Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

My Mandatory Permabullishness

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Although I'm well-known as a permabear (which, given the past four years, is synonymous with blithering idiot), the three biggest profits I've made in my live have all been from "long" positions.

I put long in quotes because these are not trades of public stocks.

1013-bullThe first of these is my house in Palo Alto, which I bought more than twenty years ago. At the time, I was told it was the biggest mistake of my entire life, and in the year that followed, as I saw its value fall by 20%, it seemed that perhaps the naysayers were right. Suffice it to say that now I'm one of those guys who has been in the same place for so long that the price I paid for it seems science-fiction cheap these days. I could never afford to live in such a nice place if I had to buy into the current market. Of course, I have stuck with this "long" position because, well, it's where my family lives, and we have no reason to go anywhere else. Having a very low and permanent tax base doesn't hurt either (Proposition 13 in California basically means two neighbors living in identical houses can pay vastly different property taxes each year, depending on their purchase price).

The second of these was my business, Prophet. This company was no overnight success story. It took thirteen years of many ups and downs before it finally paid off, and it flirted with going out of business at least once. But I'm persistent and stubborn, and my desire to create the business and its products was very strong, so I finally saw it through to the end, when we sold it in January 2005.

And it is that sale which brings me to the third and most important "long" and the one which compelled me to write this post.

After the sale of Prophet, I had a lot of extra cash, and I allocated it to various purposes and investments. One particular opportunity came to my attention, which was a venture investment in a software start-up (I'm not going to reveal the name, but you've probably never heard of it). The company had raised money at a valuation of $10 million, but one of the shareholders wanted to sell his stake (which represented 5% of the firm), and he did so at a discount of 30%, giving the firm a "market cap" of $7 million. So now I had a meaningful stake in a startup.

I had never made a venture investment of any kind before, and I thought it was pretty cool that I still had an interest in a small company, now that I was divested of Prophet.

Soon after I made the purchase, I was at a social event, and I proudly told an acquaintance (who himself was involved in venture capital) about my investment. He immediately told me, "you should probably assume you're going to lose 100% of your capital." I guess he meant the advice as well-meaning, but it sure burst my balloon.

The thing is, the company really did struggle for a while. I had bought the stock in 2005, but a year later, it seemed questionable whether the company was going to survive at all. I started to think I had made a really huge mistake, but as you can guess, the market for private stock – – particularly of a stumbling startup – – is just about nil. My stake really was worth $0, effectively.

The firm managed to limp along through 2008, 2009, 2010……..and gradually began to actually build a real business. I would drop hints from time to time about my interest in selling my stake to any interested parties. There was never so much as even a nibble, but I'm sure I would have gladly sold my stock for $100,000, and I paid $350,000 for it in the first place. I just wanted out, and I would consider myself lucky to get any meaningful amount of cash back.

Fast forward to the present day. I did sell stock. I got all my money back. And a very handsome profit. And here's the best part of all – – – I still own the vast majority of the stock, since I only had to sell off a fraction of my holdings to get my investment and a nice profit back. So at this point, it's "house money", and obviously I'm in a vastly superior frame of mind, since I'll cheerfully hold on to what I have left as it continues to grow (the company in question is thriving now).

So what's the point of this? Well, the point is one that doesn't reflect well on me at all – – – given the opportunity, I would have dumped for a big loss something which a couple of years later was worth millions. I would have chickened out based on a combination of fear and impatience.

Does this sound familiar? I think this one-two punch of fear and impatience is what chases most people out of positions that, in the end, really blossom. How many people who paid $6 per share for Apple have held on to it consistently to this day? I'd guess approximately zero.

So by having no choice – – – by not being able to get out for one reason or another (be it my house, my business, or my venture investment) I have been forced into being a bull, and it's worked out in all three cases.  Since I'm apparently psychotic, I still focus on the bear side of things when it comes to the public markets, but that's probably the subject of extensive psychoanalysis for which I don't have time here.

A Gentler Slope

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Slope of Hope is in its eighth year, which makes it an old-timer in the world of financial blogs. I have written in excess of 10,000 posts here, and over the years we have had many ups and downs together. We've seen people come and go (some departures met with sadness; others with joy). There is a rich tradition and history to this blog, and I'm proud of its popularity and prolific content (as an aside, I'll note that the tweet that is going to be sent out with this post is the 2,500th, which seems like another strange little milestone).

But what I am most proud of is the culture here. I would like to think I have had a big hand in shaping this culture in two ways. One, bluntly stated, is that I believe I am, on the whole, a decent fellow. I try to behave decently, and I try to foment respectful behavior here; and two, the custom comment system on the blog is an invaluable medium and has helped keep the lifestream of the blog – specifically, the thousands of comments shared amongst Slopers every day of the year – flowing.

But I have been doing a lot of soul-searching lately, and I feel I have strayed from my own values with respect to my own behavior. The soaring market of the last four years has left me bruised and more than a little bitter, and I'm afraid that has bled into my own spirit, expressed here. I lash out at public figures. I get angry to a fault. I write things that are poisoned with bad feelings. In short, I want to be decent, but sometimes I do not act decently. I have fallen short of my own standard.

I have been thinking of this a lot lately, and those feelings were augmented this week when I took the
1002-francis time to notice how generous Slopers are with their gratitude to the various contributors on this blog. Someone makes a post, and a whole slew of people offer their thanks. Day after day, they do this. And they do it for no other reason than to show their appreciation.

That is the sort of kind friendliness that I like to see, and my own ugly emotions can sometimes leak into this place, which is a failing on my part. Many of you are probably wondering what on earth I am talking about. I certainly don't rant and rave all day long. But I definitely have my "moments", particularly when things are (ever so briefly!) starting to get bearish in the markets.

To come right to the point, there are plenty enough jerks in the world (I should know; I have been a target of theirs for years), and there's plenty enough bile and hatred. I don't want to be a part of it, and I don't want to add to it. Slope is a friendly place, but sometimes the tone can get ugly, and I fault myself for not only allowing it to happen, but exacerbating the situation myself. This is going to end.

Does this mean that I'm suddenly going to get Bambi-eyed on you and only say nice things about everyone and everything in the world? Not at all. Slope has always been edgy, and that edge is going to stay. Sure, I'll cheer with markets start to slide. Sure, I'll rant about the Fed. Yes, I'll shake my fist with you about the state of the world. I don't like what I see, and I'm going to say it.

But what I'm going to stop doing – and you can you can hold me to this if I slip – is any kind of ad hominem attacks. In other words, I have no problem with railing against institutions or organizations, but if there's another human being involved, I'm going to draw the line. This is strictly for myself; I'm not suggesting censorship here. But I think it'll do my soul some good – – and benefit the culture here as well – – to, frankly, keep things a little more professional.

I'll say again how grateful I am that you are here, and offer my particular appreciation to those who are so generous with their own writing (Springheel Jack, BDI, Ryan, Market Sniper, Mark St. Cyr, Mike, Goatmug, and so many others). I'll be doing a market post later tonight, but it was important to me to get this off my chest. No one asked me to do this. No one sent me an email pointing this out. It simply dawned on me, and I decided on a change for the better. Thanks.

Slope Tweets

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Yesterday I was tweeted this mention that Slope of Hope was in the "Top 100 Tweeters of Palo Alto" (errr, I never knew there was such a thing). Yes, yes, this is the honor all social networkers around the globe strive to attain (ahem). Anyway, I'm beneath TED but above Tesla, so that's pretty cool. In the unlikely event you're not following me yet, it's just a click away! I'm approaching 8,000 users, and today I'll send out my 2,500th tweet. You may purchase whatever celebratory cake that you feel appropriate for this momentous occasion.

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Waiting for a Break (by Springheel Jack)

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Nothing much happened yesterday. SPX delivered an indecision doji on the daily chart that closed at the middle bollinger band for the third straight day, and TLT, TRAN and NDX all essentially traded sideways. There is quite a bit of potentially market-moving news today with the ADP Employment report at 8.30, the ISM Non-Manufacturing Index at 10, and an ECB meeting today. These ECB meetings have been pretty bullish lately, but with the Germans backpedaling in recent days on their earlier support for the ECB's statements that whatever was required to stabilize the Euro would be done, up to and including unlimited money printing by the ECB and direct support of stricken Euro members and their banks, the outcome of that meeting could well be bearish:

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