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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: epicure who wrote (14449)	2/28/1998 3:19:00 PM
From: Liatris Spicata	Read Replies (1) \| Respond to of 94695

X- Let me first deal with your issue about the gaming tables not being purely a matter of luck. If you include games like poker among the "gaming tables", then you are unequivocally correct- it is not purely a matter of luck, nor, in the long, even largely luck, if the cards are fairly dealt. I was referring to things like roulette wheels and slot machines, but poker and backgammon involve considerable skill. To the more substantive issue. <<How is that not gambling?>> There may be very good reason to invest in a company that makes "NO money". I suspect over 80% of businesses start out that way. But if you believe that the company's prospects are bright, then the company may be a good long or short term investment even if its P/E is "high" (I'd expect an engineer to say what "high" means- without a standard of comparison it's a meaningless word). Factors such as hidden assets, valuable patents that may not yet be producing revenues, price-to-sales ratios (particularly when the sales may be reasonably expected to return profits in the future), and growth prospects may all be more important in determining a stock's price than the trailing P/E. An investor must make his own determination of the value of such assets- but that's a far cry from going to Monaco thinking "seven is my lucky number today!". That's what makes this game an art, what makes it so interesting, and part of what distinguishes the sheep from the goats. So citing AOL's astronomical P/E as a reason to call it overpriced leaves me utterly unconvinced (BTW, I've never owned AOL). I think what you are missing is the distinction between gambling and risk, and it's a useful distinction. Yes, it is important to manage risk in your portfolio, and I would not advise anyone to have over 50% of their portfolio in a small, but promising money-losing company like PHTN- which one SI poster claims he does- but I would claim that a prudent person might have some of his or her assets in such companies, Ben Graham notwithstanding. But even investing in PHTN (which I do own), while risky, is owning a piece of a company that I believe has a reasonable chance of doing very well. BTW what makes you think I only own a "meaningless fraction" of the business? <<It is the nature of people caught up in manias to get upset with those who point out the irrational qualities of the situation. >> Is this some oblique reference to me? If so, it passes over my head, but I suspect it's unjustified. Finally, I find your reference to criminals engaged in fraud using the equities markets to be completely unilluminating. They are, after all, engaged in fraud, not in the process of building a business. They simply mimic what an honest business does. I think I've said all I'm going to say on this subject. Larry