WHY THE SYSTEM WORKS (From Chapter 12 of my book)

A check of the share price of Campbell Resources (spreadsheet next page) shows it has declined from the original \$ 6 a share to \$ 2.37 a share or a 61% drop. Thus a lump sum investor (all money is in stock) if he had invested the same total amount of money you had (\$35,000), would have lost 61% and the \$35,000 investment would have lost \$21,350 and be worth \$13,650 in November 1987. Compare that to what your investment is now worth. Your portfolio is worth \$48,610; quite good for a stock that may be a total disaster. You're ahead \$13,610 or 38.8%. How did we do it? What's the trick? Why does the system work?

I was curious myself and so I started investigating. A review of the buy/sell chart at the end of the chapter shows that your average buy price (excluding initial buy) was \$ 1.35. Your average sell price was \$ 1.95. Thus, you made 60 cents per share profit on every share sold.

You sold 13,094 X .60 = \$7,856.40.

Some profit comes from interest earned on the cash balance (add column 10) = \$1,120. The rest of the profit comes from the increase in value of your remaining shares from what you paid for them. I won't give all the details but will show you a couple of examples: you buy 5,771 shares at \$.94 each and 5,291 shares at \$.87 each. As of September 1987, the share price is \$2.37. Each of the 5,771 shares is worth \$1.43 more than what you paid for it or 5,771 X \$1.43 = \$8,252 more. Each of the 5,291 shares is worth \$1.50 more than you paid for it or 5,291 X \$1.50 = \$7,937 more. If you check the buy sheet, you'll see other months where you bought stock for less than the current \$2.37 share price.

When you see that you can make money on a stock that drops 61% below your original purchase price, you know you have a really amazing system. Of course you had to have a fairly tough attitude to hang in there and put that extra \$25,000 into the stock. Think of the profits if Campbell Resources merely goes back to its original selling price. Or if you decide to get out, sell out; you can sell all your shares, take your profit and get into another stock. The choice is yours.

In the book you will see all the buys and sells and find that the average selling price for many thousands of shares was \$1.95 while the average buying price was \$1.35 - so you made a profit of 60 cents on many thousands of shares you sold.

Author's Bio:

I was born on Friday the 13th a long time ago in a far away galaxy. I went to Catholic grade and high school.

My first published article appeared in the July, 1965 issue of Railroad Model Craftsman magazine for model train hobbyists. I was 17 years old.

I totally confused my parents in New Jersey and went to college at the University of Arizona - had never been further west than Philadelphia. Got a degree in History & Governemnt and started law school. Interrupted by the Nixon lotto when I drafted into the Army in 1970. After two amazing years (in Vol. 2 of my autobiography), I went back to law school. Finished 1 1/2 years of law school (guess I'm a half-assed lawyer) and worked for the City of Tucson in the City Clerk's office. Then weirdly got hired as a Park Ranger out of the blue (also somewhere in the autobiography of 3 volumes.

Then the Park Rangers were disbanded (Jim Ronstadt, Linda's brother needed \$250,000 to repair his new wiped out golf course) so I headed to Las Vegas to make my living betting on baseball games (I had a system!) Of that didn't work (see why my autobiography is aptly titled "My Only Crime Was Being Born"?

So I went back to college at the University of Nevada-Las Vegas and got a second degree in Accounting.

Since then I have been an auditor with the US Army and now the Air Force written audit reports for over 30 years, living for 17 years in Belgium, Germany, Korea & Japan. I first wrote my book in the 1987 in Seoul, Korea. I have extensively revised and improved my investing book since then. Also I have written my own newsletter showing the best stocks for my book for over 15 years.

I have also written a weekly column for the Talking Points newsletter for over one year entitled Contrarian Corner.