Postscript on BarryZee’s First

I hope you enjoyed Barry’s inaugural post on the ECRI service.

I just got off the phone with a friend who didn’t realize it was his.  Credit where due, and all that.  What I’ll do after putting up this note is go back and add our initials as a “signature” to previous posts so you’ll know who to credit (and who to blame).

I just wanted to second Barry’s little lesson on the natural inequality of access to information, determined by how much you can pay.

Back in the 1970’s, Dow Jones & Company had two weekend publications.  Barron’s cost 75 cents a copy, and The Wall Street Transcript $15.  As a kid risking his own small capital pile, I wasn’t up to spending $15 on a newspaper.

I remember well a weekend when several portfolio managers and analysts in Barron’s were reflecting my own ideas of the strength of the new Digital Equipment family of mini-computers.  At the time, I was investing in Digital and other companies’ stock and options where my “edge” was that I was using their equipment or their chips in my consulting gigs.

I charted each stock I followed and the options on those stocks, all on semi-log graph paper.  It let me visualize when the options were mispriced versus the stocks, or against each other.

When I saw that the near expiration call options were trading at what looked like too cheap a price the Monday after that weekend, I made the plunge, and bought what was for me a big position of twenty call options.

Imagine my disappointment two days later when Digital announced a big secondary stock offering and the stock fell by 10%!

Here’s the lesson:  In that same weekend’s WS Transcript, several big portfolio managers who were fans of Digital had said they also liked the new line of computers, but they expected the company to raise more capital to carry out the business plan associated with the launch of that new line.

If I had paid the $15 for the Transcript that weekend instead of 75 cents for Barrons, I might not have bought those options, saving myself $4,000.  Then again, I might have bought them anyway.

Another investing lesson that takes re-learning every so often.



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