one can predict with any accuracy where these things are going to top out. Yes, I know there are those who subscribe to the stop loss theory, and it's a valid strategy. But it is not the only strategy. Our strategy is one of following the fundamentals. The fundamental reality of this stock absolutely demanded a retracement of the insanity. This company is no Yahoo! or Amazon with the open ended potential, but a miserable little cash strapped turd that resells modem cards that are quickly becoming obsolete. I would have quit trading had this stock not retraced. One must be able to count on a few things in life.
Regards,
Barb |
