Ascend Communications February 15, 1996February 6, 2017 Welcome to my “daily comment.” The ground rules Ceres and I have agreed to are simple. I can write whatever I want, ranging from a sentence to an epic. I can even say things like, “Don’t trade stocks yourself — no matter how cheap the commissions. For most people, it’s smarter to invest through no-load mutual funds.” Which it is (though it may be less fun). I spoke with my broker about buying puts on Ascend Communications, one of the many Internet companies I know nothing about — except that it has something like 110 million shares outstanding, each of which, when I called, was selling for $38 each, up from $5 last year. That gives the company a nearly $5 billion valuation ($38 times 110 million shares), which may be cheap for all I know — maybe a fair price would really be $15 billion, or $30 billion, in which case the stock has a lot of room to climb. But $30 billion is the approximate value of all the publicly traded companies in the entire country of Russia, including some pretty hefty oil companies, and as between owning all of Russia or all of Ascend Communications, I guess I’d go for Russia. It’s risky, but then so are emerging technology stocks. The point of all this is not to knock Ascend — believe me, I’ve lost a lot of money shorting stocks I knew nothing about, and Ascend may well be another that just keeps rising. Rather, the point is to tell you what my broker said when asked him his thoughts on the stock. “I don’t want you to think I’m stupid,” he said — we’ve been friends for 20-odd years by now, so, no, I don’t think he’s stupid — “but I don’t look at the kind of stuff you do.” Like earnings and valuations and fundamentals. “I like to buy stocks when they’re going up and short them when they’re going down.” Ascend was obviously going up, so it wasn’t the sort of stock he’d consider shorting. Indeed, I suspect that now that I had brought this craziness to his attention, he was silently contemplating purchase. What kind of nut would buy Ascend at prices like these? Well, my broker, for one. And do you know what? I fear he has done at least as well with his method as I have with mine. I have the self-righteous satisfaction of being “right” about some of these things — for example, I was “right” to short US Surgical at 60, because it was overpriced (only to watch it hit $134 before dropping back to $18). But he made a lot more money than I did. It was going up, so he bought some. Tomorrow: College Loans