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Technology Stocks : VALENCE TECHNOLOGY (VLNC) -- Ignore unavailable to you. Want to Upgrade?

To: MGV who wrote (6207)	12/22/1998 11:50:00 AM
From: lws	Read Replies (2) \| Respond to of 27311

Hi, Darkgreen, Your's is a fair question, especially in light of yesterday's debacle. The brief answer is that of course there's nothing "...wrong with a strategy to wait for imminent real signs of execution before investing..." After all, it is just what I thought I was doing in the context of a company which we all know to be a speculative, high-risk/high-gain venture. I added to my position as execution seemed ever more imminent. There were many "imminent real signs:" Lev's CC statements about installations and test runs, "our's to lose," samples in the hands of potential customers, large insider purchases, increases in employment, and so forth. Unfortunately for us, these signs may not have been as imminent as we thought. But that's what makes speculating grand...you win some and lose most. The problem, of course, is with the notion of "imminent." "Imminent" is inherently a matter of judgement about the future of something which may ultimately be delayed or not occur at all. That there are buyers and sellers reflects the different conclusions which individuals may draw about how imminent "imminent" really is. After all, all those shares sold late yesterday also got bought. A lot of the buyers must think that execution remains as imminent as before, or at least imminent enough to be bought at the lower price. But I don't really think you were intending to be speaking about "imminent real signs." I have to think what you were getting at was a strategy of waiting for confirmed execution before investing. This has always been your theme, and I do not dispute its appropriateness. It is just a more conservative, lower-risk/lower-gain strategy which, like all strategies, has its advantages and disadvantages. With 20/20 hindsight, it sometimes proves to have been right; sometimes wrong. In that sense, it is one investment tool among others to be used in managing a portfolio. Finally, what do you mean by "opportunity cost?" From your other postings, I don't think you mean the lost money-market interest. I think you often use the concept in an "ex-post" sense when it is properly used only as an "ex-ante" concept. It is a tool to aid decision-making about alternatives. The opportunity cost of one alternative must be based on the certainty of obtaining the (best) alternative. (That "certainty" may be a probability calculation itself, but to pursue this would be to obscure my point...) It is misleading to talk after the fact of the "opportunity cost" of investing in Valence as the lost profit that could have been obtained by investing instead in, say, AOL or MIKL, or the S&P. Of course I too now wish I had invested in AOL instead of Valence back when the decision was made. But who then knew that AOL was going to explode while Valence languished? Who knew the S&P would rise 20+% each year for the last three years? We can properly cry over unlucky choices, or our inability to spot great investment opportunities or huge market moves, but we cannot criticize ourselves for failing to recognize the "opportunity costs" incurred because we didn't invest in what turned out to be the big winner. The proper measure of the opportunity cost of an investment in Valence was, for example, the lost interest that might have been obtained from buying a triple-A bond (held to maturity...) or a money-market fund. To say the profit lost from not investing in AOL was the "opportunity cost" of investing in Valence is to present 20/20 hindsight in fancier, but misleading, dress. Regards, lws PS. Merry Christmas & best wishes for next year's investing to you & everyone. Thanks everyone for keeping this thread lively & informative.