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November 4, 1999

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Subject:  Psychology of Traders vs LTB&Hers...
Author:  nole1

From time to time on this board and others, you see a post that says something to the effect of "don't fall in love with a stock, it's all about making money". This got me to thinking about those who "fall in love with a stock" and those who skip around, trading stocks like Don Juan traded lovers. The more I thought about this Yin and Yang of investor mentality, the more I thought about the posts we read every day and how these are affected by this outlook. In fact, I would imagine most people have a little bit of both in them, even if they are predominantly of one type....

Even so, there is a stark contrast between the mentality of stock traders vs long term buy and holders (LTB&Hers). The trader tends to rely more on charts; the LTB&Her tends to rely more on 10Qs and company fundamentals. The trader's motto is "the trend is your friend", the LTB&Her's is "Buy a good company and don't sell it unless the fundamental reason you bought it has changed". The trader uses the stock as a commodity to try and get a short term gain (or loss for a short) and move on. The LTB&Her tends to feel more like the stock represents ownership in the company.

"When you see people who are frustrated with the stock price ... you are seeing the trader mentality in that poster."

Why am I stating the obvious? Well, I think it helps to sort out the posts here into these two groups to get a better perspective of what's actually being said. In my own case, I try to state when I'm switching gears into my different modes, as I hold part of my portfolio long term, yet generally have "trading shares" set aside when I think there's a good opportunity.

When you see people who are frustrated with the stock price, even though the company is doing well and nothing has changed in the fundamentals, you are seeing the trader mentality in that poster. Of course, the longer a stock price stays in the doldrums, the more people will start to show that impatience. It's human nature.

When people post something bad about a company and are immediately attacked from all sides by posters on that board, you are seeing a reaction by the LTB&Her mentality. Some call it "falling in love with a stock", but in reality, these people are part owners of that company. Attack the company and you attack them, personally, since after looking at thousands of possibilities they chose to put their hard earned money in that company!

With Excite@Home, this brings us to the Forced Access or Open Access debate. Those who call it Forced Access and defend the "investment of billions of dollars in infrastructure and the right to make a return off of that investment" are actually part owners in the company that made those investment decisions, so it's only logical to assume that's how they feel.

"As long as we understand why people act the way we do, it's much easier to take."

On the other side of the coin, AOL LTB&Hers feel that their company should have access to the cable pipe for the same reason. Their choice of investment has integrally bound in it that open access to pipes is what made the internet what it is today and has made the company they're part owner of, AOL, what it is today. That another company would have the audacity to close their pipes in AOL's face is somewhat of an affront to them, personally.

That's why, when a poster who invests in either AOL or ATHM goes to the other's board, they are often greeted as an arch rival football team who's playing away. There are a number of people who invest in both stocks, but most of them have a larger position in the one they "believe in" and a smaller position in the other as a hedge, in case they are wrong.

As long as we understand why people act the way we do, it's much easier to take. I encourage people from both ATHM and AOL boards to come to the other for a bit of perspective. But, please, when you're at the other board, please be respectful that many there are owners in that company and may take an insult to that company personally.

Scott (nole1)