Regarding Stock Market Capitulation
Q: I see that Tesla Motors was down to $148 yesterday (written on Feb 9.) from $211 on January 8, 2016 when you placed it on your short list. That comes out to a 60% rate of return on a retail margin for short selling of 50% in less than a month. On the other hand, we’ve been waiting for you to call the low in the gold market for 10 months now, and you haven’t recommended any trades during that time. Many of us have clients who are looking for good long term investments. Could you help us in that regard?
A: I do not control the stock or gold market. You waited 10 months for the TSLA trade too. Overtrading is a major cause of portfolio performance mediocrity. The only secure long term investment I can recommend is your education and skills improvement. It is the one thing no one can take from you.
Q: Are you opposed to long-term investment in financial assets?
A: Yes, I am. I do not think it is possible. Income can be derived from land, salary or compensation for services, rents, and entrepreneurial activity. Only the entrepreneurial activity of someone like Steve Jobs makes extraordinary profits possible, certainly not salary or rents. Land values can fluctuate significantly and therefore provide an opportunity for speculative profits. Entrepreneurial activity is also based on the ability to predict future demand and means investing now to reap future profit. It is a pure speculation. All market profit is a function of being able to predict the future and make adjustments now to reap the reward later.
If you want a market profit, you must speculate or obtain the services of someone who does. All the rest is just a living.
Q: How does short selling fit into this?
A: It is a speculation to the downside. It starts off with a reverse value investing analysis. The big advantage short selling has over normal value investing is that picking losers is easier than picking the next Steve Jobs. There are more of them. They all have a distinctive odor. They all engage in lying. Anyone trained in cross examination can tell after a five-minute discussion with management. It all depends on good detective work.
Q: Is there a way to know for sure?
A: Yes, if you know that the person running the show is massively short. If you know that the company’s CFO has removed all the cash from company bank accounts and bought one-way tickets for himself and the head bookkeeper to a country that doesn’t permit extradition, it’s a good short sell for sure.
Q: Would that make it 100%?
A: No, no such thing. Over the 40 years or so that I’ve been doing this, substantially more than 95% of the short sell candidates have gone out of business or were radically reorganized within 3 to 5 years. But, I’m reminded of what happened after the first Arab oil embargo when oil went from $2 a barrel to over $10. Stock promoters on the Vancouver Exchange, now closed, had been buying worthless gas and oil properties next to producing fields for years. They would put these worthless properties into shell companies registered on the exchange and sell the stock as a way to scam investors. It was never a part of the stock promoters’ plan to run a legitimate oil and gas company. But, when the price of oil increased dramatically, the promoters suddenly found themselves with economically viable companies. For some that was a problem because they were short the companies’ shares. So, anything is possible.
[box type=”alert” style=”rounded” border=”full”]Currently, every stock exchange, in every country, is experiencing a total Stock Market Capitulation![/box]
For more information on the Fixed System and a free white paper, click here.
And yes, it is possible to turn 10K into 5.5m in less than a year trading futures and options.
And yes, Carthage must be destroyed
Photo credit: griffithchris via VisualHunt / CC BY
Leave a Reply