The 3 P's OF SPECULATION
Note I said 3P's. Right now yawl are only focusing on 2P's, rather continually doing PeePee or PooPoo. Stop wasting water and toilet paper. As they say, when you are looking to buy a house...Location, Location, Location. Similarly, when you are Speculating...Probability, Probability, Probability.
The Probability that a stock is going to go up has a lot more to do with the sector it is in rather any fundamental (alleged) improvement in the prospects of the underlying company. Remember the Technology, Real Estate/Financial bubbles? Recognizing the bubble early and then getting onto the bandwagon - that's key. That's how the easy money is made.
HOW TO SPECULATE
Are you perceiving a Technology bubble anytime soon? No?
Then WTF are you buying a stock like EXBX.OB?
Are you perceiving a Real Estate/Financial asset bubble?
Now? Really? Of course not?
Then WTF are you thinking of buying FNM or FRE or CITI?
Then WTF are you thinking of buying FNM or FRE or CITI?
Are you thinking people are worried about keeping their jobs?
Or keeping their cars looking clean in this environment?
WTF are you bottom fishing in SPNGE.OB then?
Let's examine a recent bubble - Energy. Or Oil. Take your pick. This bubble culminated when price of oil reached around $147. When the bubble burst, in less than 7 months price of oil was around $37. Now the price of oil is around $70. Are we back in a bubble? Or is there a fundamental reason that oil is now 100% up from its lows? You tell me.
Wait! Wrong freakin' question. Why? Because none of you are capable of doing Fundamental Analysis or Experts in Geopolitical Science or understand concepts of Peak Oil. The best you can do is FundaMENTAL ANALysis. And that is simply not good enough.
Wait! Wrong freakin' question. Why? Because none of you are capable of doing Fundamental Analysis or Experts in Geopolitical Science or understand concepts of Peak Oil. The best you can do is FundaMENTAL ANALysis. And that is simply not good enough.
The easy money has already been made by those champion Speculators who tried their luck when Oil bounced off $37. Whether they were Lucky, or Good, or both is irrelevant. They have doubled their money and They are out. You want to speculate on Oil? Ask yourself what is the Probability it will reach $140 and how long are you prepared to wait for that to happen? Not to mention $70 is not exactly chump change. If you are not in early, you will be left holding the basket. BASKET. An important concept I will revisit. If you are late getting in, you will always get burnt. I know someone who has less hair than me (but claims otherwise) has been making a career of it, lately.
Trying to bottom fish like Those investors did when Oil was at $37 last year, is certainly one way to go. Doing so without any rhyme or reason has a high Probability of failure not success. Whatever prompted one to get into Oil at $37, simply Hoping it will now go up another 100% to 140 based on the alignment of the Planets is madness.
So then, what has started to go up, now? Look!! It is Gold! Finally! All time high! That is how bubbles begin. Higher highs beget higher highs. Something is always going up, until it stops going up. Gold seems to have finally turned.
Now ask yourself one question? "Do I feel lucky?" Well do you, Punk?
For you too make 100% on your investment, GLD which is currently around $100 has to reach $200. In other words, Gold Bullion has to sell for $2000 an ounce. If that happens GDX - the basket of the biggest and baddest Gold Miners - might triple to $150 from where it is now. But ask yourself - What is the Probability? And how much time do I want to wait for my guess to come true? More importantly, why do I say if GLD doubles in price, GDX might triple in price?
WHAT TO SPECULATE WITH
During the Tech bubble stocks of companies providing the infrastructure i,e. CSCO went up 10 times, i.e. 900%. Those who bought CSCO switches and started www.AllYouSuckersAreGoingToLoseYourShirt.com went up 100 times, i.e. 9900%! Hard to believe? Only because hardly any of those companies exist anymore. Look at EBAY split adjusted moving from pennies to over $25.
During the Energy Boom while oil tripled to near $150, the stock GROW - which runs mutual funds that predominantly invest in energy stocks all over the world - went from under $5 to $75 - 1400% !!! Don't believe me? Look at the split adjusted chart for GROW.
So do you buy GOLD or do you buy those who DELIVER GOLD?
During the Energy Boom while oil tripled to near $150, the stock GROW - which runs mutual funds that predominantly invest in energy stocks all over the world - went from under $5 to $75 - 1400% !!! Don't believe me? Look at the split adjusted chart for GROW.
So do you buy GOLD or do you buy those who DELIVER GOLD?
The answer should be clear. Look for .PK and .OB stocks of Gold Miners that are trading in pennies, NOT the Gold Miners whose stocks make up GDX. Instead of buying 10000 shares of stock trading at 10 cents for a cost of $1000, buy 1000 shares of 10 stocks each trading at average price of 10 cents. You are risking the same amount of money. Trade The Basket. The Probability of the basket doubling is way higher than the prospect of the 1 stock you end up speculating(?) on doubling. There is speculation, and then there is Speculation!
YOUR PLAN OF ACTION (POA)
1) Go to your favorite financial website that let's you screen stocks in a particular sector. Search for Gold Miners in your desired price range depending on how much money you want to speculate with. For example, if you want to buy 10 stocks, make sure you generate enough, say, 100 names.
2) Print the names of say 100 stocks out on a 10 x 10 matrix in an excel spreadsheet.
3) Take a pencil/pen in your hand, poise it over the piece of paper, look up, close your eyes, let your hand drop on
the printed paper, look down and open your eyes to see the square where it landed. Mark that square. Repeat 9 more times.
4) Buy 1000 shares of each of the 10 stocks you randomly selected in step 3.
5) Pray.
6) Pray some more.
7) Pray not only to your God but at least two other Gods preferably from religions different than your own. If you are an Atheist, pay someone else to pray for you. Mentally include that payment in your cost basis as commissions you paid on your stock purchases.
Depending on what happens next, follow either 8) or 10)
8) If your portfolio doubles OR if it reaches your desired non-greedy profit level, sell ALL. Repeat. SELL ALL. Don't apply fundaMENTAL ANALysis and sell some stocks and not others in the basket. ALWAYS TRADE THE BASKET. SELL THE BASKET. Remember The Basket? Never get left holding The Basket!
9) Check out which sector has taken the lead in the time you have been holding those stocks. Here's one possible way to run a screen. Repeat starting at Step 1 with the new sector, or even with the same one if it has still sustained leadership. You can start with the original principal say $1000, or try to compound your Probability of Success, otherwise known as Luck with the $2000, assuming 100% profit met your greedy expectations. (Note: Sophisticated Speculators will make sure they set aside some of the gains to pay taxes).
10) If you lost the game, then STOP Speculating. You were never Good to begin with. And now you have found out you are not Lucky either. Continuing to play is not Speculating. It is Stupidity. At some point, you simply have to get out of the Game. I have.
2) Print the names of say 100 stocks out on a 10 x 10 matrix in an excel spreadsheet.
3) Take a pencil/pen in your hand, poise it over the piece of paper, look up, close your eyes, let your hand drop on
the printed paper, look down and open your eyes to see the square where it landed. Mark that square. Repeat 9 more times.
4) Buy 1000 shares of each of the 10 stocks you randomly selected in step 3.
5) Pray.
6) Pray some more.
7) Pray not only to your God but at least two other Gods preferably from religions different than your own. If you are an Atheist, pay someone else to pray for you. Mentally include that payment in your cost basis as commissions you paid on your stock purchases.
Depending on what happens next, follow either 8) or 10)
8) If your portfolio doubles OR if it reaches your desired non-greedy profit level, sell ALL. Repeat. SELL ALL. Don't apply fundaMENTAL ANALysis and sell some stocks and not others in the basket. ALWAYS TRADE THE BASKET. SELL THE BASKET. Remember The Basket? Never get left holding The Basket!
9) Check out which sector has taken the lead in the time you have been holding those stocks. Here's one possible way to run a screen. Repeat starting at Step 1 with the new sector, or even with the same one if it has still sustained leadership. You can start with the original principal say $1000, or try to compound your Probability of Success, otherwise known as Luck with the $2000, assuming 100% profit met your greedy expectations. (Note: Sophisticated Speculators will make sure they set aside some of the gains to pay taxes).
10) If you lost the game, then STOP Speculating. You were never Good to begin with. And now you have found out you are not Lucky either. Continuing to play is not Speculating. It is Stupidity. At some point, you simply have to get out of the Game. I have.
FINAL THOUGHTS
You increase your Probability of success by following a System. A System such as the one laid out in the POA above. The System itself is not important. What is important is that you have one.
The definition of Probability itself assumes that the outcomes over which probability is measured are individually independent, i.e. outcomes are random and no special circumstances existed that influenced any of the outcomes which can stack the deck when Probability is calculated. A coin with two Heads will have a 100% probability that betting on Tails will fail - clearly a stacked deck. That's why we call them Random outcomes. If you don't follow a System, then you are indeed doing some fundaMENTAL ANALysis and need to have your brain examined. You are now trying to follow some warped logic or reasoning aka wishful thinking that the stock you buy will actually go up. That is NOT Speculating.
In The Shawshank Redemption, Morgan Freeman tells Tim Robbins, "HOPE is a dangerous thing". Tim Robbins counters, "HOPE is a good thing". Morgan Freeman was right. Tim Robbins was wrong. It was a movie. Only in a movie can someone make it through a mile of crap and come out in the rain smelling like shit, looking like shit, but worth a million bucks. You live in the real world. Your deodorant prevents you from smelling like shit. But you will never have a million bucks and trust me, you will feel like shit!
HOPE is indeed a dangerous thing. HOPE is why Mo buys EXBX.OB at 21 cents and HOPES it will go to $1. When that does not happen. Mo then thinks of buying more EXBX.OB at 1 cent again HOPING if it goes up to just 10 cents, he will recover all his money. What was the Probability to begin with that EXBX.OB would go from 20 cents to 1 buck - an increase of 400%? And what is the Probability now EXBX.OB will go from 1 cent to 10 cents - an increase of 900% ?! Get real.
STOP HOPING. You thought you were Speculating all this time? You were NOT! You were HOPING.
START SPECULATING !!!
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this is called starting with a bang!
ReplyDeleteI am sure you are allergic to this bullshit stock market too..but I wonder how you got soo much knowledge about it..unless u became disillusioned later...hilarious ..need to go thru it again to understand it better...
Very glad you saw the "humor" as well as "truth" behind my attempt. And yes. At the risk of sounding immodest I do know a thing or two about how the stock market works. And does not work. You see, when something or someone burns you, one learns very quickly :-)
ReplyDeleteBest.