I heard the news this morning regarding Acer's purchase of Gateway and I just couldn't resist. I am not trying to rub salt in the wounds of Gateway investors (there's that word again). I just thought that if a picture is worth a thousand words then this one has got to be worth at least that if not more. Do you think Pompom television (CNBC) will show you this chart ! NO ! They will tell you that Gateway(GTW) is up $0.60 to a 1.80 up a whopping 50%. Do you not love selective, tout reporting. Just like they are doing to Cisco right now. What is the lesson to be learned here from the 97.8% decline? Was it that maybe the dips were not actually buying opportunities but warnings screaming sell? Or maybe that things really were NOT different this time. Or possible that the analysts had absolutely no clue as to what was going on?
Please look at this chart of Gateway the next time some analyst is on TV touting the latest hot fad like beanie babies, hoola hoops or Crocs. (speaking of which see chart top). The minute things go south they will re-iterate their buy ratings, maintain that this is buying opportunity, blah, blah, blah only to abandon you in the end, leaving YOU holding the bag. The chart above clearly shows the perils of AVERAGING DOWN. Ask the many Gateway holders who averaged down how they feel now about this strategy even with this glorious buyout from Acer. I will repeat here again, losers average their losers. Don't fall into the myth perpetuated by sales and commission driven Wall Street, averaging down is a guaranteed ticket to the poor house. I cannot say it any clearer than that. To the doubters out there of which there are many, I suggested reading up on Nick Leeson from Barings fame for empirical evidence on this issue. Good trading to you all.