To: JIM and ALL
I always enjoy Jim's posts and the fact that he appreciates some nuances of investing that are escaping certain other contributors here. He and I have very different time horizons, so it is possible for both of us to take opposing positions on the same stock and both make good money. I hope he does well. But not too well on this stock -- at least not until I decide to take my profits.
I also hope investors are reading his posts and recognizing that they could learn a lot about the cross currents that drive trading and the need for a cautious, disciplined approach, no matter how confident you are in your own opinions.
Now, Jim, back to addressing some of your points.
Lately I've been spending a lot of time puzzling about which market cliches to abide by. "The trend is your friend" and, "Don't fight the tape" come to mind here. But so do, "Buy from the fearful, sell to the greedy" and the ever popular, "Pigs get slaughtered."
As always, the market is trying to tell us something with this strong up move by AOL. The challenge of investing is to try to fathom what that is with a little artful tea leaf reading, so that there is still time to make money before all the facts come out and everyone gets it.
I find your scenarios a bit of a stretch for my tastes. While the kind of manipulation you talk about happens all the time, it usually involves shell companies, newsletter stock promoters and directors whose names you have seen before in connection with similar scams. Underdeveloped countries are popular because no one can independently verify, for a time. It might be fun -- if someone here wants to be so kind as to do the research for us -- to compare the peak market caps, percentage of institutional holders and insider sales histories for Bre-X and ZZZZZBest with AOL. AOL is an awfully visible company to try to pull off any kind of hoax. And it would take an incredible amount of nerve to do so with a company that had a runup last year, then had its bubble burst. Investors (even slow-witted ones) would still tend to be just a little more cautious and skeptical compared with some entirely fresh story.
Besides, even if you want to believe that everything we've seen can be explained by the total corruption and manipulation of the system, how do know who's got the fix in. Wouldn't you have to accept that there is a 50-50 chance that the shenanigans could just as easily be the result of insiders preparing to take advantage of some major new upside development, such as a pending takeover offer or a $1 billion payment from Microsoft so it can put a banner ad on every AOL screen.
The bull case gets the edge because you have to add back in the possibility (however unlikely a probability you want to assign this) that what you see is what you get: AOL is legitimately a company on its way up. It is moving rapidly down the learning curve, it has done a lot of the heavy lifting and emerged as a proven growth company operating in one of the hottest growth sectors of all time. From here on, it is possible that a large percentage of everything they get flows straight through to the bottom line. |
