Have a question in mind that you think is so dumb you’re embarrassed to ask it? That’s what we’re here for today!
This bonus post was inspired by a reader who wanted to know “where to ask a dumb question” here on Stock Gumshoe… and while his question was not actually stupid, and I’m happy to see questions pop up in our comment threads anywhere on the site, I thought it would be a great idea to open the floor and be more welcoming for the shy, the embarrassed, or, yes, even the uninformed.
So this is a no-judgement zone… smart people do things we’d call “dumb” all the time: Warren Buffett didn’t invest in Google in 2004, Albert Einstein married his cousin, and I just had to go back and double check that I didn’t call him Alfred Einstein (which I’ve done before, in print). So if you have that question that you can’t ask your stockbroker or your brother-in-law or Twitter without feeling like a dummy, let ‘er rip by submitting it below. I’ll be nice… and we might all learn something.
And yes, the SEC is always watching, so I must remind you that I can’t give personal investment advice… but I’ll try to share whatever opinion or answers I can provide to any investment-related question you’ve got, though if we end up with a lot of them it might take me a little while to answer thoughtfully.
So please, let your questions fly using the friendly little comment box below… and thanks for being the best readers in cyberspace!
(I will moderate the discussion just to make sure we don’t get too much profanity or offensive stuff, or personal attacks, but I’ll use a light hand — you can be mean to me if you like, just don’t be mean to any other participants.)
do your members get stock recomendations
Not specifically, but I tell them what I’m buying and selling (and thinking about buying or selling), and why, and share my stock portfolio with them, along with a bit more opinion than I typically offer in the free articles.
Wayne, as a paying member, I get to read Travis’ picks and his thinking behind them. Some of them I invest in myself if I agree with his views on the stock or sector in particular – in my case MPW and ATUSF were stocks he bought that I decided I wanted as well once I looked into them. I’ve even beaten him into a couple. But in the end, it all comes down to your own research, risk tolerance, and diversification strategy. After being a free member for a few years, I then bought the annual membership and then a couple of years later, I bought the lifetime membership. I can attest that Travis works hard to provide his thinking on individual stocks he invests in and in my opinion he has great integrity. When he gets it wrong, he tells you. I can’t ask anymore than that from him. Thanks for the hard work Travis.
I am a subscriber to all of Stansberry products, some Casey, and a little Bonner. I still enjoy seeing you reveal the teasers they all send out, although I I don’t need to read them except for their interesting stories. Clearly, these large newsletter companies know of your existance. Have any of them attempted to recruit you since your analysis and writting style would fit very well in their stables. Is your background in copywriting for any newsletters (other than yours). I cross reference recomendations between publishers and always value your take.
I’ve spoken to a few newsletter publishers and writers over the years, though they’ve not actually tried to recruit me — others have told me that Porter says he tried to buy me out in 2007 or 2008, and I did meet with him back then when I was just starting Stock Gumshoe (I used to live in DC, fairly near his Baltimore offices), but I’ve always leaned on the side of maintaining independence and not becoming obligated to any publisher… and honestly, I didn’t feel like I was getting recruited at the time. Maybe I’m just dim.
My background is not in newsletters, but writing has always been a big part of my life and part of my early career was in a different part of the copywriting world, so I did internalize and learn a lot of the “tricks of the trade” that they use to get attention… I did copywriting and campaign planning for a charitable fundraising consultant for a few years, long ago.
which stansberry product do you prefer? or would you advice?
Who is paying for Elon Musk’s tunnel under LA?
Elon Musk
Yep, as far as I know Musk is the only investor so far in The Boring Company. But that will certainly change if they ramp up much more, that’s going to be a hella expensive infrastructure project once (if) they get past a test tunnel.
Why do some analysts initiate stocks they cover or upgrade a stock they cover to buy but the price target is still under the current price??
Seems dumb, right? I don’t know for sure, but I suspect they’re trying to have it both ways — have a rational price target, but not have to call it a “sell” and possibly hurt their firm’s ability to get investment banking business from the company, or have the folks on CNBC make fun of them if the stock keeps going up.
Anton Kreil and the ITPM. YouTube video kind of made me angry after thinking about how the system works as he explained it. Everybody gets a cut, brokers taking the other side of my trades, fees, commissions etc. question would be have you heard of him and is his explanation of how the system works true? Heard it called The cost of doing business, when was at Apiary learning to trade Forex.
If you don’t day-trade, and aren’t an institutional investor, then the minor amount of friction in the market (bid/ask gap, commissions, fees) is utterly inconsequential. I don’t waste my time worrying about it… but then, I’m not trying to sell a trading “master class.”
The market is dramatically more efficient than it was even 20-30 years ago, and commissions, fees and other friction are all far less important, which, ironically enough, encourages lots of day trading… which means lots of emotional traders lose lots of money. I prefer investing with a long holding period, which means I have to worry more about being right and less about whether a fair price today is $14.05 or $14.08.
Small investors are horribly disadvantaged as rapid traders, but can be supremely advantaged as long term investors. I try to avoid the stuff I’m likely to be terrible at.
Do brokerage houses get a wholesale price for stocks they sell? in other words when I buy a stock did a pay a retail price and the broker got a price differential over and above the commission?
Not exactly, though sometimes orders are bundled by market makers and someone along the line gets a portion of a penny. Usually brokers earn their money in bond trading from the price differential, but my understanding is that in stock trading it’s mostly the commissions that generate revenue for them (and the margin interest, if they convince you to borrow money). For your broker, buying the stock from someone else and charging you more for it than they paid, absent the trivial market-maker earn on the spread or something like that, would be a type of front-running and not kosher.
Hi Travis. Really appreciate you ‘keeping things honest’ in this crazy world of investing.
I am curious, I have heard this term ‘market maker’ many times but still don’t know what it means. Who is this person? He sounds eerily like the bogey man – always out to steal a little bit of my money every trade I make.
Skip
Here’s a n easy to understand definition. https://www.thebalance.com/what-is-a-market-maker-and-how-do-they-make-money-4053753
That’s a good basic overview. Market makers have changed quite a bit over the decades and don’t play as large a role anymore, with so much of trading computerized in matching trades, but they are still important in providing liquidity at exactly the moment that no one else wants to provide liquidity.
Whenever you hear someone talking about how the “market makers” are screwing them over, or driving a stock down, just ignore them. They’re looking for an excuse — market makers provide liquidity by buying when no one wants to buy and selling when no one wants to sell, and they collect a little vigorish for doing that, but it’s a very small bite and they’re not controlling the overall market sentiment about a particular company. I’m curious to see how things shake out the next time there’s a real rush for the exits, since market makers are likely to be overwhelmed by selling pressure from passive ETFs that generally have to sell low and buy high, but I just think of market makers as a small bit of friction in the market that we pay for in order to make it more likely that buyers and sellers will be able to connect quickly.
What do you think of seasonality? I’ve realized my account is at it’s highest level every mid Jan and then it’s downhill from there: I think exiting every mid Jan, getting in for a short time near April earnings and then out and entering near July earnings and then out until sometime in Oct. What’s your opinion?
I think there are seasonal tendencies in the market, but that in a typical investment time horizon of 10-20 years they aren’t predictable enough to be worth moving meaningful amounts of money because of those seasonal tendencies.
But I’m very much biased toward being a long-term investor, with the backdrop conviction that the more trading in and out I do, the more opportunity I have to make a bad call.
The strongest truth of the market as a whole, I think, is that a huge percentage of overall gains can be attributed to just being in the market on the best 5-10 days of each year, and you can’t predict when those days will hit (except that they sometimes are very close to the worst days), so being really out of the market increases the chances that you’ll miss those days and have really sub-par returns as a result.
The second strongest truth (or maybe it should be first) is that investors are our own worst enemies, particularly when we try to time the market. The most important chart I’ve ever seen, and I try to look back on it every now and then and think every individual investor needs to really internalize this truth, is the one that illustrates that individual investors do far worse than the performance of the asset classes in which they invest — with average performance that’s worse than inflation as well as being markedly worse than any one of the asset classes. That’s almost entirely because they traded in and out of those assets (mutual funds, for the most part) at the worst times in the self-destructive buy high/sell low dynamic that drives so much of investor sentiment.
Here’s that chart from last year, which I wrote about in a long screed about “inevitable collapse” back in March of 2017, there may be an updated version from Dalbar now but I haven’t checked — it hasn’t changed much over the years:
is denys gold advice belivable?
Do you mean Harry Dent? I have not tested his past advice and don’t know how his timing has been, but his doom-predicting ads have not inspired confidence. I haven’t heard of him being particularly prescient about price movements in any asset class over short periods of time (like 3-5 years), though his writing about long waves of demographic trends is worth thinking about.
Thank you for your offer. I would like to find a source of financial info.
like, earnings dates, dividends, forecasts, comments ect.
My favorite summary sources for that kind of basic info are YCharts and Briefing.com, though neither is free.
Travis, could you publish, on the real money page, how does your whole portfolio look like, including your passive and active funds investments? I mean what is your % allocation to growth/value stocks, HY, short/long duration bonds, gold coins, gold miners etc?
Maybe. That would be interesting (at least to me), but it would also take a bit of work and thought to make it worthwhile and sustainable. I’ll think about it.
Hi Travis,
Why doesn’t Hawaii allow buying of crptocurrenices? I kept trying to open a wallet online to do so for months before finding out that it’s not allowed in Hawaii. Thanks for the many good articles, by the way!
I don’t know, but it looks like they have been the most aggressive state in making it hard for legitimate cryptocurrency service providers to operate, and when Coinbase pulled out last year the other big names followed suit — sounds like they’ve had a few rounds of potential legislation to set up some regulatory regime for cryptocurrency trading, but I don’t know why they’re being more restrictive than other states.
Let’s say you open a Call Option on some decent company in anticipation of positive earnings to be announced. Let’s say earnings were decent, but the stock drops a few percent, sending the option down 50-75%. The option still has 60 days… If there are otherwise no signs of impending doom for the company, do you think it would be a decent strategy to buy a couple more options at the lower price to hopefully cut your loss from the original position?
Not usually, not when you’re talking about something very short-term like that — you’d just be doubling down on a short-term bet where you’ve already had the market demonstrate to you that weren’t right in the short term.
Buying a couple more options doesn’t cut your loss, it means you’re increasing your potential loss. Yes, if you end up being right about where the stock is going in a couple months, then buying more at a lower price will give you a better return in the end… but it also means you have more at risk than you did before. The constant that you must always remember with options speculation is that there’s a high probability of a 100% loss — you can’t usually count on a stop-loss order to manage your potential losses, and anything can happen to a stock or to the market in any given 60-day period, so you always have to keep an eye not on the return of a position and whether it’s in the green or in the red on a given day, but on the total amount of capital you have at risk in that options speculation, and what it would mean to your portfolio to lose 100% of it.
I can’t claim to be an expert at options trading, but unless I have a lot of conviction and think there’s some temporary problem that will be resolved quickly I wouldn’t bet on a losing position for a short-term trade. I might well “double down” on a stock I own if the stock declines for reasons that I think will be unimportant in the long run, but when you’re talking about the leverage of options and a very short time period (60 days), you’re just adding risk to a situation where there’s no positive catalyst (if they just reported earnings, they won’t report again within the next 60 days)… that’s OK if you want to add that risk, and if you want to make a bigger bet, but don’t do it just to lower your per-option cost.
Having been in the investment advisory business for decades, taken professional options trading courses, taken futures trading training and traded futures, I will make one statement for the new wanta be options investor: The person who most consistently makes money in options is the seller. Unless you have a deep understanding of time decay, interest costs, volatility and greeks in general, options trading will take all your funds dedicated to options trading. It may take months or even years, or happen in a matter of weeks. For me I personally sell ES futures (S&P 500) one month out and VERY much out of the money and watch the daily market like a hawk. They expire worthless and I keep the premium. One can make a few bucks every month with a very small investment and manageable risk. The % return annualized is very attractive.
There are some (one that I know of) resources that use a strategy of buying call options so deep in-the-money that the intrinsic value is at least 99% of the premium for a one month expiration. The theory is that if the stock price does not move or goes down the loss is managed due to the return of intrinsic value. The position is rolled over (saves commission) every expiration date. (Monthly options but I have seen weekly options also used ) There is more technical info to this strategy that I will not go into here, the point being that this is a very involved strategy designed by very knowledgeable options traders….. not for the newby.
Lastly, one other tip….buying an option position that is priced reasonable ( think well below the strike price) and longer than 6 months out to expiration, begins to work against us, as the seller will price enough time decay and volatility into the premium that even if the stock does increase in price to reach in-the-money, the seller will have erased so much of the premium value by vaporizing the decay and volatility and interest charges leaving the premium we can get on a sell of the position unable to make a decent return. (The only way to overcome this leverage is to again, buy deep in-the-money strike prices where the premium moves close to dollar for dollar with the stock price, and hope it does move up.) However, the best way to approach a long term call position is to buy 6 month or less expiration as deep in-the-money as you can afford and roll over the position every 6 months for the duration you want it.
Cheers
Great points, thank you. Option trading for steady income requires lots of discipline, and speculators who buy options face long odds.
What is the stock associated with the “Internet of Things”, that Paul Mampilly keeps referencing on the internet?
That’s been the push for STMicroelectronics — he’s been using essentially the same ad for almost exactly two years now, I covered it here: https://www.stockgumshoe.com/reviews/profits-unlimited/profits-unlimiteds-7-tech-stock-and-the-strange-industry-is-expected-to-surge-8000/
For what it’s worth, he was right about STM and I was overly curmudgeonly about it, so I missed out.
Marijuana is building a new sector. I have confidence it will grow into a huge, stable industry in time with many catalysts along the way i. e. Volatile and periods of overvaluation. Additionally how does one invest in such a market when all investing rules created previously, must be violated if one wishes to enter?
My question is what new rules should I establish to continue investing in this sure fire but volatile tsunami of opportunity?
If you’re convinced of that, then you have plenty of time to scale in and find the opportunities.
My largest question about the marijuana industry is whether it’s going to be a commoditized agricultural business, with strong price competition in the legalized and regulated markets (or even price controls, as may well be the case in Canada), or whether it will become a business like tobacco or alcohol, with a few strong brands and lots of changing brand dynamics driven by marketing and product differentiation.
I’d be most interested in stocks that either will benefit from the trend as background players (I currently own IIPR for that purpose), or which can develop popular early brands that inspire brand loyalty, but I’m not a consumer in the space so it’s hard for me to judge the brands. When it comes to the big players in Canada, which get most of the attention, the prices are so wild that it’s hard to think about them rationally — I assume that as the industry grows there will be some “come to Jesus” moments when people actually start to think about prices and margins, and that might be when slower and more thoughtful investors can get involved.
I do hear anecdotally that the industry is getting big enough, and drawing enough new participants, that the supply/demand equation is getting a little silly — in Washington, for example, there’s so much supply that the legal market is apparently saturated, at least for now, and that’s fueling the black market. That’s just from a single NPR story I heard recently, though, so it might easily not be the full story everywhere.
And on a personal note, I don’t object to marijuana being legalized and regulated on moral grounds, and I think of it as relatively benign and similar to alcohol or tobacco for adults… but I’m not so crazy about the fact that I smell a lot more skunks around the neighborhood than I used to.
Wow, well, you asked for it Travis! How about giving us your opinion on a extremely unique investment which is under the “public benefits corporation” arena and the name of this entity is “To The Stars Academy of Arts and Science” via former musician Tom DeLonge. One can invest with a min. of $200 @ $5/share and it will IPO at some point in the future. Fascinating and unusual topic to be sure but worth knowing about for the long term and lots of reasons. For you more “enlightened” readers, worth checking out the website and learning about this one of kind new venture. Would enjoy hearing back comments from members as well! (keep an open mind!) Thanks as always TJ!
Never heard of that one before, hard to imagine they will raise enough money to do meaningful work in science and aerospace but it sounds like an interesting story.
How do I turn off the notification? My mailbox is inundated!
I’ve turned your notifications off – there should be link in the notification, and a link at the bottom of the page, that will allow you to delete or change your “comment notification” subscriptions.
What is the teaser that shows a dime with an arrow? Has Gumshoe treated this one?
That’s the Mampilly pitch for STM as well, commented on it above.
I have two questions.
1) regarding Chinese tech stocks (and Chinese stocks in general)–knowing that China inflates numbers all the time, in every direction–there was a recent article about how they are lying about their GDP numbers–how can we know for sure that these companies aren’t lying about their financials? What would prevent them from doing something like that?
2) What is the best way to get a really great education in all things financial? But specifically pertaining to the market, with options/futures/etc.? I understand the basics, but I would like to take a deep dive into these topics and while I’m great with reading lots of things and tying them together, I would really LOVE a central resource that I can trust, but that seems quite difficult to find. Any pointers would be greatly appreciated.
Thank you so much for what you do, I really appreciate this service and your insight.
Sorry, I wasn’t logged in to ask this question.
China is manipulating their numbers, certainly, and having a command economy with so many state-owned enterprises means they could report pretty much whatever they want much of the time.
Large Chinese companies I think are less likely to be lying about their financials in a wholesale way, though there are so many reports about fraud and dissembling that you never know for sure. That’s a risk, to be certain… though it’s also true that Chinese law treats fraudsters who are caught much worse than US law… less likely to get a golden parachute, more likely to get “disappeared” for a few weeks for some re-education, or, in cases of actual fraud from people who don’t have good government connections, just killed.
There’s no best way to get a really great education, other than reading lots of different resources. I am biased in that I believe the advantage of the individual investor is from being patient and focused on the long term at a time when almost no institutional investor or money manager can afford to look past the current quarter… and when individuals get into derivatives or frequent trading, they lose that advantage and begin to find themselves in an area where they are the plankton swimming in front of an oncoming whale.
I still think books are the best first resource, but don’t have any favorites on the more esoteric options/futures stuff — if anyone else does, hopefully they’ll chime in. I’ve heard good things about the options classes offered by the CBOE (though they don’t have as much free stuff as they used to) and about the basic guide published by the Options Industry Council, but I’ve not read widely in that area.
No question today, even though I’m a noon at all this! Just wanted to say ‘thank you’d for all your great advice. When I first started researching, I signed up for dozens of ‘interesting’ emails and most of them quickly drove me crazy. Last week I went through my list and unsubscribed to all… Except yours! Thanks again for all the work, research and valuable info you share. I learn a lot from your emails and you’ve saved me from a lot of expensive mistakes. <3
Travis,
MedReleaf (MEDFF) was my favorite cannibus stock. Now it could be taken over by Aurora, a company I don’t like. What is your favorite Cannibus stock ?
I don’t have one. Haven’t found one whose fundamentals are rational enough to commit to an investment.