Stock Market Articles

Mark,

I had thought that paradise starts with an H for Hermanus, but I have
news for you. Its H for Hawaii, especially when Crox bolts up over 10%
while I am sitting on the beach. We spent the last week there, and I
just got back into Connecticut this am to see that CROX is performing
just as the Dr ordered!

Please read this email, I know you don’t like too much communication,
but it would mean a lot to me.

I think I have explained my story before, but just to summarize -
immigrated to the US from SA 10 years ago, got hooked on the market,
retired 4 years ago to Colorado, traded full time and underestimated my
capital needs, and trading ability! Struggled for 2 years, had to come
back to Corporate America, much stress with family, broke, etc etc.
Company offered to send me to do an exec MBA and I decided to choose
Columbia in NYC for their value investing program. This was started by
Graham and Dodds in the 1930’s, and is where Warren Buffet learnt his
trade.

The reason for this is that I had in the interim found your website,
read all about Darvis, ets etc and made good money on HANS,ICE (and now
Crox). And after the thousands of dollars, and countless trials and
errors, now know and believe that simplist is best, and your system
works, especially for my personality, bar none.

But I also know, and you confirm this somewhere in your notes, that
once you start getting above a million or so, you need to start trading
a few more stocks and getting a little more sophisticated on managing
risk. Hence value investing. I just think that if one has the momentum
system and the best of value investing, then the sky is the limit.

I am also going to clash and have clashed with these professors big
time. Although some are now starting to believe in momentum trading -
they have an elective at Columbia called ” Behavioral Finance”, for the
most part the profs are too clever for their own good. They cannot
accept taking a trade in a stock like crox where the P/E is so high etc
etc. And all the while they are arguing with me, I make money. IT is
really sad, but also hysterical.

But here is the real reason for the email, Mark. When it comes to large
portfolios, these guys know there stuff. Its sophisticated mathematics
and they use modeling to control risk. For us, trading a few stocks at
most, as you say, our risk is simply our stop loss. Easy, no need for
covariance formulas, Beta etc etc. Not so once you are talking big
money. So what I am going to try and do, is take this course ( of 130
students doing the MBA at Columbia, only 18 get accepted to do value
investing - it is hugely intense, and I found out today that I have
been accepted) and work it into our way of thinking ( momentum trading -
your rules, Darvis etc) and come up with a model that works for guys like
you and me once we get to the bigger numbers - say $5M. Maybe less, I don’t
know yet.

I have no idea yet how this will work out, but I will keep you informed
if you are interested. I may get into this class and find it is a bunch
of pie in the sky theory, but I don’t think so. The guy teaching the
course is an investor worth millions, so lets see what he has to say.
If all goes well, what I am planning to have is a two tier trading system.
Always have $1M doing MSTS, and the earnings above that go into this
quasi MSTS/value investing portfolio.

Okay, apologies for the long email. You have helped my fortunes slowly
turn around though, so I want to give back what I can.

Stuart Anderdorff
1st August 2007