You know what I like about swimming? The fact that if you put in the hours working on your conditioning and technique, you get rewarded. Simple as that. Of course, if you're blessed with size and athleticism on top of your hard work, you have a chance to become truly great.
But essentially, hard work wins the day. Pay your dues, step on the top of the platform.
Now, you know what I hate about this market? It's the fact that every single day, people are making absolutely great gains without doing one single iota of hard work. No, strike that: They haven't done one single iota of
work. They have no method, they have no research, they have no money management -- they simply go out, buy xyz.com at some ridiculous price and then sell it for an even higher ridiculous price! I mean, it's enough to make a writer want to absolutely bust loose and vent for a bit. So ... that's what I'm going to do today.
Now, this conversation is not about Internet valuations. And it's not about technical analysis vs. fundamental analysis. No, it's about the unfairness and idiocy of it all.
And, yes, I'll pre-empt you: I
being petty. But, trust me, it's not about being jealous that Joe Blow made 1,000% this year on nutcase.com. That I can live with. No, it's about the fact that Joe Blow made 1,000% essentially by being an idiot.
Now, so we're clear, here's what an idiot is: An idiot buys a stock -- normally an Internet stock, at least this year -- for no other reason than it looks good. Or it's been going up. Or, people are talking about it. Or, it's "hot." And that's the extent of the idiots' rationale. No forethought. No research. No thinking about an exit plan. No thinking about how much they could lose. They're just in -- and then hopefully out at a profit. Now, where to get out? Well, shoot, they'll worry about that after they get in!
This is not to be confused, by the way, with someone trading Internet stocks who
thought about it. Shoot, I don't care if your methodology is based on the number of vowels in the symbol. If you have some kind of rationale and you've spent at least 30 seconds thinking about where to get out -- with a gain,
a loss -- then more power to you. I mean, even those
guys seem to have at least thought about why they're long
. (Although, in keeping my petty theme going, their smugness and, let's face it, glee, are enough to drive me crazy.)
Want some examples of what I'm talking about? OK, here are a few select items from my idiot file:
- Idiocy No. 1:
I received an email this past weekend. The fellow heard -- yes, heard -- AOL (AOL) was a good company. Also heard it had gone up a zillion percent this year. So, his strategy was to go get a home-equity loan and buy about 3,000 shares. A home-equity loan, mind you! And, naturally, the poor chap bought exactly at the top, only to see it drop 30 points or so. And then another 20 this past Monday. When he first wrote me, I suggested he might think about putting a stop in place. His response: What's a stop? Listen, I feel for the guy. I really do. Still, I'm darn sure he's closer to the majority than minority... Idiocy No. 2:
From the newswire: "Investors Forecast, the upstart Web site that publishes collective stock forecasts for the coming week, has grown over 500% in user visits per week since year-end. Page views have increased from 313,000 in December to 941,000 in March 1999, representing a 300% increase over the three-month period. "Stock and market forecasts made by visiting online investors have ballooned 349% from 4,616 the first week of the year to 16,149 last week. Investors Forecast, at www.investorsforecast.com, gathers market and stock forecasts for next week from investors, and after averaging and weighting them, publishes the resulting collective forecast for each stock every hour. "Commenting on the growth in visits and page views, John Dick, Publisher, said, 'We seem to be answering a need for a growing audience of investors who want to compare their numerical opinions and sentiment with fellow investors. Our message boards confirm that we attract a highly involved and intelligent group of daily users.' "Currently, Investors Forecast has 47,000 registered users." Highly intelligent group of daily users?? Are you kidding me -- 47,000 folks who share their opinion on where @Home's (ATHM) - Get Report stock price will be? Why in God's name would anyone give one hoot where Joe Schmoe thinks @Home will trade? I mean I don't care if it was the CEO of @Home talking: He has no idea of the stock price either! It's absolute lunacy. Idiocy No. 3:
In the current issue of the very excellent Brill's Content, there's an article on the Raging Bull Web site (www.ragingbull.com), a stock-discussion site similar to Silicon Investor. The article states that membership has grown from 5,000 members in July 1998 to 95,000 members as of mid-March. And what are these 95,000 members checking out? "Each other mostly. The Web site offers traditional editorial content. ... But the brains behind the bull insist that their greatest selling points are their technology and their members, who endlessly joust, cheerlead and share hunches on the site's thousands of stock-related message boards." So, again, an entire community whose sole purpose exists to let members talk to one other about stock picks! Oh, by the way, the "brains" of Raging Bull are all of about 21. Idiocy No. 4:
A close friend of mine calls me a few weeks ago about an associate who got in on @Home early and made a killing. At this point, @Home is up 400% since October. My friend's question: Is there any "wiggle room" left in the stock? You know, a place to "get in." My friend has no idea what @Home does, other than go up.
Need I go further? Oh, I could go on and on, but you know, maybe I shouldn't even care. The number of swimmers who won an Olympic gold without working their butts off is zero. And in trading, the number of folks who survive for the long term by acting like idiots is also zero.
So maybe for the short term, the "all-play, no-work" style makes a mockery of anyone who takes trading seriously. And there are times I sit here, at the still-young-I-hope age of 41, and feel like a relic. "Gee, maybe I
make 1,000% per year, year after year, just by buying stocks that
recommends on his chat board!"
But then I think -- heck, I know -- that most people who put zero thought into their trading will get back exactly what they put into it. Oh sure, a few will slip through ... this year. But, over the long term, their bad habits and lunacy will catch up with them, and they'll be hauled under just like everyone else who thought he or she was a genius.
So maybe this past Monday, when the
dropped 16%, was a wake-up call. Somehow, though, I doubt it. "It's another buying opportunity!!" But, gotta run. Have to check in and see what price everyone thinks
will be at tomorrow!
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication he had no positions in the stocks mentioned, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. This column, Charted Territory, appears every Wednesday. Smith also writes Technician's Take, which appears every Monday, and TSC Technical Forum, which runs Saturdays and Sundays. While he cannot provide investment advice or recommendations, he welcomes your feedback at