* At the bottom, there is maximum negative, and no positive, information, but the price risk is minimal. (p 36). . . The price risk--because selling is exhausted--has been taken out of the stock, even though we have total information risk.... At the moment of maximum information risk, the price risk is mininal.
* The more information that becomes available, the greater the price risk because the stock has already risen (p. 42). . . Thus at the point of maximum positive information we also have maximum price risk.
* Time risk is alwasy present for those who are over anxious to bottom-fish.What does eventually turn out to be the bottom eighth--in hindsight--is a high-risk place to buy a stock. (p. 34)
Friday, January 23, 2009
The Nature of Risk Part Two
Justin Mamis's book, The Nature of Risk, is now on my 'must recommend' list for new investors. I'm not longer a new investor, but I sure learned plenty from it. There is a mosaic of points that he makes about time, price and information risk that is so cogently said, that I've not considered them together in such a way. Consider these points. . .