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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (15125)	8/10/2002 10:58:06 PM
From: Don Earl	Read Replies (1) \| Respond to of 78767

Paul, <<<It's just that sometimes - like NOW- I am getting tired of these opportunities to average down!!>>> I used to be a big fan of cost averaging, but it seemed like there were too many times where I kept ending up with too large a position on certain issues that just kept going lower. In most of those cases I would have been a lot better off stopping out when it became obvious there was something wrong with my timing, or at least limiting my exposure to the original position. There have been times when I've done well with cost averaging, but overall I've lost more on the strategy than I've won. I've seen a lot of discussion over the years on averaging down, both pro and con, and to be honest, I really don't know exactly where I stand on the strategy as of this writing. Since it's less expensive to fix a mistake early than late, I suppose I'm leaning more toward fairly tight stops these days rather than cost averaging, although I've used both methods in the past several months depending my mood at the time. I agree with your point that focusing too much on compensation issues could tend to limit the list of possible investments under current conditions. I also relate to the idea that repricing options is a slap in the face to shareholders. Maybe the worst impact on the whole option issue is that insiders rarely make purchases on the open market anymore. Once upon a time it helped to find the bottom in business cycles as that was when insiders considered their stock too cheap to pass up. Now they just load themselves up with options and dump the underlying stock anytime the options are in the money. So far I haven't seen any proposal surrounding the topic of the abuse of options which feels satisfactory. Since no two companies treat options quite the same way, I suppose it bothers me to see bureaucrats leaning toward a one size fits all rule on how they should be treated on the balance sheet. Issuing new stock to cover options on a few hundred shares issued to a computer programmer to keep cash expenses down, is a lot different than purchasing a million shares on the open market to issue to Michael Dell below the purchase price. Whatever.