By DAVID MOON, Moon Capital
August 21, 2005
One evening I settled into my
favorite chair, propped up my feet, and looked forward to a few minutes of rare
quiet time to watch a little television. Sadly, the most attractive choices from
among our 142 channels (not counting video-on-demand) were an NBA basketball
game and an infomercial promoting an upcoming free, live seminar on a foolproof
method of stock market investing. Since it was the regular season, and no one
watches the NBA until the playoffs, I chose the
First came the
testimonials. After only 25 days of studying the stock market, students and
waitresses bragged of making 8.6 percent in a single month. Another of the
budding Warren Buffetts earned 33 percent in nine days. Other testimonials
described extravagant European vacations and having the ability to 'work less
hours.' Another of the more successful of these super-successful investors
bragged that because of this system, she would never have to work
At the bottom of the screen, in a small typeface and faint color, was
another bit of potentially useful information: 'Individual results may
How's that for an understatement?
I successfully fought the urge to attend the free seminar and learn the
secrets of 'how to get right and stay rich.' (I guess I just like doing things
the hard way.) But I did glean a little about the crux of this amazing system.
An actor, playing the
role of an official-looking news reporter, asked one of the investment masters
about market bubbles. What should an investor do if the trend changes and begins
to move against him? (Pay very close attention here. This is the secret of
investment success.) When the trend changes, all an investor needs to do is push
a button and sell everything.
With the push of that
button, he's out. He misses the market downturn and has his capital available
when the trend changes again and stock prices start to go back up. Those were
the exact words of the master: 'Push a button and
In other words, this road to riches was the same one mapped earlier by
Will Rogers: 'Buy some good stock and hold it till it goes up. If it don't go
up, don't buy it.'
Even if I did have one of those magic sell buttons, I wouldn't know when
to push it. This would all be so much easier if someone would ring a bell when
the trend changes. Has the trend changed when a stock declines ten percent?
Twenty percent? If so, how do you know when the trend has turned positive again?
After a ten or twenty percent increase? So let me see if I have this right: when
a stock declines 20 percent, sell it. When it goes up 20 percent, buy it.
That sounds like a
pretty good system to buy high and sell low.
At a superficial level, this general approach makes sense. You'll make
more money if you own stocks while they are going up. And you'll lose money if
you own them when they're going down. No kidding. It's no wonder the seminars
are free. Any higher price would be a severe case of
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).