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Subject:  Dell’s Bonds Date:  1/25/2013  10:21 AM
Author:  globalist2013 Number:  34722 of 35576

No doubt you’ve been tracking Dell’s bonds, because that’s what those who are serious about their bond investing do. They track bond prices daily, and they make their moves (to buy or to sell) when conditions are favorable. "What constitutes “a favorable move”? I’m glad you asked, grasshopper, and the intention of this post is to provide some thoughts on the matter.

The advice given to stock traders is to “never, ever average down”, and there’s good arguments for not doing so, not the least of which is that ‘averaging down’ is a highly speculative technique that is going to fail more often than not. In other words, it’s a dumb way to make bets. ‘Averaging up', OTOH, is highly thought of. In adding to your position, you’re betting on a known winner. Your average entry-costs are going to be higher. But the likelihood of making a profit on the position has also increased. So, that’s the trade-off you’re making. You can choose to try to get in cheaply, thus lowering your price-risk but at the cost of accepting greater information-risk. One, or the other? You can’t have *both* low price-risk *and* low information-risk. You've gotta choose.

Now, let’s consider Dell’s bonds. What’s the direction of prices? If you’ve been tracking their bonds --as you should have been doing-- you’ll know that prices a