Roger's 1998 Short Picks Message Board

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Strategies & Market Trends : Roger's 1998 Short Picks

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To: Roger A. Babb who wrote (2327)	2/5/1998 4:54:00 PM
From: Tino	Read Replies (1) of 18691

Roger, I've been following this thread for quite some time now and believe it's one of the more interesting places on SI. Thanks to you and everyone else for making it worthwhile! Now I have a question about those floorless convertibles. You and others keep referring to them as "free money". I understand that by now you have probably made enough money off of those floorless deals to justify making such a statement. However, I have to admit I am still a little skeptical, in fact too skeptical to pour my own money into the game. Maybe it's because I'm not 100% clear on how they work but maybe it's rather because I grew up thinking there is no such thing as a free lunch. Now you're telling me I've been wrong all the way. Okay, the thing I wanna know is if you're convinced it's a risk-free deal why do you continue to trade risky stocks? Don't get me wrong. I don't mean to be cynical or sarcastic. But why would someone who's found a sure-fire way to make money still bother with the Yahoos, AOLs and CTXSs where you stand to lose a substantial amount if they move the wrong way? You have 30 yrs of investment experience. Given that you consider floorless convertibles to be risk-free you should be a zillionaire by now or at least become one easily without having to take the - ceilingless :-) - AOL risk. I was thinking maybe you trade other stocks because there are not enough floorless candidates out there. But I pretty much scrapped that idea after seeing that someone somewhere finds a new floorless sucker each and every day. In other words, something is telling me you, too, must have doubts about free lunches. I think that's why you diversify. That's why you have a long portfolio. And that's why you have many different (risky) shorts. That's the way I see things. But if indeed you really do believe it's 0% risk I don't understand how you can justify trading anything other than convertibles. Please let me know what I'm missing. Regards, Tino

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