investors can fix a toilet but they do operate from deep within one. Retail investing’s like a toilet, or Vegas. There’s a whole lot of swirling and ugly going down. Absolutely everybody’s invited, but only the sick or savvy stay.
Everyone else will be promptly flushed out the bottom penniless. The market’s also like a rodeo. The action’s rough with a lot of clowns jumping around. Look at Wells Fargo. A ruthless gang of filthy clowns has been running that rig for years. Clowns talk, some on TV, on CNBC. They all wear makeup, so who knows? Let’s sort it out.
All investors need a clown, oops some help. So which clowns are you listening to? CNBC just turned 30. CNBC’s an entertainment channel built by NBC to sell ads. Investors comprise the target audience. The clowns are content, more or less. Either way, some of what they say is good. The rest is utter rubbish or purely irrelevant. Think David Faber speculating on media mergers, or the truly brilliant Jim Cramer for the thirty minutes prior to kickoff.
We live in a “technical” market now. That’s like a cranky bull with a bad clown fixation. It’s not running, but it’s looking to dart. That means you have to play heads-up and deliberate ball. You can’t dither or toss your money about like before.
Strategy’s good now. Mandatory actually. What’s yours? And who’s got your back? We do, for one. Buying low and selling high is the hope. Yet everyone goes about it in very different ways. Mostly it breaks down to investors and traders. What’s your way? STOCKjAW takes a look at both strategies. We also take a look at listening to opinion. Somebody’s Cranky. Mixed Voices in a Mad Market.
By all means,
have it your way. But it only comes in two. You’re either trading or investing, at any given time. Many do both, but with different positions. There are criminals and cops. Each of those falls somewhere along a continuum. Vehicles and strategies vary, but investors stay longer, and pick up dividends for their trouble. You can bet over a longer period, which in general increasing you odds. Or you can bet shorter, narrowing your odds.
Trading is not television and CNBC is not investing. It’s entertainment, along with some investing nuggets tossed in like chum. When David Faber’s talking media it’s neither television nor investing. It’s obsession, and that’s only sort of about investing. Strategy begins as either long term or short term–trading.
Why talk about any of this? Because clarity pays and confusion costs and this relentlessly technical market will eat the weak and pay only the best executors. Dithering now results in demise by shrapnel.
Traders are obsessive market timers. Long term investors don’t give a damn about market timing, Faber’s media obsession, or technical analysis–except when creating a cost basis. Bad technicals often create good prices. But they are obsessive. Investors stay long and jump out mostly only when the house is on fire. They may use stock or they might use derivatives at first, but only to get in.
Both trading and investing work, but in very different ways. In this market some stocks seem to demand a trading approach. Think T. Over time dedicated traders build a deep knowledge of specific stocks patterns’. They have a stables of favorites they know intimately. The best use bracket orders, thus covering their downside, and setting a profit target.
Traders love puts and calls, or derivatives. Buying stock is expensive. Owning stock is risky. Staying long term means prolonged exposure to market risk, the last thing many traders would ever do. They hate risk. But what they won’t tell you is that 90% of all derivatives expire worthless. They only like profit, and they want it quick, particularly in ways no one else can understand. Complex multi-legged derivative plays are their way. “Straddles,” “strangles,” “put spreads,” etc. It’s market timing. And much like crack, it always begins with some sort of deal.
are telling you that they can get in , and back out, with a gain, over a short period of time. Can you Facebook Live that? That’s timing, any way you film it. They’re also boasting that they can do that sweet trick over and again, like a bowler crashing thunderous strikes with both hands. Is that all? No. Some traders depend on pulling that same act with a host of different stocks. Investors trust in what they buy based on the fundamentals of the underlying business, not a repeating chart pattern.
“Crazy” you say? That’s Alphabet helping the Chinese develop AI after quitting a U.S. government gig doing the exact same thing. How’s that “Don’t Be Evil” motto gonna play after the first AI-directed missile puts a hole in an American aircraft carrier in the South China Sea?
Time is good when you’re looking for a business model to develop. Think Netflix, or Amazon taking over the planet. AWS will in fact be the first socially conscious company to develop cheap hand-cuffs for an Alphabet robot. Some day people will admire them for that. More time unavoidably increases the odds of good models and stories succeeding. Yes, more time means more market risk. Yet what are traders really doing, if not remaining exposed in a sequence? Same thing.
World domination takes time, when you want it legal. That’s why AMZN investors are patient. More time means more opportunity. But on the other hand they are betting that most dogs will bark, eventually. Traders look for a dog about to bark now. Traders are betting that a specific dog will bark soon. And tomorrow they’ll make that same bet again. Traders are additionally attempting to pick barkers out of a crowd, repeatedly.
Research shows that reinvested dividends account for 40% of long term gains. A stock’s share price is adjusted down immediately following payment. Traders miss most dividends because they don’t stay. Investors profit from them when reinvested, even when the share price remains mostly flat because their share count rises. That win also compounds over time.
Listening is a skill. Talking is less so. Who you listen too as a market player matters. Doesn’t matter who you talk at. People say the trick is learning to simply listen, instead of constantly interrupting with meaningless advice. Whether trading or investing, you will need people. Why? What you do matters and troubles only a click away.
Investors in trouble sweat fat bullets behind their desks, while you’ll find deeply troubled traders out on the ledge. Back on Black Friday in ’29, which was actually a Tuesday, both were side-by-side, out on the ledge. Not even psychiatrists attempted to listen to either that day. The helping professions had their own problems. “I’m down 80% now.”
Fund managers talk but don’t listen. Only psychiatrist are paid to listen. They don’t skip work to appear as CNBC though. Money managers don’t appear as TV guests simply to offer us free picks. Watch the dodge and hedge when they’re directly questioned concerning specifically holdings. Money managers are selling. They’re solely on their own side, busy flogging their own “firms.” That’s why it’s called “an industry.” That’s why fees and charges exist. That’s why fees and charges go from you to them. That means you’re down right from your first move. You’re required to pay to get in, every time.
Retail investing operates like a club. You pay a cover charge. You pay right up front, putting you in the hole from the gun. Knowing you strategy and who to trust helps.
Listening to other investors is mandatory. However, listening to others seems like nonsense, when you’ve got your own specific issues. And if you’re holding stock you’ve got “issues” by definition. Listening to stock recommendations is an art. Nonsense rules and financial industry offers the purest variety. How else could the sub-rime meltdown have happened? Someone told a story that others literally bought. What’s the trick then?
This is common sense, but let’s break it down concisely. Job one is unwinding the content. What are those people actually attempting to say? Everybody’s talking and from time to time some are making sense. Right–job two is determining whether the message makes any sense in context. Thus, do they really know what they’re talking about? Can it be verified? Job three is determining if it’s useful for you.
your money. It pays to know who you’re listening to, and what they mean. Jim Cramer is fun, brilliant, and stunningly knowledgeable. Yet he’s now also operating as an entertainer. On a personal level it seems he’s a real estate investor. And why not? The first thirty minutes of the day he will say about anything, and does. Yet during Mad Money he often provides real insight. Good luck attempting to gain any definitive insight during many of his CEO interviews.
People are different, and their ideas and ways differ as well. When a talking head says a stock is a “buy,” do they mean for a trade, or over time? Do they mean using derivatives or stock? How people trade of invest deeply colors their view and thus their “Buys.”
Stephanie Link is a savvy experienced investor, yet who knows? She’s a TV personality too. It’s hard to judge her views, after watching moments like her recent bullish call on the banks during the “Halftime Report.” When her bank call was vigorously challenged she responded with a fevered fast dance featuring “Well, that’s why the banks have out-performed over the last couple of days.” Last couple of days?
We all have to trust someone. Yet who are we listening to, and what do they mean specifically? Only listening over time will tell. Are you listening to a swing trader, an options trader, an investor with an 18-24 month average time horizon, or a Buffet-style long-term investor who might ride something down 30% or hold shares for a decade?
What stocks or sectors are being fetishized? Are they hot on value, or is it growth? We love trend-driven secular growth, aka consumer-facing momentum. Again, think AMZN. Institutions worship at the church of What’s Working Now. They are the mad drivers of furious ocean-wide sector rotations. Thus their recommendation reflect that practice. Most individual investors can’t make that work.
Are the people we listen to really any good at what they do? What do they do, really? We know Fa King nothing about the track records of most so-called analysts.
The market is a Mad Hatter’s tea party, irrational and mostly unpredictable. Shares of fundamentally sound companies are summarily trashed and bashed. Think UNH and healthcare now. Meanwhile disordered stage shows like Tesla move on promises and the charisma of a visionary, rather than execution. People charge in on day one to buy Lyft even after the company plainly states that it may “never achieve profitability.” Remember many IPO buyers are prohibited from flipping shares by agreement.
In the final analysis trust is no substitute for knowledge or experience. No shortcuts exist. Investing is one of the hardest dollars you might ever make. Cons, frauds, and shills lurk around every corner as well as on your screen. Think the utterly horrendous “Online Trading Academy.”
Long term investors don’t cash in on spikes and traders typically miss the huge boost of dividends. Yet both approaches work. Many use both. Some trade T from $29 to $32. Others stay for the dividend, hoping for a return to $35, or more. Any way you slice it, knowing precisely your goal, is the only way to crisp execution.
term investors with time horizons set in years face far better odds. Investing is easier than trading. Yet it requires diversifying, reinvesting dividends, continually upgrading knowledge, and steadily maintaining a current grip on shifting market conditions. In fact, history continues to be on your side, and so are we. And it will still be the hardest dollar you ever earned. It’s like a video game without boundaries, where the points are real.