WHY I'VE BEEN RIGHT ON THE MARKETS

In response to emails proclaiming my "genius". No. I am a follower of William O'Niel at Investors Business Daily. I've read and studied his book and I rigorously employ the CANSLIM system. My commentary has always been for the small investor ($5,000 to $50,000) and the rules for small investors preclude taking "shots" at stocks. You invest by certain rules and bail out on certain rules and you never deviate. You don't catch bottoms and you do catch a lot of tops, and when you miss "tops" you certainly get out with most of your gain.

You cannot follow people like Jim Cramer, although good he has always worked with a customer base of millionaires who can afford to lose 50K and come back for more. You cannot listen to any of them. Using the CANSLIM system you are always in the game with a company with the prospect of huge moves. My recommendations were all based on only investing when the broader indexes were positive, meaning your chance for loss was reduced exponentially and chance for gain increased substantially.

That's it. Invest, don't trade. Have bailout signals and buy in signals. That is it. A guy with 25K or less should be in no more than one or two stocks. Screwing with the indexes is neither hedging or investing. Buying options is speculation. Writing them is the same.

OK? I'm not a genius. Just a guy who learned from the best and follow the rules laid out.

Oh, one other thing. A small investor MUST "scale out" of winning positions. This means that when a stock has risen 25% you sell part of the holding just because. You repeat the process at 50%. This means that you are now in the market with a risk of zero and have capital to look at another stock. Why is this critical?

A tale from my poker days: I played poker in the Navy and made some bucks but when I used to go to the card rooms in Gardena I was losing overall, and losing to mental midgets. I knew all the odds, all the percentages, everything. One day I asked one of the winners I had rapport with to lunch and asked him what the hell I was doing wrong. He leaned over the table and whispered like he was telling me something nobody in the entire world knew but him. "Money management, my friend. Money management. You see me leave tables in the middle of the day or early in the morning? That's because I have lost my gambling capital for the day. I go to the movies. I go to the beach. I play tomorrow with gambling capital." That gambling capital "system" changes everything. The system is to establish your absolute limit of gambling capital and never risk more than ten percent of it during a single sitting. This system means you have never risked everything you have and so your brain concentrates on the game and not winning or losing. Your bluffs are sharp your calls are sharp and you are never cowardly. You never add to your gambling capital other than once a year. You invest 50% of your winnings in something else (Real Estate, art, or CDs), at least 10% goes to fun and things you absolutely don't need, and tithe.

Same with stocks. Have investment capital. Manage that capital. The investment guru of all time is still Benjamin Graham. Old Ben said you should have half your money in bonds. Even at 3%? He had his in bonds at 1%.