danish

The Wisdom of Half Positions

I don't believe any wisdom in half position. Why not a quarter or a third. The idea is to maximize ones profit. So, as they say let the profits run and cut the losses short. Neither of these goals will be accomplished by reducing the position size. In fact by closely monitoring the price and watching the charts one may even consider adding to a profitable positions.

On occasions it may become necessary to repair a position that has gone bad due to a sudden change in the markets. A good example for this is the shipping sector and in particular DRYS. Say you had 200 shares purchased at $50 and the price suddenly dropped and you missed the opportunity to sell them at a decent price. You could have bought 600 shared at $4.00 for $2400 effectively reducing your average cost to $15.50. The price subsequently went back up to near $18.00 and one could have recovered from the loss plus a small profit.

Iceland's Best-Laid Plans Fall Apart

No. Don't blame accounting systems. Double entry accounting has worked for centuires, and will keep track of the $80 interest receivable which is a book keeping entry. The borrower of $1000 loan is expected to have produced collateral for the loan and to have a business plan to use this money to trade and to make far more than $80 in earnings to repay the loan and to take his share of profit. The bank must have known this. All that is hepenning here in simple terms is that the collateral collapsed and the $1000 receiveable has turned into a bad debt and must be written off. So if the bank did not have enough provisions for bad debt then the bank is doomed to fail. In fact, thanks to accounting systems that opened up the can of worms.