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Wednesday, August 12, 2009

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in my live trading room for only $99.99. Go to:
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I can tell you the exact days I knew the “dot com” bubble was going to burst. There are three events that told me it was time to fade the “internet is going to cure cancer so you better load up for the long term on stocks like HorseAuction.com” story.

CNBC had a “special report” on Pets.com. Seems they were bringing in truck loads of flying fish to be shipped out to customers around the world.

…and, yes, I did a double-take.

FLYING FISH?

Talk about “jumping the shark.” I kind of figured the demand for “flying fish” was on the low side, and, maybe if Pets.com was stocked up on that nonsense, they might (call me crazy) have some other less-than-profitable “pets” in warehouses somewhere.

Then, there was the report from the “CEO” of Furniture.com who said they had a problem. Small problem he said. Small, but, hard to solve: Seemed that the cost of shipping furniture was more than the cost of the actual furniture they tried to sell.

“That can’t be good for the ol’ bottom line”, I thought.

And, the moment of zen: Juno.com made a public announcement that their business model was to GIVE AWAY INTERNET ACCESS. That’s right, FREE internet access.

My partner looked at me and said, “Hey, their stock just jumped about 80 points today. Maybe we should start giving our services away free, too.”

We chuckled. Oh, how we laughed. And, then, cried for the knuckleheads who were loading the boat on those idiotic stories.

“Tulips, indeed,” I opined.

I wrote commentary that, for example, Amazon was WORTHLESS and headed for ZERO. This was as Amazon made the move from $30 to $7.

Talk about being right. I could not have been more right. In fact, there are people to this day that will tell you I was a prophet. My calls to sell the market in 2000 and in 2007 helped propel me from just a “guy on the internet” to “guy on the internet with a few people who made money on his calls and continue to support his efforts to provide more good calls.”

Okay, so, that about sums it up. I mean, I’ve been so right, for so long. What a genius I am.

Oh, wait. Did I forget something? Yeah, I did.

Whoops.

I forgot the part about me in 2000 and 2001 being right about the market and yet following some of the dumbest trading strategies ever devised. Some of you will smile at this.

I bought long term options (leaps) on tech stocks. I bought them on margin. I then sold short term calls against these leaps.

…pause…

…more of a pause as you let that soak in…

…and, now, the punchline…

So, at a time when my call was so very, very right, my strategy was very, very wrong.

Eight years later, and, I’ve learned. Learned myself something fierce. That’s what happens if you lose 2/3 of your money doing stupid stuff that you knew better than to do and let a golden opportunity pass you by while those around you profit wildly off your advice.

That was then. This, my friend, is NOW.

And, NOW, means no margined, optioned, zany “strategy” to make a fast buck. It’s all about small positions. As little margin as possible (read: how about none?) There will be no calls from my accountant saying things like, “Dude, if you don’t clear out you won’t be able to cover your taxes this year.”

I know there may be a few of you that read this and smile. You smile that smile of “knowing.” You’ve been there. You’ve done that. You’ve got the scars to prove you’ve been in the battle.

Others may think, though, that it “can’t happen” to you. And, you will be proven wrong. Horribly, terribly wrong, if you persist in whatever nutty strategy, “black box” strategy, or, “triple dog doo margin” trading.

What works can be summed up with the following rules: 1) Small positions, 2) Follow the charts, 3) Know ahead of time when you will sell on the way up or down, and, 3) Be liquid more than you are in the market.

Yeah, that sounds easy. That sounds like some kind of pablum. I know. I know. Believe me, I know.

And, their are also still people stupid enough to smoke cigarettes when the packs come with a warning that says if you smoke it’s gonna kill you.

So, my tale should be seen as instructive and cautionary. But, the best part is…

…and, this is good…

I’m right about the market again. It’s a great time to sell. The story about “goldilocks,” “the consumer,” “economic nirvana,” “green shoots,” and, the “new bull market,” are all hyped, ginned-up, and, garbage. The way to play them is to keep finding ways to fade them.

Difference is, if I’m wrong, I’ll be able to pay my taxes this year.
Sincerely,
Don Harrold

Remember, you can still get August and September
in my live trading room for only $99.99. Go to:
http://augustspecial.joindh.com