This is hilarious. Buy at 3.15 just b/c it's trading below its book value? You can't be serious?? I seem to recall Bear Stearns's book value somewhere around the neighborhood of $84/share around early November of last year, and yet how low did it go? Exactly! Do you have any idea that you are engaging in a classic boiler room operation called the Pump and Dump strategy buddy- with absolutely no analysis, and given the super low volume and small market cap of this stock it has got the signs of ill-formed connotation on the intent of your postings, and thus your desire to keep this thread running.

Now before you get all feverish let me try to clarify a few of your misunderstandings in my earlier post, and albeit I do not have a lot of time today I am going to give you some background into the world of how professional money managers PROPERLY manage their financial assets.

First off, a little synopsis on your approach: 

Everyone has the right to invest in the capital markets as they well damn please- you included. If your financial investment philosophy has worked for you thus far, and continue to prosper- that's great. No one is discrediting you for your investment behavior (of course, this is exclusive of your pump and dump strategy above). However, what is evident is that you terribly lack sound investment judgement based on solid fundamental techniques that many seasoned individual investors and professional money managers are accustomed to. Granted you argue that you are a small-time player and do not have a huge portfolio, but that still does NOT mean you should bet all your eggs in one basket (when you see the futures go up by 200 points one morning for example). Let the truth be told that you would be better off in Las Vegas. This, of course, is a critique on your investment strategy, but no reason to get overly furious and hasty- after all, you do not have to read a word of what I have to say- ignore if you like. I am sure that others who are testing the waters in the ocean of capitalism will appreciate the commentary.

A two-liner on my investment philosophy:

Over the years, as an investor and a recent buy-side investment analyst for a big cap fund this is something I live by: be very cautious of the downside movement because upside will take care of itself. Preservation of capital (unlike the capital appreciation) is of absolute importance to me. I can bear to watch my portfolio not beat the S&P 500 index in any given year, but having a negative return is unforgivable. When you hedge your downside risk (risk-arbitrage) you minimize the downward spiral. This is most likely to return your results being skewed toward the black on your books.        

So, now let's answer some of your questions, shall we?

Diversification works if you are trying to protect your capital but does not work if your main goal is capital appreciation.

As a speculator (and not an investor) your attempt to get-rich-quick scheme is not going to work. If you lose 80% of your assets because you gambled how in the world are you going to see your capital appreciate. I suppose you like to believe all stocks eventually go up.

Where did you get the idea that diversification will provide above averge returns in the long run? I'd like to see that. If the portfolio is diversified properly and has a portfolio beta of 1, then it will perform exactly like the market--no better no worse.If you use 3% of your portfolio on 1 stock, then you'll have 33 stocks in the portfolio and that does not provide the necessary diversification. That's what my professor told us in the portfolio management class.

Good question. There is a lot to be said here- and b/c of sake of time I am going to be very succinct. Diversification does not mean that you invest in broad indexes- if S&P 500 (as a benchmark) has a beta of 1 we can compare this against individual firms which may have a beta greater than 1 (this can be easily done using a financial history database like COMPUSTAT or Bloomberg). Then you plug this into your model given the criteria you set, for example:

-risk free rate (US treasury bill will do)
-associated risk (standard deviation of the equity)   
-arithmetic average of past returns
-past earnings growth (inclusive of dividends)
-alpha
-financial ratios
-others, etc..

And out pops the risk premium, which is the rate you expect this stock to perform relative to the benchmark. The above model is very proprietary and varies quite distinctively. So, to answer your question- I may pick a stock with the risk premium higher than the index, but comfortable enough with the associated risk (i.e. optimal risky portfolio in academia) all while concentrating in several sectors- telecom, pharmaceuticals, biotech, internet, financials, etc. There is also asset allocation step here where a different model applies (I will omit this one for the sake of brevity) And so, this is diversification. The best of money managers know how to tweak this model depending on current market conditions- and their chances of beating the index is increased by the risk-arbitrage position they take, which I have not even talked about (won't do so as I don't have the time).

Anyway, if you are not convinced I suggest you go on with your Pump and Dump scheme (others- be aware!) And BTW you have got to have a lot of balls to call someone a commie in this country. But as frustrated as you might be with your performance I do not think it will worthwhile for me to call you any names. You are at the mercy of your own disposition buddy.

JB