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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: sim chambers who wrote (8050)	4/27/2000 6:24:00 PM
From: Jon Tara	Respond to of 18137

OT on MSTR. I run a couple of web sites, and got a fancy MicroStrategy package FedEx'd to me. To this day, it sits on my desk in the "what the ???" pile, where it sits until I can figure out just exactly what they are proposing and why I would need them. It was nebulous as hell. I have reviewed the WAP and WML specifications, and it would appear fairly easy to "wireless-enable" just about any web site. Even downloaded a simulator and played around a bit, and satisfied myself that I could easily enable my sites if I wanted to. Why do I need these clowns?

To: sim chambers who wrote (8050)	4/27/2000 7:25:00 PM
From: Eric P	Read Replies (4) \| Respond to of 18137

sim: MSTR was the biggest bag of goods i have ever seen. Forbes even told the story pre top in the stock. hope you got it short. MSTR is an excellent illustration on why shorting can be very, very difficult. Let's assume that MSTR is currently 'fairly' priced at it's current close of $25. It's safe to assume that the true value of MSTR has not changed a huge amount in the last six weeks since it traded at $333. Therefore, a stock which is 'worth' $25 seems dramatically overpriced at $50. Furthermore, it's massively overpriced at a price of $100. Knowing the true value of MSTR ($25), you are about to burst if you don't short the stock when it reaches $150. Finally, you short the stock when it reaches the unbelievable price of $200 per share for this stock which is 'obviously' only worth $25. Even at these excessive levels, the irrational purchases of droves of market idiots cause the stock to go still higher. By the time the stock reaches $300, you scream "UNCLE" and bail out of you short position at a huge loss. Obviously, in hindsight, the stock topped out at ~$333, and then "proved you right" by since declining to a price of $25. Unfortunately, you were unable to profit from shorting this obviously overpriced stock because you couldn't forecast the extent to which the stock could be even more overpriced. This is not typically a problem on the long side. A stock cannot become dramatically undervalued or someone (like Warren Buffet) will buy the stock at the cheap prices. Other potential buyers would be insiders (who knows the true value) or a hostile takeover from another firm. Unfortunately, none of these self correcting mechanisms exist to keep a stock from becoming dramatically overpriced. Until one day, some guy realizes that the stock is at a ridiculous price and sells. Then another sells, and another, and another, until eventually no one wants to own this piece-of-crap stock. The bubble bursts and the stock returns to a rational price. The difficulty is figuring how large the bubble can get before it pops. And not shorting until you see the needle in the side of the bubble... -Eric