Bill Wexler's Dog Pound Message Board

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Non-Tech : Bill Wexler's Dog Pound

REFR 1.820

+5.2%

3:58 PM EST

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To: Graeme Smith who wrote (5408)	12/9/1999 2:07:00 AM
From: Bill Wexler	Read Replies (5) of 10293

<<What are your thoughts on VLNCs release? Likely to be any more to come?>> I think it is way overblown for such a tiny order. It also isn't exactly clear if this is simply an evaluation order. My guess is yes. <<I got killed today on still being short VLNC and ZIXI>> You know as well as I do that these small cap companies with questionable technologies draw enormous speculation - sometimes for long periods of time (I had to ride the ZONA fraud from 40 to the teens to 40 several times over two years before the stock collapsed to the low single digits). I suggested to place a stop-loss at 12 1/2 when the stock began running and I was stopped out at that price. Sometimes it makes more sense to wait it out than to chase it. ZIXI - this is an interesting one. There's a passage in Victor Niederhoffer's book The Education of a Speculator where he opines that if someone offers you a bet that looks like a sure thing...run the other way. The short-sellers gnash their teeth and know for certain that ZIXI is a big pile of nothing (and I tend to agree); however, this is irrelevant at this point in time because the people on the other side of the trade are better poker players, have much deeper pockets, and you don't have a clue what cards they're holding. It is an incredibly dangerous short. Compare shorting ZIXI to shorting something like ABTE, where not only do you know the your opponent's entire hand, but you also happen to be holding a straight flush and the house is about to cut off your opponent's credit line! <<However I'm very nervous about VLNC, it has now grown to 10% of my portfolio>> Niederhoffer also explains that shorting stocks is the surest and fastest way to lose money in the market. I also happen to agree with that. In my own portfolio I am either very long or less long. Short selling is simply a minor component. 10% of a portfolio in a speculative small cap short or long is terribly overweighted. The best way to make reasonable money shorting stocks is to take small positions up front and to press your bet much further down the road when all the bad news is cascading out and the stock gets closer to zero (i.e. you see all the cards). I shorted Zitel from 50 to 1; however my position increased dramatically and the vast majority of my profits were made in the drop from 16 to 1.

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