It is hard for me to believe that Mr. Cook has written this as it is his first-ever post, but I will respond as if it is he who wrote it.

I appreciate his putting his "selling" comments into context.

Maybe his readers cannot actually read very well as they hammered both GEL and another stock, CTG, brought to my attention my one of his readers, despite the newsletter warning (as in Mr. Cook's post) that this is unnecessary at best and foolish at worst.

I am also not sure what this three-day rule actually means.

I will assume that it is at least reasonable to believe that he bought shares in GEL prior to his comments that rocketed the stock, something that would be completely fair to all involved.

Since he states that the newsletter reflects the stocks that he owns, I also assume that he was not at his computer at 9:30 a.m. the day after the GEL comments with his close friends, wife and children all at their respective computers frantically trying to be the first person to buy the stock before his voracious readers ran the stock up like a rocket.

There is nothing unethical for him to buy the stock in the process of analyzing the company.

There is also nothing unethical about selling into the massive run created by the newsletter, even if his readers are the buyers, especially if they were specifically told not to behave they had to complete their positions by 9:35 that morning.

In any case, if he didn't sell as it rocketed up, I do not know why, but I did sell into that, partially because I did not realize at the time why it was running for no apparent reason.

In fact, I am not sure what thought-processes would take place for him to watch the stock run from 37 to 75 cents and not realize that if 37 cents was a reasonable price...and 27 cents just a few days earlier...then 75 was certainly not...and react appropriately and ethically, and sell some or even a great deal of his shares.

But I have no way of knowing what he actually did.

He seems to tell his readers not to buy or sell like this, so if they do, that is their problem.

If he bought shares prior to his comments and sold shares after the newsletter, this is his business, not mine, and again, not an unethical transaction.

If he did do this, then fine.

If he didn't do this, then also fine. 

 

He didn't wake up one morning and decide GEL was a buy, but in the process from "Who-The-Heck-Is-GEL" to "GEL-Is-A-Buy", he might have bought himself a very good position

And if he did do this, I see nothing unethical, but he may have been well positioned prior to his comments, which is as much of my business as what I had for breakfast is his.

The important issue...the critical issue for me..is whether Mr. Cook writes honestly about a company when he puts it in his newsletter, and although I don't have enough knowledge to comment on this, I know many large and sophisticated brokers, and not one has anything negative to say about his intentions or ability...not one word.

So, he writes solely what is in the best interests of his readers, but that doesn't stop him from trading as he sees fit.

In fact, my main broker was sufficiently aware of Mr. Cook and his integrity that I bought several hundred thousand shares of CTG this week, and have instructed him to contact the company with some questions to see whether I should increase this small position.

And this does not mean that I think I can analyze stocks better than Mr. Cook, but the stock is down 60% from a very-recent high, so maybe even if Mr. Cook is correct about his concerns, I am buying at a 60% discount from a few weeks ago.

In addition, CTG is almost 80% below his original 'buy' comments of 76 cents a share (the 76-cent figure is according to one of his readers, which I hope is correct).  

I assume the three-day rule applies to only the stock that he has not yet sold on the day of his 'selling' comments, as this is logically true, so there is no alternative.

But given the lemming-like behaviour of his readers, he might have sold some, most, or virtually all his stock prior to his comments, leaving him little to sell after his newsletter reached people's in-boxes at 2:00 pm on a Wednesday or early some Friday morning or whenever he chooses to sent it.

So, without knowing what he has sold prior to his comments, the degree his "sacrifices" himself at the altar of his three-day rule is impossible to understand.

However, if he chose to sell virtually every share prior to his 'sell' comments, then that is up to him.

In looking at the CTG stock brought to my attention last week, anyone could have sold hundreds of thousands shares in the 40-plus cent level in the days and weeks prior to his newsletter with the 'selling' comment.

Not only am I suggesting that he is under no ethical obligation to hold onto most of his shares of CTG (or GEL) in the days and weeks leading up to his 'selling' comments, I would also suggest that he is ethically-bound to sell them in this lead-up time, a sentiment so strong that Mr. Cook may not share this position with me.

If I am the family stock-guru, and I post buy recommendation on the family facebook page, but my pesky, not-too-bright, and much-too-rich sister's husband in Guangzhou goes out the day after I suggest he start to slowly accumulate GEL shares and runs the stock up 100%, I would only need to see this once before I would buy my own shares before I told him.

In fact, I would sell him my shares at 70 cents and then phone him and say, "How many times do I have to tell you that I said to judiciously accumulate GEL shares, not double the stock by 9:35 that day! I sold you my shares, and if you plan to be such a stupid buyer next time, I will sell them to you again"

The same is true on the sell side.

If Mr. Cook is married and has a family, then he has an obligation to provide for them that supersedes (in my opinion) his obligation to sacrifice himself at the lemming-like behaviour of his readers.

If he has doubts about CTG, then holding onto all his shares in the weeks or months prior to his sell comments is not something that I understand.

Knowing that judicious comments not to crash -or double- a stock like GEL and CTG will not be heeded, then I believe that there is an ethical obligation to protect his own financial position for the sake of his family.

Again, Mr. Cook may disagree with me and behave differently, but that is up to him.

How many times do I have to write my brother-in-law in Guangzhou telling him to slowly and carefully sell a stock like GEL or CTG only to see them cut in half in hours because he hits every bid out there, before I feel I have an actual moral obligation to my wife and children to sell my shares before I call him?

Whether Mr. Cook sells most of his positions prior to his 'sell' comments is something that I don't know, but I believe there is no reason why he should not do so freely if he so wishes.

If he disagrees with me, then he can hold onto as many shares as he likes. 

And even further than this, I am suggesting that, knowing the behaviour of his readers -despite his cautions- he has some ethical obligation to his family to sell his shares prior to his 'sell' (or 'buy') comments...again, thoughts or actions that Mr. Cook may not share with me.

But without knowing his policy prior his three-day hold period, then I am not sure what this really means.

If it means that he is free to sell all that he wants up to the day he publishes his comments, then this is different than if it means that for a reasonable -but substantial- period before his 'sell' comments, he does not sell even against his own concerns about that particular stock, in addition to the known and deleterious effect that his sell comments may have regardless of the cautions to his readers. 

But I believe that the proper and most ethical position when faced with a mad crowd of irrational stampeding people is to get the heck out of the way before you get killed, and I can find no moral argument against anyone who does.

 

Sam