Page 108

It's largely a question of term or time. But you can't go for too long a term, as fundamentals DO change over some term, and value does too therefore. So only quirks I'd look to "correct" are shorter term than the terms over which fundamentals can be perceived to change. So I'd be looking for excessive behavior. But not knowing how much the fundamental components are justified, I can't know if there's excess.

It would seem like a 300 pt drop in 2 days in DOW would be excessive, but it's done 600. You can't tell when to buy on drop because excess may go to even more excess. After all, it's EXCESS. Nothing exceeds like excess!

3:45 Drive to Laguna. Decide what to do

4:15 Start walk on beach, tinking about the market stuff.

Interestingly, on this beach 6 years ago, I decided how to work out a plan to go to Microsoft and that I made decision then that made me poorer now by as much as I've lost yesterday, getting [whited out] shares + $[whited out], instead of [whited out] sh and $[whited out].

And thought about my decision not to sell because I would lose the gains to paying taxes. But where's the breakeven? If I had sold at 72, then I'd have kept 48. ws - shares A.T. Now I had said that I couldn't do that since I didn't know of any investment that would increase more than 40% (to offset the taxes) than MS would increase.

Well, I guess I wasn't considering just holding cash, and the possibility that MS could plummet. Effectively, this means that MS would have to decrease such that cash was worth 40% more, ie, MS would have to decrease 30%, to make the sell strategy worthwhile, ie, make holding MS not as good a deal.

But anyway, the unlikely has happened. Am I any worse off then? I had two choices which I viewed as equivalent:

A) Hold MS stock

b) Sell MS stock, pay taxes, and wait for MS stock to slump, or invest in something better than MS.

Well I guess the idea of MS stock slumping never crossed my mind.