Tag Archive: Buy Side


Pass the Maalox!

The Dow lost 651 points on Xmas Eve.

The Dow gained a record 1,066 points the day after Christmas.

The Dow lost 611 points Thursday morning only to finish up 260 points in the very same afternoon.

What’s the lesson for retail investors competing in an unfair market?

Don’t go all wobbly over the Dow Jones.

More to the point: Never panic.

And let’s not forget: Don’t morph into Gloomy Gus or Negative Nancy when the market gyrates downward.

Just as important, never become a Pollyanna when the markets surge. Stay grounded.

Since October 3, the ever-downward market psychology has resulted in traders selling the rallies as opposed to buying the dips.

Buy Low, Sell High has been redefined … at least for now.

Algos Giveth; Algos Taketh Away

Almost DailyBrett clearly recognizes the Wall Street playing field is not level; it tilts downward to the “institutions,” the Buy-Side and the Sell-Side traders.

Similar to Oakland Athletics general manager Billy Beane (played by Brad Pitt) in “Money Ball,” the Charles Schwab retail investor (e.g., me) is competing in an unfair game.

Isn’t the easy solution to simple not invest in Wall Street, stick your money in a bank with pathetic interest rates or maybe even under the mattress?

Having said all of the above, the markets remain the choice investment vehicle for the 54 percent of Americans who constitute the Investor Class. These optimists about America’s future devote discretionary revenues in stocks and stock based mutual funds to pay for retirement, health care, children’s education or that dream vacation.

There is a ton of advice out there about taming the markets – some counsel is sound, other “advice” is dubious.

What is the humble advice from Almost DailyBrett, who has invested in markets for 25 years and who taught Corporate Communications and Investor Relations at two major universities?

There are Bulls. There are Bears. And Pigs Get Slaughtered

 “Know what you own, and know why you own it.” – Investor Peter Lynch

  • Your author believes in building your own mutual fund, instead of always paying a fee for someone else (e.g., Fidelity) to manage your money. And when you do structure your very own mutual fund make sure you know why you own each stock (thank you Peter), and make sure you diversify these holdings (everything can’t be tech).

For example, Almost DailyBrett presently owns Apple, McDonald’s, Nike and Salesforce; just sold Boeing. Two are differing tech stocks, one feeds 1 percent of the world each day, and the swoosh just does it as the leader in athletic apparel.

  • Passive investing is a loser. Building wealth is work. Far too many just purchase mutual funds at work through pensions and 401Ks or IRAs at home and literally forget about them. Really? This is your money. What is being done with your money? What are your returns? Forget passive. Be active.
  • Use or consume the product/service of the companies you own (i.e., Apple iPhones, McDonald’s Big Macs, Nike running shoes …). Understand very clearly how a company makes money. If you can’t comprehend why shares are increasing (e.g., Bitcoin), don’t invest. There is a world of difference between investing and gambling.
  • The harder mental gymnastics is not when to buy, but when to sell. Think of it this way: On Wall Street, there are bulls, there are bears … and pigs get slaughtered. Set upside-and-downside sell targets for your stocks. When they reach these points, ring the register. Sure wish your author always followed his own advice.
  • Accept the algorithms. The big institutions (not you) have pre-programmed servers with instruction algorithms that automatically to the nanosecond buy or sell large blocks of stocks whenever certain market price points are triggered. The game is not fair. Accept it.
  • For the longest time the bulls have been running (e.g., November 2016 – October 2018), and corresponding market psychology has been optimistic (bad news discounted). Since the start of the bear market on October 3, the psychology has dramatically shifted to the negative (good news is irrelevant). If you invest, you will experience both moods.
  • Most of all: Don’t panic. Stay active. Remain calm. Sometimes strategic retreat is necessary. Sell underperformers and convert to liquid. Cash is always king. There will be a bottom. There will be a day to buy low with the hopes of selling high.
  • Know your level of risk. If you can’t accept gaining $10,000 one day, and giving $9,000 back in the next day (a $1,000 gain for those scoring at home), you shouldn’t be investing in markets. Pathetic bank interest rates or under the mattress is right for you.

Yes there will be a day when it is time to buy the dip, while those who try to sell the rally end up losing their … fill in the blank.

Investing without research is like playing stud poker and never looking at the cards.” – Über-investor and former Fidelity Magellan Fund manager Peter Lynch

peterlynch1

Couldn’t help but note Lynch’s gambling metaphor when it comes to investing in global markets.

There are many who absolutely contend, and will not be convinced otherwise, that investing in Wall Street is nothing more and nothing less than gambling. They even talk about playing the market.

Are the Manhattan-based NYSE and the NASDAQ stock markets, Las Vegas East?

Or is Las Vegas, Wall Street West?

Can’t say the author of Almost DailyBrett is an expert about either gambling (never been to Lost Wages) or investing, but I do know enough about Wall Street to be dangerous.

And based upon this finite knowledge, let me proclaim IMHO: Investing in Wall Street is not gambling, provided that you do your homework, and as Peter Lynch has stated, “Invest in what you know.”

Strategic Business/Financial Communications

The academic paper for my M.A. project at the University of Oregon School of Journalism and Communication provided the backdrop for the creation of an upper division college course: Strategic Business/Financial Communications. I was privileged to teach the course that I created.

Many students thought that Strategic Business was a math class. Ahh … I flunked geometry in high school. Screw the Pythagorean Theorem. Yours (left-brain challenged) truly cannot and will not ever teach a math class. Instead, communications’ students learned a new language – speaking, writing, hearing, reading – the lexicon of Wall Street.

There is a reason why financial communications/investor relations are easily the highest compensated segments of the public relations profession. According to Salary.com, IR directors received in the range of $97,753 to $201,565 annually in 2013. Corporate PR directors received $86,469 to $167,836 in the same year.

This is serious money, not including stock purchase plans and options. And why is that? Both jobs demand qualitative excellence (e.g., developing relationships with analysts, investors, reporters, employees) and quantitative skills (e.g., reading income statements, balance sheets and cash-flow statements).

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Which brings us back to the point as to why Wall Street is investing and not gambling. The answer lies with responding to a basic question: How does a company make money?

Microsoft sells software and video game consoles. Boeing produces airplanes. Google is the No. 1 search engine. Apple is Macs, iPods, iPhones and iPads. Nike makes athletic shoes. Amazon is the No. 1 digital retailer etc.

And backing up the answer to these questions is a plethora of facts, figures and information. Looking up a stock on Yahoo Finance, CNBC, Wall Street Journal, Reuters, MarketWatch.com, The Street.com and others is the easy part.

There are also the aforementioned income statements (revenues and net income…there is a major top-line and bottom-line difference), balance sheets (assets and liabilities), CEO letters, annual reports, analyst reports and more. The sheer volume of this data can be overwhelming, but it is all there, free of charge.

Leading or Trailing Indicator?

“ … Don’t care where a stock has been, only where it’s going.” – CNBC Mad Money Jim Cramer.

Cramer is fond of stating that he really does not care about a stock’s past, only its future. That answers the leading vs. trailing indicator question. Stock prices are an indicator of the expected/anticipated/projected/forecasted upward or downward direction of a company’s business prospects.

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How do we know whether a company is doing well or not? Certainly there are oodles of information online, maybe even too much data. There is also your personal experience.

Ever observe the perpetual line out the door at Starbucks as people queue to pay $4.00 for that overpriced grande mocha with no whip.

Ever notice that Southwest Airlines only offers peanuts and a soda; you can choose your own seat; the airline only flies Boeing 737s; and the flight attendants are actually Pharrell Williams Happy?

Ever note the high prices, superior quality, commitment to service and high-traffic stores at Nordstrom?

And did you ever wonder about all the hoopla about “The Cloud” or the access of Big Data contained in mega servers and offered in manageable chunks by a company such as Salesforce.com?

When one mentions “Hog,” your mind may conjure a barnyard or you may think about high-performance, big muscle motorcycles. Want to invest in one of the country’s great comeback stories? Just enter NYSE: HOG or Harley Davidson into the search engine.

“The House Always Wins”

When one is mathematically challenged, it is best to stay away from Texas hold-em or the black-jack table. Can’t tell you how many times I have heard the phrase: “The House always wins.”

wallstreetgambling

That’s not to say that there are not legitimate complaints about Wall Street, particularly as it applies to executive compensation for underperforming CEOs. And there are those who contend the market is rigged against the little guy, the retail investor.

There is no doubt that cash is king. And the buy-side (e.g., PERS, Fidelity, Putnam) and the sell-side (e.g., Goldman Sachs, Morgan Stanley, J.P. Morgan) own the lion’s share of company shares. The respective analysts for these investment houses naturally draw the most attention from publicly traded company execs.

Having said all of the above, there are still opportunities for the retail (e.g. Charles Schwab, eTrade, TD Waterhouse) investors. The time-tested tenets of diversification, doing your homework, know who you are buying and why, still apply.

Sure beats investing in a 0.02 percent passbook account, plunging hundreds of thousands into real estate that could go underwater, stuffing dollars under the mattress or even playing the Roulette wheel in Vegas.

http://en.wikipedia.org/wiki/Peter_Lynch

http://25iq.com/2013/07/28/a-dozen-things-ive-learned-about-investing-from-peter-lynch/

http://www.cnbc.com/id/15838187

http://www.thedigeratilife.com/blog/jim-cramer-stock-picks-money-tips/

http://www.salary.com/

 

 

 

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