(Warning: this is a long and probably boring post...)
Hi, Bob
Thanks very much for your well-written post.
You and I seem to have a lot in common: careers in the computer field, exposure to marketing, short DDIM, (losing money!), value kind of guy, play with shorting as a very minor part of investing. Are you by chance a Green Bay Packer fan also??
I sometimes wonder if my career in engineering has made me a bit blinded to what the general public is likely to think about the Y2K issue, which looks so overblown to me. What's the saying, in the valley of the blind, the sighted person is handicapped? I'm beginning to think so what if Y2K is very overblown, if the general public creates a buying frenzy with it?
Anyway, I agree; sitting on these DDIM shorts has been not so fun. On one side, it's practically a sure bet IF you care to wait long enough (might be a year or two) and don't mind being perhaps heavily in the hole for a while; on the other hand, while you have margin invested in these shorts, the rest of the market is busy cruising upwards (maybe taking DDIM with it), so this is dead money for a while. On the third hand, one could always watch the situation and wait for the price to convincingly break before shorting. You miss part of the downward move as a price, but then you don't have all this margin tied up in waiting... and waiting... and waiting.
I believe there is a lot of creative accounting going on with DDIM. However, this kind of stuff can go on for a LONG time before a company has to deal with it. Also, Wall Street LOVES growth; with or without solid profits. If DDIM earns a meager 14 cents next quarter, that's not much vis a vis their market cap; but that will nevertheless be profit growth of 100% (no matter how dicey the internal accounting has been). In the vernacular of the thread: WALL STREET LOVES GROWTH!!
So you have to wonder; if DDIM is going to show impressive quarter-to-quarter growth for even one more quarter, it's a cinch that Wall Street will ignore all the worts and the stock will be in no danger of falling. Quite the contrary...
But on the other side of that is the insider selling and top-level people leaving. Why all the selling & leaving??? Why does the street seem not to care?
I wrote a rambling note a while back about what classical "investing" was really about: you get sure of your position, and you wait for what _should_ happen _to_ happen. It's not a game of day-to-day or week-to-week. HOWEVER, it is also not a game of buying something, throwing it in the closet and never looking at it for years and years. You have to keep an eye on all your investments, even erstwhile long-term ones, because things change. You get smarter, the market gets smarter, fundamentals change, etc. So maybe I should cover some of my DDIM position and wait for the stock price to convincingly break before getting back into it with quite so much. Plus, that way I could short more ZITL, which honestly is looking more and more like a sure thing than DDIM is.
Plus, I'm thinking about all the sage Wall Street cliches about "don't fight the tape," etc. Maybe getting out of some DDIM shorts and waiting until I'm "with the tape" might be a better use of my time & money.
I dunno. I'm waffling, I guess. IMHO, DDIM is overvalued, goofy, etc., etc., and it's not going to stay in these rarified altitudes forever. But it sure seems like it can stick around for a pretty long time!
I'm starting to wonder if maybe my best move is not to continue to sit here saintly, comfortable with the knowledge that the price will drop way down eventually (hope I don't die of old age first), while I could be using that money on issues which are rising. That way, I could be putting this money to good use for however long the DDIM crash takes to happen; and when DDIM startes really falling towards earth, I could jump back on the shorting bandwagon then. Yes, I might miss 20% or so of the move, but waiting for DDIM to tumble has been like banging my head into the wall. Unfortunately, there is no master timer going for how long a stock can remain terrifically overvalued...
Has anyone here looked at hedging their shorts with some calls? I might look into that...
Let's see what happens next week.
-- Pete |
